2010 (3) TMI 806

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....he Income-tax Act. 2. All these assessees have subscribed 8 per cent Reserve Bank of India Bonds, in the previous year relevant to the assessment year under appeal. The 8 per cent RBI Bonds were redeemable on maturity along with interest on 9-5-2011. The Reserve Bank of India credits interest on this Bond at the time of maturity and not before. 3. In the above scenario, the assessees filed the return of income but without offering any interest income attributable to the 8 per cent RBI Bonds. According to the assessees, they are following cash system of accounting and the interest should be accounted only when the Bonds are redeemed and interest is paid at the time of redemption. According to the Reserve Bank of India, the interest inc....

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.... these appeals before us. 7. We heard both sides in details. 8. The reference made by the CIT(A) on the Board's Circular No. 2 of 2002, dated 15-2-2002 reported in 252 ITR (St.) 241, issued in the context of Deep Discount Bonds is not applicable to the present case of 8 per cent Reserve Bank of India Bonds. The general Rule on recognition of income is either accrual or cash method. The assessees has the right to choose the method, unless the statutory provisions prescribes any other method to be followed mandatorily. In this case, there is no such mandate by the statutory and, therefore, they are entitled to recognize the interest income on RBI Bonds, either on accrual basis or on cash basis. 9. The option of the assessees will for....

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....Bank of India makes the deduction of tax only at the time of redemption. How it is possible for an assessees to claim credit for the TDS made by the Reserve Bank of India? This is almost impossible. This impossibility defeats the contention of the assessing authority that the interest income attributable to 8 per cent RBI Bonds should have been offered on accrual basis. 11. Regarding the Circular issued by the CBDT in the context of Deep Discount Bonds, it is to be clarified that no such Circular has been issued in respect of the subject 8 per cent Reserve Bank of India Bonds. In the light of the Circular issued by the CBDT, the Deep Discount Bond stand on its own independent footings. Only for the reason there are certain common feature....