Law: Income Tax Act, 1922

Section:

Income-tax----Income---Income from other sources---Interest---Interest received set off-against interest payments and balance capitalised---Not, permissible---Interest received not to be adjusted against interest payments---Interest received is income from other sources and is taxable. For the assessment years 1982-83 to 1985-86, the assessee, a Government undertaking, derived income from interest. The assessee did not disclose the income from interest in its return on the ground that the interest received was adjusted against the interest paid and the balance interest was capitalised. The Assessing Officer treated such interest as income from other sources and assessed it to tax. The Commissioner of Income-tax (Appeals) confirmed the order of the Assessing Officer. The Tribunal directed the Assessment, Officer to adjust the interest received against the interest paid. On a reference: Held, that the Tribunal was not justified in holding that the amount of interest received should not be considered for being taxed as revenue but had to be set off against interest payments and the balance alone had to be capitalised. Challapalli Sugars Ltd. v. CIT (1975) 98 ITR 167 (SC) applied. CIT v. Assam Plantation Crops Development Corporation Ltd. (1996) 221 ITR 392 (Gauhati) ref. JUDGMENT D.N. BARUAH, J.---At the instance of the Revenue, the following question has been referred by the Income-tax Appellate Tribunal under section 256(1) of the Income Tax. Act, 1961, for short "the Act", for the opinion of this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the amount of interest received should not be considered for being taxed as revenue but has to be set off against interest payments and the balance alone had to be capitalised?" The facts for the purpose of answering this question are: The assessee is Government of Manipur undertaking. The present question relates to the assessment years 1982-83 to 1985-86. During that period, the assessee derived income from interest. The assessee did not disclose the income from interest on the ground that interest received was adjusted against the interest paid and the…

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