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Issues:
Taxability of interest received under an agreement of sale dated April 2, 1983. Analysis: The appeals were against the order of CIT(A) regarding the taxability of interest received by the assessee under an agreement of sale. The assessee claimed that the interest received was not taxable income as it was on "capital account." The Assessing Officer disagreed and charged the interest to tax. The CIT(A) upheld the addition, stating that the amounts represented interest on the outstanding balance payable by the purchaser. The assessee argued that the amount was wrongly described as interest and was actually compensation received as part of the sale consideration. The Departmental Representative supported the CIT(A)'s order, emphasizing that the amount in question was interest and should be taxed as such. The Tribunal considered the legal propositions regarding the taxability of interest. It was noted that interest represents compensation for the loss suffered due to being kept out of money, and its nomenclature is not decisive. The character and nature of the payment must be considered. The Tribunal referred to a case where an amount labeled as interest was held to be damages or compensation for deprivation of property, not taxable. Applying these principles to the case at hand, the Tribunal examined the agreement dated April 2, 1983, which clearly stated that interest was to be paid for the delay in payment of the stipulated consideration. The interest was calculated at a fixed rate on the balance amount and was not part of the sale consideration. The Tribunal concluded that the interest was rightly treated as a revenue receipt and was correctly taxed. In conclusion, the appeals were dismissed, upholding the order of the CIT(A) regarding the taxability of the interest received under the agreement of sale.
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