Interest on securities treated as income when actually received, so half-yearly interest taxed in subsequent assessment year.

Half-yearly interest due 15 Oct 1944 (credited 21 Oct) was held assessable in AY 1946-47 because Section 8's reference to interest "receivable" must be read with the charging provisions and the deduction-at-source mechanism in Sections 4, 18 and 19, and mercantile accounting under Section 13 does not alter treatment under Section 8. The court applied the principle that a debt due is not income until realised and that Section 18(4)'s deeming operates when tax is actually deducted; outcome in favour of the assessee.

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Issues: Whether the half-yearly interest payable on 15th October, 1944 (credit to bank on 21st October, 1944) is assessable in assessment year 1945-46 or 1946-47.

Analysis: Section 8 deals with tax under the head "Interest on securities" and uses the term "receivable." The statutory scheme must be read with the charging provisions in Section 4 and the deduction-at-source mechanism under Section 18 (including sub-sections (3), (4) and (7)) and Section 19. Section 13 permits mercantile accounting for Sections 10 and 12 only; it does not alter the treatment under Section 8. Authorities establishing that a debt due is not necessarily income until actually realized support the view that mere liability or capability of receipt on a particular date does not by itself create taxable income. The statutory deeming in Section 18(4) applies when tax has been deducted at the time of payment. For interest on securities, the legislative scheme treats the interest as income when it has come in to the assessee (received) rather than merely when it is due or capable of being received.

Conclusion: The half-yearly interest is assessable in assessment year 1946-47; decision is in favour of the assessee.

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