Income TaxLaw Report
Equity shares received in lieu of accrued interest constitute constructive receipt of income and taxable under the Income Tax.
The Madras High Court has held that the equity shares received against the accrued interest instead of cash is taxable under income tax.
The court held that even if the assessee follow cash system of accounting under Section 145 of the Income Tax Act, 1961, it cannot defer tax liability when an asset of monetary value, is received in lieu of accrued interest.
The assessee, Sanjjay Saumyha filed a tax appeal challenged the order passed by ITAT upholding the revisionary order of PCIT. The assessee is an individual taxpayer, director and shareholder in AVR Swarna Mahal Jewellery Pvt. Ltd. (SMJPL).
He received zero-coupon convertible debentures September 2, 2009. The debentures had a nine-year tenure and were scheduled to mature on September 1, 2019, with a redemption value of Rs.6,400 per debenture.
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Before the Court
