- (1.)The subject-matter of the dispute in this appeal relates to the interpretation of S. 5 of the Interest-tax Act, 1974 (the Act) which reads thus :
"Subject to the provisions of this Act, the chargeable interest of any previous year of a credit institution shall be the total amount of interest (other than interest on loans and advances made to other credit institutions) accruing or arising to the credit institution in that previous year. Provided that any interest in relation to categories of bad or doubtful debts referred to in S. 43-D of the Income-tax Act shall be deemed to accrue or arise to the credit institution in the previous year in which it is credited by the credit institution to its profit and loss account for that year or, as the case may be, in which it is actually received by the credit institution, whichever is earlier. "

(2.)The questions which had been referred to the High Court for its decision were : (1) Whether, on the facts and circumstances of the case, on account of incorporation of S. 145 of the I.-T. Act, 1961 with effect from 1-10-1991 the s. 21 of the Interest Tax Act, 1974 and the overriding effect of S. 21 over S. 5 by which the interest tax has to be levied only on the interest income computed, based on the method of accounting regularly employed by the assessee, the appellate Tribunal was correct in law in concluding that the assessing officer has rightly made the computation of the interest on accrual basis, rejecting the cash system of accounting accepted for the assessment under the I.-T. Act, 1961 (2) Whether on the facts and circumstances of the case on account of doctrine of incorporation, S. 145 of the I.-T. Act, 1961 having been incorporated in S. 21 of the Interest-tax Act, 1974 when the assessee maintains books of accounts on cash system and being assessed under cash system under Income-tax Act does not the chargeable interest deserve to be computed on cash method and if the intention of the legislature would have been to tax on mercantile system, the Legislature in their wisdom would not have included S. 145 of the I.-T. Act, 1961 in S. 21 of the Interest Tax Act
(3.)The High Court decided the first question only against the assessee and in favour of the revenue. The second question was not considered given the High Court's decision on the first question.