Accrual of enhanced interest: additional 2 per cent. interest was taxable in the year the appellate increase was allowed.

Enhanced interest allowed on appeal was taxable in the accounting year relevant to assessment year 1973-74, because the additional 2 per cent. arose only when the High Court increased the rate above that fixed by the District Court. The court held that the difference in interest accrued wholly in that accounting year and did not have to be spread over earlier years, so the Revenue's position succeeded and the assessee's challenge failed.

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Issues: Whether the difference of interest at 2 per cent. accrued in the accounting year relevant to assessment year 1973-74.

Analysis: The reference concerned the taxability of the enhanced interest allowed by the High Court, over and above the earlier rate fixed by the District Court. The question was whether the additional 2 per cent. interest, arising from the later appellate enhancement, accrued wholly in the accounting year relevant to assessment year 1973-74 or had to be spread over the earlier years.

Conclusion: The question was answered in the affirmative in favour of the Revenue and against the assessee; the difference of interest was held to have accrued in the accounting year relevant to assessment year 1973-74.

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