Fixed deposit interest is taxable on gross receipt; loan interest against the same deposit does not create a net-off right.

Interest on a fixed deposit is taxable as income in the assessee's hands and cannot be reduced by interest paid on a loan taken from the same bank against that deposit unless a statute expressly allows the deduction. The borrowing and the deposit do not become mutually linked transactions for assessment purposes merely because the loan is secured by the deposit. The principle of mutuality does not apply on these facts, so taxability is determined on the gross interest received rather than a net figure after setting off loan interest.

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Issues: Whether interest earned on a fixed deposit can be reduced by interest paid on a loan taken from the same bank against the security of that deposit, and whether such deposit and borrowing constitute mutually linked transactions warranting assessment only on the net amount.

Analysis: The Court held that the interest received on the fixed deposit was income in the assessee's hands and could be reduced only if a legal provision permitted such diminution. The fact that the loan was taken from the same bank did not alter the position in law. The case did not fall within the principle of mutuality, and the assessee's reliance on a different factual situation was rejected.

Conclusion: The assessee was taxable on the gross interest from the fixed deposit, and the loan interest paid to the bank did not reduce that income. The issue was decided in favour of the Revenue and against the assessee.

Final Conclusion: The appeals succeeded and the questions referred were answered against the assessee.

Ratio Decidendi: Interest earned as income cannot be reduced by interest paid on a separate borrowing, merely because the borrowing is from the same bank and secured on the same deposit, unless the statute expressly permits such deduction.

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