2002 (2) TMI 54

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....e relevant previous year in full?" The necessary facts are as follows: The assessees are individuals. For the assessment year 1992-93, the assessees claimed deduction under section 54E of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for the amounts deposited in the National Housing Bank Three Year Bond. The interest was payable at the rate of 9 per cent. by the Government. Both the assessees had opted for the discounted interest and the same was paid to the assessees during the year underassessment. The assessee, A. R. Santhanakrishnan, received the discounted interest of Rs. 11,28,000 on July 9, 1991, on the deposit of Rs. 47 lakhs. Likewise, the other assessee, A.R. Chandrika, received the interest of Rs. 2,29,68....

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....ar, the same has to be accounted for in the assessment year. Learned counsel appearing for the respondents/assessees has submitted that the Tribunal has passed an order only following the principle of law laid down by the Madhya Pradesh High Court in the decision rendered in M.P. Financial Corporation v. CIT [1987] 165 ITR 765 and as such, there is no infirmity in the order. We have heard learned counsel on either side and perused the material on record. It is the admitted case that the assessees have deposited certain amount in the National Housing Bank Three Year Bond, which carry interest at the rate of 9 per cent. and payable by half-yearly rest. However, the assessees opted for discounting of interest and received the interest....

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...."The discount on the issue is, in effect, deferred interest, and should accordingly be written off over the period having the use of the money raised by the debentures, unless a sinking fund is created to accumulate the full redemption price, including the discount." The Madhya Pradesh High Court further relied on Batliboi's Principles and Practice of Auditing, as to the effect of issue of debentures at a discount, which stated as follows: " 'When debentures are issued at discount, an account styled "Discount on Debentures Account", will be debited with the discount allowed on the issue. The debentures account will be credited in the books at their nominal value and will appear at that value as a liability in the balance-sheet. The lo....