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2012 (9) TMI 922 - HC - Income TaxAddition being accrued interest on advances - ITAT deleted the addition - Held that - The Tribunal endorsed the finding of the CIT (Appeals) relying upon its decision for the assessment year 2004-2005. The Tribunal s finding would show that it had also relied upon the decision of the Supreme Court in Fuerst Day Lawson ltd. Vs. Jindal Exports Ltd., (2001 (5) TMI 881 - SUPREME COURT OF INDIA). This Court also noticed that having regard to the terms of the repealed Arbitration Act, 1940, an award could not be enforceable. The same was the case with the foreign award; the Court had to first adjudicate as to the enforceability. In these circumstances, the assessee s right to interest was a mere claim, till the date of the judgment of the Court dated 4th December, 2006. In other words, the right to interest crystallized after the judgment of the Court. Till then, it was inchoate. For this reason, the Tribunal s finding cannot be faulted with. Decided against revenue.
Issues:
1. Interpretation of tax liability on accrued interest during assessment year 2005-2006. Analysis: The High Court addressed the issue of tax liability on a sum of &8377; 6,64,71,000/-, alleged to have accrued as interest during the assessment year 2005-2006. The assessee filed its return on 31st October, 2005, and the dispute arose regarding the inclusion of this interest amount in the assessment. The CIT (Appeals) accepted the assessee's contention that the entitlement to the interest arose only after the award was made a rule of court on 4th December, 2006. The Tribunal, in line with the CIT (Appeals), relied on its decision for the assessment year 2004-2005 and also cited the Supreme Court's decision in Fuerst Day Lawson ltd. Vs. Jindal Exports Ltd., (AIR 2001 SC 2293) to support its finding. The Court examined the enforceability of the award under the repealed Arbitration Act, 1940, and noted that the assessee's right to interest was merely a claim until the judgment of the Court on 4th December, 2006. The Court emphasized that the right to interest crystallized only after the judgment, and until then, it remained inchoate. Considering these factors, the Court upheld the Tribunal's finding that the interest amount was not liable to be taxed during the assessment year 2005-2006. The Court concluded that no substantial question of law arose from the matter, leading to the dismissal of the appeal.
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