Interest Income on Securities Accrues on Due Date of Payment and not on Everyday Basis: Supreme Court Declines Interference with Bombay HC Ruling [Read Order]

The Supreme Court of India recently dismissed a Special Leave Petition filed by the Principal Commissioner of Income Tax-2 challenging a judgment of the Bombay High Court which had refused to admit the Revenue’s appeal on the issue of accrual of interest income on securities.

The dispute pertained to the financials of the Central Bank of India for the Assessment Year 2008-09 which had already been adjudicated by the Income Tax AppellateTribunal (ITAT).

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Before the Bombay High Court, the Revenue, represented by Samiksha Kanani, raised the following query among another:

“(ii) On the facts and circumstances of the case and in law,whether the Hon'ble ITAT is correct in holding that the interest income on securities held by the assessee accrues on the due date of payment of interest and not on every day basis, given that the assessee claims broken period interest as expenditure, thus violating matching principle of accounting?"

The respondent Central Bank of India, was represented by Nitesh Joshi instructed by Tejas Shah.

A Division Bench comprising Justice M.S. Sonak and Justice Jitendra Jain examined the issue and noted that the ITAT had duly followed the decision of the Bombay High Court in Director of Income-tax (International Taxation) v. Credit Suisse First Boston (Cyprus) Ltd. (2012) The Bench observed that since the coordinate bench decision covered the issue, no substantial question of law arose for consideration.

Considering the premise, the High Court further observed that such a question could not be answered in favour of the Revenue and accordingly declined to admit the appeal.

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Aggrieved by the refusal to admit the appeal, the Revenue approached the Supreme Court through this present petition.

The Bench of Justice Sanjay Kumar and Justice K. Vinod Chandran condoned the delay in filing the Special Leave Petition. However, after hearing counsel, the Court found no good ground or reason to interfere with the judgment of the Bombay High Court and accordingly dismissed the Special Leave Petition.

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