IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH `E' : NEW DELHI)
BEFORE SHRI R.S.SYAL, HON'BLE VICE PRESIDENT
AND
SHRI LALIET KUMAR, JUDICIAL MEMBER
ITA No.616/Del./2016
(ASSESSMENT YEAR : 2011-12)
ITO, INS Finance & Investment Pvt. Ltd.
Ward-12(3), vs. A-2/452, Sector-8, Rohini
Room No. 420-B,
4th Floor,
C.R.Building, I.P.Estate
New Delhi New Delhi
(PAN : AABC14418E)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Sh. Satya Jeet Goel, C.A.
REVENUE BY : Sh. Manoj Kumar Mahar, Sr.DR
Date of Hearing : 11.10.2018
Date of Order : 11.10.2018
ORDER
PER LALIET KUMAR, JUDICIAL MEMBER :
1. The present appeal is being filed by the revenue on the
following grounds :-
"1. On facts and circumstances of the case CIT (Appeal)
has erred in holding that the interest income received by
the assessee is to be taxed in the respective years after
holding the receipt of Rs. 3,19,07,676/- by the assessee as
interest income on the deposit for purchase of land and
hence taxable, ignoring the clear provisions of Section
56(1) of the Act.
2.On facts and circumstances of the case CIT (Appeal)
2 ITA No.616/Del./2016
has erred in holding that the interest income received by
the assessee is to be taxed in the respective years relying
on the decision of Hon'ble Supreme Court in the case of
Rama Bai versus CIT 181 ITR 400 ignoring the fact that
the amount involved is not in the nature of interest on
compensation or enhanced compensation.
3.On facts and circumstances of the case and without
prejudice to the GOA as per (1) and (2) above, CIT
(Appeal) has erred in holding that the interest income
received by the assessee is to be taxed in the respective
years relying on the decision of Hon'ble Supreme Court in
the case of Rama Bai versus CIT 181 ITR 400 ignoring
the clear provision of Act in section 145A(b) which clearly
lays down that interest received by an assessee on
compensation or enhanced compensation as the case may
be, shall be deemed to be the income of the year in which
it is received.
4.On facts and circumstances of the case and without
prejudice to the GOA as per (1) and (2) above, CIT
(Appeal) has erred in holding that the interest income
received by the assessee is to be taxed in the respective
years relying on the decision of Hon'ble Supreme Court in
the case of Rama Bai versus CIT 181 ITR 400 ignoring
the clear provision of Act in section 145A(b) which was
introduced to overcome the hardship caused by the above
cited decision of the Hon'ble Supreme Court as is evident
from the explanatory note to finance act, 2009 (para 46 of
CIRCULAR NO. 05/2010, DATED 3rd JUNE, 2010 (copy
attached.)"
3 ITA No.616/Del./2016
2. At the outset, the Ld. AR has drawn our attention to the decision of
the Tribunal passed in the case of the assessee in ITA no. 505/Del/2016
where in the Tribunal in paragraphs 10, 11 and 12 held as under :
" We have carefully considered the rival contentions and
perused the orders of lower authorities. Admittedly, assessee
is not in business of real estate. Brief facts shows that
Assessee Company participated in the auction carried out by
Punjab National Bank, Chandigarh on 5.12.2006 through
Debt Recovery Tribunal in respect of property mortgaged by
M/s. Sanmati Rice Mills as a security for borrowed fund.
The assessee was declared the highest bidder at Rs. 10.07
crores. The assessee deposited the above sum with DRT in
stipulated time as per terms and conditions of the bidder
auction. The Debt Recovery Tribunal also issued the
certificate of sale to the assessee on 02.03.2007.
Subsequently the order of the Debt Recovery Tribunal was
challenged before Debt Recovery Appellant Tribunal
(DRAT) and orders dated 25.06.2009 was passed wherein it
was Page | 4 ITA No. 505/Del/2016 & 3099/Del /2016
Assessment Year: 2011-12 INS Finance & Investment P Ltd
Vs ITO ordered that the possession taken by the assessee of
the auctioned property be returned back to the original
borrower. The assessee challenged the above order before
the Hon'ble Punjab and Haryana High Court in CWP
number 1470 of 2010. The Hon'ble High Court directed
Punjab National Bank to return the whole sum deposited
along with interest accrued thereon. Consequently, the DRT
recovered the money from Punjab National Bank and
refunded the same to the appellant. So assessee was repaid
originally auction amount as well as a further sum of Rs
31907676/- . The Punjab National Bank by making the
repayment deducted the tax at source in respective years
and issued certificates in favour of DRT. Furthermore, the
assessee filed a civil suit in the court of Civil Judge Sr.
4 ITA No.616/Del./2016
Division, Chandigarh for recovery of damages. It is stated
that the above sum was accepted from Punjab National
Bank subject to legal right of the petitioner to challenge the
compromise arrived between the borrower and the bank.
Therefore, it was stated that the dispute had not reached any
finality and therefore, no interest or damages have accrued
to the assessee finally. The assessee further relied on the
decision of Ghaziabad Development Authority Vs. Dr. N. K.
Gupta 258 ITR 337 wherein it has been held that merely
because the damages are stated to be interest they cannot be
subject to tax as interest. We have also carefully perused the
order of the Debt Recovery Tribunal, Chandigarh dated
03.12.2008 wherein in para No. 22 has set aside the sale,
and the bank was directed to refund the sale consideration
originally accepted from the appellant along with any
interest accrued on it, which has been kept in the office of
the Debt Recovery Tribunal. Therefore, the Debt Recovery
Tribunal has not awarded any interest to the appellant but it
has just refunded the money deposited by the assessee in
auction along with any interest earned by the bank on that
sum in favour of DRT. The revenue could not show that at
the time of auction there was any condition of payment of
interest to the assessee in case the auction is cancelled. In
fact as per certificate of sale dated 02.03.2007 even the
Page | 5 ITA No. 505/Del/2016 & 3099/Del /2016
Assessment Year: 2011-12 INS Finance & Investment P Ltd
Vs ITO possession of the property was also given confirming
the sale absolutely in favour of the assessee. Even otherwise
as per the provisions of section 2(28A) of the Act interest
means interest payable in any manner in respect of money
borrowed or debt incurred including a deposit, claim or
other similar rights. In the present case, the above sum was
not payable to the assessee because of any such debt
incurred. The assessee purchased a property in auction
which was transferred to assessee, subsequently the sale was
cancelled, so assessee was paid original sum and some
further amount which was earned by bank as interest
5 ITA No.616/Del./2016
thereon from the date assessee paid to the bank till the date
of order. Therefore, above sum cannot be considered as
interest. Now, it is required to be examined that whether
such sum received by the assessee is a capital receipt or
revenue in nature. As held by the Hon'ble Supreme Court in
CIT Vs. Saurashtra Cement Ltd. 325 ITR 422 that the
question whether a particular receipt is capital or revenue it
is not possible to formulate any single criteria as decisive in
the determination of the question. In the present case, the
sum is received by the assessee on cancellation of sale
contract as per the auction of Sanmati Rice Mills. Further,
the sum received by the assessee had direct nexus to the
cancellation of acquisition of the immovable property
obtained by him in auction. Further, it is clear that excess of
amount then what assessee deposited, received by the
assessee for a breach of a contract and hence same is a
capital receipt. The coordinate bench in DCIT Vs. Winsome
Yarns Limited [TS-546-IT-2014 (Chandigarh)] [2014] 50
taxmann.com 318 (Chandigarh - Trib.) decides the identical
issue. In that particular case the transaction of sale of
industrial plot was set aside by Hon'ble Supreme Court and
the assessee was deprived of making future profits on the
industrial plot and therefore, the compensation received by
the assessee against such surrender was held to be capital
receipt not chargeable to tax.
11. The ld DR could not controvert above facts and finding
that sum is not chargeable to tax as it is capital receipt. Ld
DR has heavily relied on the provision of section 56(2) (viii)
of the act. The above section provides that income shall be
chargeable to tax under the head income from other sources
if it is income by way of interest received on compensation
or on enhanced compensation referred to in clause (b)
of section 145A. The provision of section 145A provides that
any interest received by the assessee on compensation or
enhanced compensation shall be chargeable to tax in the
year in which it is received. Therefore, provision of section
145A speaks about the timing of taxability and section 56(2)
6 ITA No.616/Del./2016
(viii) the head under which it is chargeable. However, the
character of income should be interest on compensation or
enhanced compensation. In the present case, we have
already held that it is not interest but compensation. Section
56 (2) (viii) also does not provide for taxation of
compensation but only interest on such compensation. In the
present case, the assessee has received compensation. Ld
DR also could not show that if the amount received is
interest on compensation what the amount of compensation
itself is. In view of this, we reject the contention of the
revenue that provision of section 56 (2) (viii) applies to the
impugned amount.
12. In view of above decision of coordinate bench, which has
considered identical issue as per principles enunciated by the
Hon Sc , we respectfully following it hold that Rs. 31907676/-
is a capital receipt Page | 22 ITA No. 505/Del/2016 &
3099/Del /2016 Assessment Year: 2011-12 INS Finance &
Investment P Ltd Vs ITO and is not chargeable to tax
therefore. Hence, Ground no 1 of the appeal of the assessee
is allowed.
3. On the basis of the above, it was submitted by the Ld. AR that
as the interest income received by the assessee has been held to be
capital in nature by the Tribunal, therefore, action of the Ld. CIT
whereby the Ld. CIT has allowed the claim of the assessee and
permitting the assessee to claim interest income as compensation in
different years on proportionate / pro rata basis is not correct. Per
contra of the Ld. DR, has submitted that the decision of the Tribunal
rendered in the case of ITA no. 505/Del/2016 (supra) was not finally
accepted by the revenue and he further relied upon the decision of the
Hon'ble Supreme Court in the matter of Rama Bia vs. CIT.
4. We have heard the rival contention of both the parties and
perused the material available on record. As is clear from the
7 ITA No.616/Del./2016
paragraph 11 (supra) that Tribunal held in the case of the assessee
that the income by way of interest received by the assessee was in the
nature of compensation and therefore in view of the provision of
Section 56(2) (viii) is required to be excluded from the total income.
5. Once the Tribunal in the case of the assessee, had categorically
held above, then it is not appropriate for the bench in the present
proceeding to take a contrary view. Therefore, in view of the facts
when the Tribunal had already held that the income received by way
of interest was compensation in nature ad clause falls within (viii) of
section 56(2) then the receipt of income cannot be treated as interest
and would not be liable for taxation, hence the finding recorded by
CIT whereby CIT has granted proportionate adjustment of interest in
various years, become, irrelevant & infructuous on the basis of finding
i.e. income was capital in nature, had already been reversed by the
Tribunal.
6. In view of above, we find no merit in the appeal of the revenue
and accordingly the appeal of the revenue is dismissed.
7. In the result, appeal of the revenue is dismissed.
Order pronounced in open court on 11th October, 2018.
Sd/- Sd/-
(R.S.SYAL) (LALIET KUMAR)
VICE PRESIDENT JUDICIAL MEMBER
Dated 11/10/ 2018
BR
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-XXVI, New Delhi.
5.CIT(ITAT), New Delhi.
8 ITA No.616/Del./2016
AR, ITAT
NEW DELHI.
Date of dictation 11.10.2018
Date on which the typed draft is placed before 11 .10.2018
the dictating Member
Date on which the typed draft is placed before 11.10.2018
the Other Member
Date on which the approved draft comes to the 11.10.2018
Sr. PS/PS
Date on which the fair order is placed before .10.2018
the Dictating Member for pronouncement
Date on which the fair order comes back to the .10.2018
Sr. PS/PS
Date on which the final order is uploaded on .10.2018
the website of ITAT
Date on which the file goes to the Bench Clerk .10.2018
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant
Registrar for signature on the order
Date of dispatch of the Order
|
