COMMISSIONER OF INCOME TAX Vs. NANHELAL

JUDGEMENT

(1.) THE Commissioner of Income-tax referred three questions to this Court under Section 66, Income-tax Act on the application of the assessees. They were stated as follows by the assessees, and sent on by the Commissioner without alteration: 1. Whether interest which has not been actually received or realized by the assessees but which has been merely entered in their account bocks for the purpose of proper account keeping can be said to be income, profit or gain, which is liable to assessment of income tax.

(2.) WHETHER interest which has not been actually received or realized by the assessees but which is merely acknowledged by the debtors to save limitation can be said to be income, profit or gain which is liable to assessment of income-tax.

(3.) BUT it is quite clear from the Commissioner's statement of the case and the arguments advanced on his behalf that the question he and the assessees intended to put was this : If interest has fallen due to an assessee but has not been paid to him and he shows the amount due in his interest ledger (byaz khata) on the credit (jame) side for himself, according to the mercantile system of accounts which he has adopted, is the amount so shown to be treated as income, profit or gain under Section 13, Income-tax Act? The Commissioner would answer this question in the affirmative.