COMMISSIONER OF INCOME TAX Vs. MAHESHWARI SARAN SINGH

JUDGEMENT

(1.) These are two references made under Section 66 (1), Income-tax Act, & though the questions have been differently framed in them, the point raised is the same. The aaseesees had lent money to certain persona who applied under Section 4, U. P. Encumbered Estates Act. In due course decrees were passed under Section 14 of the Act. These decrees carried interest at a rate mentioned in the decrees. Bonda were issued by the Collector under Section 30, U. P. Encumbered Estates Act, to the creditors in satisfaction of the decrees in their favour. These bonds included not only the principal amount due under the decrees but also the accumulated interest between the date of the decree & the date on which the bonds were issued; so that the total amount of the principal & interest due under a decree was the amount for which the bounds were issued & they carried interest at 84 per cent. per annum.

(2.) In both the oases the Income-tax Officer, after deducting certain expenses incurred by the assessee, held that the amount, which covered the interest due under the decree, was assessable income.

(3.) The Appellate Assistant Commissioner upheld the decision of the Income-tax Officer that the amount of interest included in a bond, must be deemed to be income received by the assesses & was thus taxable.