Commissioner of Income Tax-V, V. Sri Dandamuri Avanindra Kumar,

ITTA/52/2013

AI Insights

The case involves the Commissioner of Income Tax-V as the appellant and Dandamuri Avanindra Kumar as the respondent. The core issue was whether the interest income on amounts invested in redeemable cumulative debentures (RCDs) should be charged to tax on an accrual basis. The Assessing Officer had added a sum of Rs.2,63,84,593 to the respondent's income, considering the interest received. However, the Commissioner of Income Tax (Appeals) and the ITAT found that the interest on these debentures is cumulative and does not accrue annually, thus not taxable until actually received. The High Court upheld this decision, agreeing that the interest had not accrued to the assessee except to the extent of the TDS, and was not taxable during the year.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 719131 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 20-06-2013
• Assessment Year: misc
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Accrual basis; Income Tax; Interest income; Cumulative Debentures

Judgement Text

"HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE Ms. JUSTICE G.ROHINI I.T.T.A.No.52 of 2013 Date: 20.06.2013 Between: The Commissioner of Income Tax-V, IT Towers, A.C.Guards, Hyderabad. .....Appellant AND Dandamuri Avanindra Kumar H.No.88, Gunrock Enclave, Secunderaabd.. ...Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE Ms. JUSTICE G.ROHINI I.T.T.A.No.52 of 2013 JUDGMENT: (per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta ) This appeal is sought to be admitted on the following substantial questions of law: 1. In the facts and circumstances of the case, Whether the Tribunal (ITAT) is correct in law in upholding the decision of the addition made by Assessing Officer in regard to the interest income on the amounts accrued and derived by the respondent- assessee on the amounts invested in the redeemable debentures, when the said interest income is chargeable to tax on accrual basis? 2. In the facts and circumstances of the case, Whether the Tribunal (ITAT) is correct in law in upholding the finding of the learned Commissioner of Income Tax (Appeals) that the interest income would not accrue on the debentures at the end of each year and the respondent-assessee has no right to receive the said interest on the investment in the debentures, without due appreciation of related material facts and reasons mentioned in the assessment order? We have heard the learned Counsel for the appellant and gone through the impugned order of the learned Tribunal. In order to consider the arguments of the learned Counsel for the appellant, we have also gone through the findings of the assessing officer and that of the Commissioner of Income Tax (Appeals). It appears at the time of scrutiny, the assessing officer made an addition of Rs.2,63,84,593/- on account of difference of interest received. The Commissioner of Income Tax (Appeals), however, found on fact as follows: “It is undisputed that the interest is cumulative, i.e., it is not payable to the assessee every year, but is accumulated and added to the amount invested in the RCD. There is, therefore, merit in the assessee’s claim that he had no right to receive the interest during the year and the interest had not accrued. This view is also supported by the various case laws cited by the assessee. Therefore, even on accrual basis, the interest had not accrued to the assessee, except to the extent of the TDS, and is not taxable during the year. The addition of Rs.2,53,84,593/- to the assessee’s income is deleted.” The learned Tribunal has examined the aforesaid fact- finding and has concurred with the fact-finding of the Commissioner of Income Tax (Appeals). We are of the view that in terms of debentures, there cannot be accrual of income as the same are cumulative in nature. If there is no accrual of income, the question of right to receive the interest does not and cannot arise. The learned Tribunal has also observed as follows: “Considering the above findings given by the CIT (A) that the interest would not accrue on the RCDs at the end of each year and the assessee also has no right to receive the said interest on account of investment in the said debentures, we are of the opinion that the said order of the CIT (A) does not call for any interference.” We, therefore, do not find any element of point of law involved in this matter. The learned Tribunal has correctly accepted the order of the Commissioner of Income Tax (Appeals). Hence, we do not find any reason to interfere with the order of the learned Tribunal. Accordingly, the appeal is dismissed. No order as to costs. As a sequel, miscellaneous petitions, if any pending, shall stand dismissed. ___________________ K.J. SENGUPTA, CJ _______________ G.ROHINI, J 20.6.2013 Gsn. "