Actual receipt governs taxability of Government security interest; mere due date did not trigger assessment.

Half-yearly interest on Government securities was held taxable on actual receipt rather than on mere due date or accrual. Section 8 of the Income-tax Act was treated as a machinery provision for computing income from securities, and the word "receivable" was construed in the context of the Act as a whole to mean more than being capable of demand on the due date. The scheme of deduction at source and deemed receipt supported taxation only when the interest was actually received. Section 13 on method of accounting was held inapplicable to this head, so the mercantile system could not accelerate taxability. The interest was therefore assessable in assessment year 1946-47, not 1945-46.

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Issues: Whether half-yearly interest on Government securities, which fell due on 15 October 1944 but was credited by the bank on 21 October 1944, was assessable in assessment year 1945-46 or 1946-47.

Analysis: Section 8 of the Income-tax Act used the expression "interest receivable", but the expression was construed in the context of the scheme of the Act. The provision was treated as a machinery section fixing the mode of computation for interest on securities, while the charging provisions required the point at which income came into existence. The Court held that "receivable" in this setting did not mean merely "capable of being received" on the due date. The surrounding provisions relating to deduction at source and deemed receipt on payment showed that the taxable event for this head was actual receipt, not mere maturity or entitlement. Section 13, dealing with method of accounting, was held inapplicable to Section 8, so the mercantile system could not be used to tax this head on accrual basis. The debt due from the Government on 15 October 1944 was not itself income until it was discharged and received.

Conclusion: The interest was taxable in the assessment year 1946-47 and not in assessment year 1945-46.

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