The Bank Of Rajasthan Ltd vs Commissioner Of Income Tax

The Supreme Court addressed the issue of broken period interest in the context of the Income Tax Act, 1961, specifically examining the implications of Sections 18 to 21, which were repealed by the Finance Act, 1988. The Court held that a Scheduled Bank is entitled to claim a deduction for broken period interest when calculating its taxable income, affirming the practice of netting interest paid against interest received. The judgment clarified that the CIT's interference under Section 263 was unwarranted, thereby upholding the appellant's method of accounting for interest in its assessments.