1993 (4) TMI 90

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..... ficer that the financial condition of Shree Vallabh Glass had become precarious and, therefore, the assessee-company would account for interest on the debentures of Shree Vallabh Glass on cash basis. The Assessing Officer held that interest on the said debentures was taxable under s. 18 of the IT Act as interest on securities and further that it was taxable on accrual basis. He computed the interest attributable for the whole of calendar year 1985 and made the impugned addition of Rs. 91,151. 3. Before the CIT(A) various contentions were raised on behalf of the assessee as noted in cls. (i) to (vi) of para 5 on pages 4 and 5 of the appellate order. It was, inter alia, contended on behalf of the assessee that Shree Vallabh Glass was decla .....

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..... oned then it is considered as revenue of the period in which it is properly recognised. He submitted that even before the commencement of the previous year relevant to this appeal Shri Vallabh Glass was declared a relief undertaking and its financial condition was so bad that there was no chance of receipt of even the principal amount of debenture let alone interest thereon. 5. The learned Departmental Representative, on the other hand, submitted that s. 18 of the new Act makes a departure from s. 8 of the old Act. He emphasised that under the old Act interest from securities was taxable when it was receivable or received as held by the Hon'ble Bombay High Court in the case of Seth Lalbhai Dalpatbhai vs. CIT (1952) 22 ITR 13 (Bom). He su .....

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..... e is further right in mentioning that that item of income can be taxed only under s. 18 for asst. yr. 1985-86. However, the learned Chartered Accountant is right in mentioning that the interest should be really due to the assessee and if the attendant circumstances show that the interest had really not become due in the real sense of the term it should not be and cannot be taxed. He is right in mentioning that till date interest had not been received and further that s. 18(2) envisaged a position of interest being not taxed on accrual basis. His reliance on the Hon'ble High Court decision in Calcutta Investment Co. Ltd. vs. CIT is also valid though in that case the item of interest was taxable as business income while in the case before us .....

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