Case Law Details
DCIT Vs. Delhi Tourism Transporation Corporation Ltd. (ITAT Delhi)
Interest income on fixed deposits was taxable on accrual basis on following of mercantile system
Conclusion: Addition made by AO on the ground that although assessee had claimed credit for TDS on the interest income from the bank, corresponding interest income was not offered to tax by assessee during the year was justified as assessee was regularly following mercantile system of accounting, interest income in question was liable to be taxed in assessment year in question itself.
Held:
AO made addition on the ground that although assessee had claimed credit for TDS on the interest income from the bank, corresponding interest income was not offered to tax by assessee during the year. CIT(A) confirmed this addition on the ground that assessee had failed to file any evidence to reconcile the amount. Assessee submitted that interest income on Fixed Deposits was offered to tax in subsequent year(s), following cash system of accounting; in the year in which the income was actually received by assessee. It was held once assessee had opted to follow Mercantile System as its regular system of accounting, it was not open for assessee to account for certain income (Interest Income from Fixed Deposits in the Bank, as in this case) under cash system of accounting. As income from Fixed Deposits in Bank had accrued to the assessee in accordance with system of accounting regularly employed (mercantile system, in this case), the income had to be assessed during the year.
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