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TMI Blog2008 (11) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... (not ?) be included in the taxable income of the assessee, especially when it is following mercantile system of accounting ?" 2. The learned senior standing counsel submitted that the claim of exclusion in respect of the interest accrued cannot be granted because, before the Assessing Officer, the assessee had claimed exclusion on the ground that it had accrued but not received and the assessee had been adopting mercantile system of accounting. However, the Commissioner of Income-tax (Appeals) had dealt with this issue as though the claim of the assessee was that the "interest had accrued but had not become due" for the relevant year. 3. The learned senior standing counsel submitted that even assuming without admitting that this was a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar. The Assessing Officer also dealt with the interest income on the principle of accrual and confirmed the assessment order. The Tribunal, however, rightly held, in our opinion, that the opinion of the Commissioner of Income-tax (Appeals) that once it has accrued, it should be included as income is not correct since the very term "accrued but not due" would show that the right to receive the interest had not arisen to the assessee and the interest was receivable only from the 1st of April of the next year. In fact, an identical issue came up before this court in CIT v. Tamilnadu Mercantile Bank Ltd. [2007] 291 ITR 137 (Mad). In that case also, the assessee had adopted mercantile system of accounting as in this case and it was contended bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent years, but, without any change in circumstance, changed the method of assessment during the financial years in question, which, in our considered opinion, is unsustainable. As already observed, even though section 18 of the Act was deleted, the assessee is taxable for interest on securities only on specified dates when it becomes due for payment, in view of third proviso to section 145(1) of the Act, which was in force during the relevant assessment years, as well as in the light of the well settled principles laid down in the catena of decisions referred to above... In the result, these appeals are dismissed answering the substantial question of law raised against the Revenue and in favour of the assessee. No costs." 7. This judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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