COMMISSIONER OF INCOME TAX Vs. VARGHESE MANI

JUDGEMENT

(1.) THIS appeal at the instance of the Commissioner of Income-tax, Cochin, filed under Section 260A of the Income-tax Act, 1961, was admitted by this court on the following substantial questions of law :

(2.) ON receipt of notice the assessee appeared and the appeal was heard on the substantial questions of law formulated as above.

(3.) THERE is no dispute about the fact that the assessee exercised an option to receive interest for the entire three-year period of the bond at the discounted rate in a lump on the acceptance date by the IDBI. In other words, it was the option of the assessee to receive the entire interest at a discounted rate during the accounting year relevant to the assessment year. By the exercise of the option, the entire interest accrued to the assessee during the accounting year. It was also received by the assessee during the same accounting year. In this situation, we see no difficulty in principle to find that the entire income is liable to be assessed at the hands of the assessee during the accounting year. What is contended on behalf of the assessee is that, the discounted interest that was received by the assessee during the relevant accounting year, was in fact interest that was receivable in future also and hence the interest must be spread over for the three years and assessed on that basis. But once the whole of the interest has accrued to the assessee as has happened in this case by virtue of his exercise of an option in that behalf, it is not possible to postulate accrual of portions of that income for the future years. THERE can be only one accrual and that accrual in respect of the entire discounted interest took place in this case on exercise of option by the assessee and at his volition during the relevant accounting year. It is, therefore, not possible to accept the contention of the assessee that only such portion of the interest that is attributable to the relevant accounting year should be taken into account for the current assessment year. Moreover, in this case the income was also received in the same year and since the accrual and the receipt of the income were both in the same accounting year, it appears to us that the assessee is liable to be taxed on that income during the relevant assessment year.