Law:

Section:

SECTION 4 OF THE INCOME-TAX ACT, 1961 - INCOME - CHARGEABLE AS - ASSESSEE-COMPANY HAD FILED SUITS IN HIGH COURT FOR EVICTION OF ITS TENANTS AND HIGH COURT HAD APPOINTED RECEIVERS FOR REALISATION OF AMOUNTS OF RENTS DEPOSITED WITH RENT CONTROLLER AND ALSO RENTS LATER ON - THOUGH NOT AUTHORISED TO DO SO, RECEIVERS INVESTED AFORESAID AMOUNTS BY WAY OF LOANS TO OTHERS AND EARNED INTEREST INCOME THEREFROM IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR - WHETHER MERELY BECAUSE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, AFORESAID INTEREST INCOME COULD BE ASSESSED IN ASSESSEE'S HANDS IN SPITE OF FACT THAT RIGHT OF ASSESSEE TO HAVE ANY PART OF AFORESAID INTEREST ON UNAUTHORISED INVESTMENTS MADE BY RECEIVERS WAS STILL TO BE DECIDED BY HIGH COURT IN EVICTION SUITS - HELD, ON FACTS, NO Facts The assessee-company had instituted suits in the High Court for eviction of some of its tenants and the High Court had appointed receivers for the realisation of the amounts of rents deposited with the Rent Controller and also rents later on. The receivers advanced the deposited rent as loans to others and earned certain interest thereon in the previous year relevant to the relevant assessment year. The ITO included the impugned interest income in the total income of the assessee. On appeal, the AAC held that until and unless the suits were disposed of by the High Court, the assessee was not entitled to any money or interest and the interest could not be charged on something imaginary. He further held that as the moneys were not standing in the assessee's books, the mercantile system of accounting, followed by the assessee, was not at all relevant for the purpose of determining the issue. On further appeal by the revenue, the Tribunal also upheld the AAC's order on the ground that as the receivers had been vested with all powers under Order 40, rule 1 of the Code of Civil Procedure, 1908, which does not specifically give any power to a receiver to advance the amounts received by him as loan on interest, the investments of amounts, in the present case, had been unauthorised and the assessee could not be held responsible for the same. It further held that even assuming that…

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