Real income doctrine excludes interest on UI charge deposits from tax and book profit where funds belong to the regulator.

Interest earned on deposits of UI charges held under the regulatory framework was treated as not belonging to the assessee where the PAN was used only for convenience and the funds were maintained for the regulatory authority's purposes. The later trust arrangement reinforced that the assessee did not own the moneys in the UI account. As the interest was not the assessee's real income, it could not be assessed in its hands and there was no basis to include it in book profit under section 115JB. The deletion of the addition was upheld.

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Issues: Whether interest earned on deposits maintained out of UI charges in the assessee's name was taxable in the assessee's hands, and whether such amount could be included in book profit under section 115JB.

Analysis: The interest arose from investment of balance UI charges maintained under the regulatory framework governing the State Load Dispatch Centre and the West Bengal Electricity Regulatory Commission. The funds were held for regulatory purposes, the PAN of the assessee was used only for convenience because no separate body had then been created, and the subsequent trust arrangement confirmed that the assessee did not own the moneys in the UI account. The income from such deposits was therefore treated as belonging to the regulatory authority and not as the assessee's real income. Once the interest was held not to belong to the assessee, there was no basis to assess it in its hands or to include it in the computation of book profit.

Conclusion: The interest income was not taxable in the assessee's hands and could not be added to its income or to its book profit computation; the deletion of the addition was upheld.

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