Kerala HC reverses ITAT
order for AY 2009-10, rules that interest income from bank deposits accrued but
not due and hence not credited to assessee’s (a Public sector undertaking)
account is taxable; Assessee had disclosed Rs. 3.23 cr accrued in the balance
sheet as interest receivable on fixed deposits but excluded the same in its tax
return claiming that it was only a hypothetical income and the right to receive
had not accrued; Rejects assessee’s stand that since the b ank neither
credited/paid the interest nor deducted TDS u/s. 194A, the question of accrual
did not arise; HC observes that assessee follows mercantile system of
accounting, further observes that assessee had exercised the option to let the
interest accumulate to the deposit and thereby earned compound interest by the
end of the deposit term; Clarifies that the Bank's liability to deduct tax at
source arises only when it pays the interest and not on periodical accrual of
interest, remarks that “the interest income that accrued cannot, by any stretch
of imagination, be termed as hypothetical income”, relies on SC rulings in
Tuticorin Alkali Chemicals and Fertilizers, Keshav Mills Ltd., distinguishes
assessee’s reliance on SC ruling in Excel Industries Ltd.:HC
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