Accrual of interest income on refund balance rejected where only part payment was received and premium was not yet released.

Refund correspondence showed that the buyer had to return the principal first and release the premium or interest component only afterwards, so the disputed balance had not accrued or been received as income in the assessee's hands. The assessee had received only part of the total amount and had not claimed TDS credit on the unpaid balance, and no material supported treating that sum as part of principal already received. The addition was therefore deleted in favour of the assessee.

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Issues: Whether the addition of Rs. 16,11,000 represented taxable interest or premium in the assessee's hands for the year under appeal.

Analysis: The refund correspondence showed that the buyer was to first return the principal amount and only thereafter release the premium or interest component. The assessee had received only part of the total amount and had not claimed TDS credit on the unpaid balance, supporting the case that the disputed sum had not accrued or been received as income. No material was found to justify treating the balance as part of the principal already received.

Conclusion: The addition of Rs. 16,11,000 was deleted and the issue was decided in favour of the assessee.

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