Gross interest income remains taxable despite foreign tax deduction at source, not merely the net amount received.

Interest income received from a foreign bank remained taxable on the gross amount accrued or received, even though tax had been deducted at source abroad. Foreign tax deduction did not alter the taxable character of the receipt or justify assessment only on the net figure. Applying the same principle previously used for dividend income, the Tribunal's view that only net interest was taxable was held incorrect, and the referred question was answered in favour of the Revenue.

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Issues: Whether interest income received from a foreign bank, after deduction of tax at source abroad, was taxable only on the net amount received or on the gross amount.

Analysis: The netting of tax deducted at source in the foreign jurisdiction did not alter the taxable character of the receipt. The governing principle, previously applied to dividend income, was that income is assessable on the gross amount that accrued or was received by the assessee, and not on the reduced figure after foreign tax deduction.

Conclusion: The Tribunal was not right in holding that only the net interest income was taxable. The answer to the referred question was in the negative and in favour of the Revenue.

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