ITO v. R. Venkatachalam

INCOME TAX ACT, 1961

--Income--Year of chargeabilityInterest on bonds attributable to 3 years --Assessee had discounted IDBI bonds and received the entire interest in the year under consideration. It offered to tax only proportionate interest for eleven months. AO was of the view that since the entire interest was received during the year, whole of the amount was chargeable to tax. Assessee contended that it had received interest on IDBI bonds, but had no right to receive the interest in advance. Receipt of advance on a discounted rate, could not be a reason to treat the same as income of the assessee but could be taxed in the year in which the assessee has right to receive it. Held:. What was received by the assessee was the entire interest for 36 months in advance and, therefore, the entire money received could not be construed as income in the hands of the assessee. In present case, the assessee had received advance money but it had no right to retain the same. Hence, assessee was correct in offering such interest to tax, as was attributable to the year under consideration.