Notional interest from book adjustments cannot be taxed where property transfer is ignored and no real accrual exists.

Interest arising only from book transfer entries, and not from any cash loan or actual payment, could not be treated as taxable income where the underlying property transfer was itself disregarded. The assessee could not at the same time be treated as the owner of the building for notional rental income and as the recipient of the sale proceeds for interest accrual. Mere accounting adjustments with a sister concern did not create real accrual of interest income, so the amount could not be assessed as the assessee's income.

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Issues: Whether interest of Rs. 15,534 arising only from transfer entries and not from any cash loan could be assessed as the assessee's income when the transfer of the property was itself disregarded.

Analysis: The assessee could not simultaneously be treated as the owner of the building and as the recipient of the sale price. Once the transfer of the building was ignored, the supposed sale consideration could not be treated as money belonging to the assessee on which interest accrued. The addition of notional rental income on the footing that the assessee remained owner was inconsistent with the separate addition of interest on the alleged sale price. Mere book adjustments between the assessee and its sister concern did not create an accrual of interest income.

Conclusion: The interest amount of Rs. 15,534 could not be legally assessed as income of the assessee.

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