Law:

Section:

Section 5, read with section 86, of Income-tax Act, 1961 [Corresponding to section 4(1), read with section 14(2), of the Indian Income-tax Act, 1922] - Income - Accrual of - Assessment year 1949-50 - Assessee resided in taxable territory and kept fixed deposits in Part B state - Assessee failed to explain inspite of opportunity given to him by ITO as to where and how interest accrued on these fixed deposits were utilised - Tribunal concluded that interest received by assessee in fixed deposits in Part B State was brought into taxable territories and, thus, included same in assessee's total income - Whether there was evidence or material before Tribunal to come to conclusion that it did - Held, yes FACTS The assessee, a moneylender, was a resident within the taxable territories. The assessee had kept number of fixed deposits in the Part B State. During the assessment proceedings the assessee failed to explain inspite of the opportunity given as to how and when the interest accrued on the fixed deposits were utilised. The ITO treated the amount of interest due on the fixed deposits as brought into the taxable territories and included in the assessee's total income. On appeal, the AAC confirmed the order of the ITO. On second appeal, the Tribunal also agreed with the approach and conclusion of the AAC. On reference: HELD Under section 4(1)(b)( ii) of the 1922 Act, the interest that accrued to the assessee outside the taxable territories would be included in the income of the assessee for the purposes of taxation unless it is excluded by other provisions of the Act or exempted by any other provisions of the Act. At the relevant time under clause (c) of sub-section (2) of section 14 of the 1922 Act which was in force at that time if the income or profits or gains had arisen in the Indian State, if it was not shown that such income or profits or gains were brought within the taxable territories, that would have been exempt from taxation under section 14 of the 1922 Act. It was, therefore, clear that prima facie in respect of an assessee who was a resident within the taxable territories during the relevant previous year, interest income that accrued to him outside the…

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