Pendente lite interest accrues only when the court awards it, not merely from the original contract after suit filing.

After a suit is filed, entitlement to pendente lite interest is governed by the court's discretion under section 34 of the Code of Civil Procedure, 1908, rather than by the original contract alone. The claim does not become a vested or accrued right for the post-suit period until the competent court passes the decree awarding such interest. Applying that principle, the interest relatable to 1 January 1980 to 31 December 1980 was held not to have accrued in the previous year relevant to assessment year 1981-82, so the addition was not sustainable for that year.

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Issues: Whether interest on the decretal amount for the period from 1st January 1980 to 31st December 1980 accrued to the assessee in the previous year relevant to assessment year 1981-82, where the suit for recovery had been filed earlier and the final decree awarding pendente lite interest was passed after the close of the accounting year.

Analysis: The decisive question was whether, after institution of the suit, the assessee retained an enforceable contractual right to interest during the pendency of the proceedings. The reasoning applied the principle that, for the post-suit period, entitlement to interest depends on the Court's discretion under section 34 of the Code of Civil Procedure, 1908, and not merely on the original bargain between the parties. Once the suit was filed, the claim for interest for the pendente lite period did not mature into a vested right until the competent Court exercised its discretion and passed the decree. On that basis, the majority held that the interest relatable to the period within the accounting year had not accrued merely because the decree was passed later, and that the accrual occurred only when the High Court finally adjudicated the claim.

Conclusion: The interest for the period 1st January 1980 to 31st December 1980 did not accrue to the assessee in the previous year relevant to assessment year 1981-82; the addition was therefore not sustainable in the assessee's hands for that year.

Ratio Decidendi: After a suit is filed, the right to receive pendente lite interest is controlled by the Court's discretion under section 34 of the Code of Civil Procedure, 1908, and such interest does not accrue as a matter of contractual right until the decree is passed.

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