DEVAYANI AMMA Vs. DY COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The question raised in the appeal filed by the assessee is whether the Income Tax appellate Tribunal was justified in holding that interest received by the assessee on refund relating to previous year is assessable to tax in the assessment year in which such interest is granted to the assessee along with the refund.

(2.) We have heard Sri. P. Balakrishnan, learned counsel appearing for the appellant and the Standing Counsel appearing for the respondents.

(3.) The assessment made in the case of the assessee for the year 1983-84 was subjected to appeal which was decided in favour of the appellant. However, the assessing officer re vised the assessment under S.140 of the Income Tax Act, 1961 (for short 'the act') and granted refund only in the previous year relevant for the year 1994-95. Along with refund of excess tax paid, a further sum of Rs.2,87,537/- was granted towards interest payable under S.244 (l A) of the Act. However, the entire interest was treated as income of the assessment year 1994-95 and assessed to tax. The assessee contested the liability for tax on the entire interest amount for the assessment year 1983-84 on the ground that interest accrues every year from the date of excess tax payment till the date of refund. Even though the assessee was successful in first appeal before the commissioner of Income Tax Appeals, the Tribunal, following the decision of the Orissa high Court in C. I. T. V/s. Sri. Popsing Rice Mill (212itr 385) and another decision of the allahabad High Court in J. K. Spinning and Weaving Mills Co. V/s. Addlc. LT. (104 ITR 695), allowed the Department's appeal and restored the assessment holding that interest income is assessable on receipt basis. It is against this order of the Tribunal, the appellant has approached this Court in this appeal.