M.C. Agarwal, Judicial Member - (1.)THESE are cross appeals by the Revenue and the assessee respectively arising out of the assessee's assessment for asst. yr. 1982- 83. We have heard the learned Departmental Representative and the learned counsel for the assessee and have perused the material placed before us.
(2.)The first ground raised in the departmental appeal is as below:
1. The CIT(A) was not correct in law and on facts in directing the ITO to recompute the interest income and assess the same only on the basis of accrual, leaving out accrued income of earlier year(s) received this year; when the assessee has not accepted the accrual basis decision of preceding years and itself offered for taxation accrual income of earlier year(s) received this year. Moreover, the assessee has not prayed for such a relief in its grounds of appeal as preferred before the CIT (A).

In the assessee's appeal also, ground No. 1 is on the same point and is as under:

1. For that the learned CIT(A) has erred in law in rejecting the contention of the appellant company that interest on some of its fixed deposits with banks, which under the terms of the said deposits was due and payable to the company only on the date of their maturity falling after the expiry of the relevant previous year, i.e., in the company's accounting year 1st Oct., 1981 to 30th Sept., 1982 (which interest amounted to Rs. 33,221) did not accrue or arise to the company in, and not taxable as its income of, the relevant previous year.

The assessee invested its funds in fixed deposits with banks and the question in the aforesaid ground is about the time when the income from interest on such fixed deposits should be deemed to have been earned by the assessee so as to be included in its income for tax purposes. The Revenue's contention has been that the interest from day to day and the ITO has, therefore, been calculating the assessee's income from interest on what is called de diem en diem basis. The assessee's case on the other hand has been that interest accrues to it only on maturity and is, therefore, taxable in the year in which the fixed deposit matures.

(3.)THE assessee's accounting year for the assessment year under consideration ended on 30th Sept., 1981. It held certain fixed deposits which were to mature in the following accounting year but on which interest on de diem en diem basis calculated up to 30th Sept., 1981 amounted to Rs. 32,221. This amount was credited by the assessee in its accounts and taken to the profit and loss account. However, while filing the return of its income the assessee excluded this amount from its income on the basis of the contention as stated above.