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March 2014

Method of accounting: System of accounting: Cash basis: Section 145: Block period 1987-88 to 1995-96: Assessee maintaining accounts on actual receipt basis: Interest income must be taken on receipt basis:

By K. B. Bhujle Advocate
Reading Time 1 mins
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CIT vs. Dr. K. P. Singh; [2014] 41 taxmann.com 406 (All):

The assessee was following the cash method of accounting. Accordingly, he offered the interest income on FDRs on receipt basis. The Assessing Officer assessed the interest on accrual basis. The Tribunal allowed the assessee’s claim and directed the Assessing Officer to assess the interest on receipt basis.

On appeal by the Revenue, the Allahabad High Court upheld the decision of the Tribunal and held as under:

“i) We find no infirmity in the Tribunal’s order, where the Tribunal observed that the interest income must be taken on receipt basis shown by the assessee from the F.D.Rs., Sahara and L.I.C. mutual funds. The assessee is maintaining the accounts on actual receipt basis and he is not maintaining any account on mercantile basis, as appears from the record.

ii) When it is so, then the answer to the substantial question of law is in favour of the assessee and against the Department.”

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