Taxability of excess interest received remains linked to the year of receipt, with later refund allowed only as year-of-repayment deduction.

Excess interest actually received by a bank in the relevant assessment years was chargeable to tax under section 6 of the Interest-tax Act, even though it was later credited back to the customer. The later discovery that a higher rate had been charged did not change the character of the receipt for the earlier years, so the assessee could not reopen those years to reduce taxable income. Any relief arose only as a deduction in the year of repayment or credit, here the later assessment year in which the adjustment was made. The claim to exclude the amount from the earlier years therefore failed.

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Issues: Whether excess interest received by the assessee bank in the relevant assessment years, though later credited back to the customer, was exigible to tax under section 6 of the Interest-tax Act, and whether the assessee could reduce its interest income for those earlier years on that basis.

Analysis: The assessee had admittedly received the interest during the assessment years in question, and that receipt fell within the computation of chargeable interest under section 6 of the Interest-tax Act. The later discovery that a higher rate had been charged did not alter the character of the receipt for the earlier years. The subsequent credit in October 1985 operated only as a later adjustment, giving rise to a deduction in the year in which the credit was made, namely assessment year 1986-87, and not to any reduction of income for the earlier assessment years.

Conclusion: The excess interest was taxable in the relevant earlier assessment years, and the assessee's claim to exclude it from those years failed. The question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Income actually received and chargeable in a particular assessment year cannot be reopened for reduction merely because it is later refunded or credited back; the appropriate relief is deduction in the year of repayment or credit.

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