Interest (difference between purchase & redemption price) not assessable in year of allottment of debenture

The assessee’s act of offering the interest income arising on the difference between purchase price of the debenture and redemption price after six years on an amortization basis is in accordance with the “matching principle” laid down in Taparia Tools 260 ITR 102 (Bom) and the real income principles. Such interest cannot be taxed on accrual basis in the year of allotment of debenture itself but has to be taxed on spread-over basis.

Rakesh Shantilal Mardia vs. DCIT (Supreme Court)