Yearly accrual taxation and mandatory advance-tax interest govern treatment of deposit instruments and related deductions.

Fresh factual claims for salary deductions and depreciation cannot ordinarily be raised for the first time before the Tribunal when professional income was returned and assessed on estimation without books of account, because the necessary factual foundation was absent. Indira Vikas Patras were treated as instruments with yearly accrual of interest, so the interest was taxable on annual accrual rather than only on maturity, and the maturity payment did not amount to transfer of a capital asset. Interest for default in advance tax under section 234B was held mandatory once liability arose, and the absence of an express recital in the assessment order did not defeat the levy where it was computed in the order.

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Issues: (i) whether deductions for salary to doctors and staff and depreciation could be claimed for the first time before the Tribunal when professional income had been returned and assessed on estimation basis without books of account; (ii) whether Indira Vikas Patras constituted a capital asset and whether interest thereon was taxable only on maturity or on yearly accrual; (iii) whether interest under section 234B could be levied when the assessment order did not expressly state the charge in so many words.

Issue (i): whether deductions for salary to doctors and staff and depreciation could be claimed for the first time before the Tribunal when professional income had been returned and assessed on estimation basis without books of account.

Analysis: The claim for salaries and depreciation was never raised before the assessing authority or the first appellate authority and the necessary factual foundation was not on record. The assessee had returned professional income on estimation basis without maintaining books of account, and the Tribunal had already granted relief by allowing further estimated deductions towards overhead expenditure. In such a situation, a new factual claim for specific allowances and depreciation could not be entertained for the first time at the Tribunal stage.

Conclusion: The issue was decided against the assessee.

Issue (ii): whether Indira Vikas Patras constituted a capital asset and whether interest thereon was taxable only on maturity or on yearly accrual.

Analysis: Indira Vikas Patras were treated as post office deposit instruments carrying a predetermined return and a special rule governing tax treatment of yearly accrued interest. The Court held that repayment on maturity was not consideration for transfer of a capital asset and that the instruments had no market value in the sense required for capital gains treatment. It further held that the governing rule required interest to be deemed to accrue year by year, and that this scheme was consistent with the charging provisions of the Income-tax Act, 1961.

Conclusion: The issue was decided against the assessee.

Issue (iii): whether interest under section 234B could be levied when the assessment order did not expressly state the charge in so many words.

Analysis: Interest under section 234B was held to be mandatory once default in advance tax was established. The absence of a formal recital in the body of the assessment order did not negate the liability where the computation portion had worked out the interest. The recomputation aspect had already been remanded by the Tribunal, and no jurisdictional error was found in the levy itself.

Conclusion: The issue was decided against the assessee.

Final Conclusion: No substantial question of law arose on the challenges raised, and the appeals failed in entirety.

Ratio Decidendi: Where professional income is returned and assessed on estimation without books of account, fresh factual claims for specific deductions cannot ordinarily be raised for the first time before the Tribunal; instruments that mandate yearly accrual of interest are taxed on accrual notwithstanding maturity payment; and statutory interest for advance-tax default is mandatory and does not depend on an express recital in the assessment order.

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