2002 (10) TMI 30

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....sa State Financial Corporations Act, 1951, the Tribunal was legally correct in coming to the conclusion that no interest accrued to the assessee corporation till the decision of the civil court and that no such interest amount would be chargeable to tax in the hands of the assessee for the assessment year 1983-84?" The respondent-assessee is the Orissa State Financial Corporation established under section 3(1) of the State Financial Corporations Act, 1951. The assessment year is 1983-84 for which the previous year ended on March 31, 1983. During the relevant year, the assessee credited Rs. 1,14,82,064 to "interest suspense account" instead of crediting the same to "interest account". This amount was not shown as income during the year on....

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....the Income-tax Appellate Tribunal which did not agree with the reasoning of the Commissioner of Income-tax (Appeals) and by the impugned order dated April 10, 1991 (out of which this reference arises) held that no interest can be held to have accrued legally till decision of the court is arrived at. We have heard learned standing counsel for the Revenue. Under section 5 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), taxability is attracted not merely when income is actually received but also when it has "accrued". As explained by the Supreme Court in CIT v. K.R.M.T.T. Thiagaraja Chetty and Co. [1953] 24 ITR 525 and Morvi Industries Ltd. v. CIT [1971] 82 ITR 835, income accrues when it falls due that is to say when....

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....he date of decree is within the discretion of the court and it can prescribe such rate of interest as it thinks just and proper in the circumstances. It may be that according to section 34, the plaintiff is entitled to interest even for the period pendente lite but he cannot say at what rate until the court determines the same. In such a situation, it would not be possible for the plaintiff-assessee to say that interest is accruing to him from year to year pending the suit at a particular rate. It accrues to him on the date of the decree. To arrive at such a conclusion, the court relied upon a decision of the Calcutta High Court in CIT v. Naskarpara Jute Mills Co. Ltd. [1983] 141 ITR 384. It cannot be disputed that the award of interest ....