Commissioner of Income Tax vs R. Ramanathan Chettiar

N.V. Balasubramanian, J.—Pursuant to the directions of this court in T.C.P. No. 358 of 1983, dated January 23, 1984, the Appellate

Tribunal has stated a case and referred the following question of law for our consideration :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that only the net interest income from Indian

Overseas Bank, Colombo, after deduction of tax deducted at source should be included in the assessee''s case and not the gross interest ?

The point that arises is whether the net interest income received by the assessee from the Indian Overseas Bank, Colombo, after deduction of

tax at source is taxable or whether the gross interest income is taxable. The Appellate Tribunal held that tax can be levied only on the net income

received after granting deduction of tax at source in Srilanka. This court, however, in A.F.W. Low Vs. Commissioner of Income Tax, held that the

gross dividend income should be regarded as having accrued or arisen or received by the assessee and it is only with reference to the gross

income, the tax can be levied. Though the decision reported in A.F.W. Low Vs. Commissioner of Income Tax, was dealing with a case of

dividend, the principle laid down in that case would equally apply to the case pertaining to the interest income as well. Accordingly, we hold that

the Tribunal was not correct in holding that the tax can be levied only on the net interest income. Accordingly, we answer the question of law

referred to us in the negative and in favour of the Revenue. There will be no order as to costs.