2022 (10) TMI 301 - HC - Income Tax

Accrual of interest income - FDRs made in the name of the respondent-assessee by virtue of a consensual order passed by the Arbitral Tribunal - HELD THAT - As this Court in agreement with the finding of the two Appellate Authorities below that till the final award was passed by the Arbitral Tribunal determining the ownership of the fixed deposits and interest, it could not be said that the interest income had crystallized in the respondent s hands and the same cannot be held to be income of the respondent-assessee under Section 5(1) of the Income Tax Act, 1961 - No substantial question of law arises.

Summary

Issues:
1. Exemption applications in ITA 376/2022 and ITA 377/2022.
2. Delay in filing appeals in ITA 376/2022 and ITA 377/2022 condoned.
3. Challenge to Impugned Order dated 5th October, 2020 by ITAT in ITA Nos.262/Agra/2016 and 387/Agra/2017.
4. Dispute over additions made by Assessing Officer for Assessment Years 2012-13 & 2013-14.
5. Ownership of fixed deposits and interest pending final award by Arbitral Tribunal.
6. Interpretation of interest income under Section 5(1) of the Income Tax Act, 1961.

Analysis:

1. The High Court allowed the exemption applications in ITA 376/2022 and ITA 377/2022, subject to all just exceptions, and disposed of the applications accordingly.

2. The delay in filing the appeals in ITA 376/2022 and ITA 377/2022 was condoned by the court, considering the averments in the applications, and the applications were disposed of accordingly.

3. The appeals were filed challenging the Impugned Order dated 5th October, 2020 by the ITAT in ITA Nos.262/Agra/2016 and 387/Agra/2017 for the Assessment Years 2012-13 & 2013-14. The Appellant argued that the ITAT erred in deleting the additions made by the Assessing Officer, emphasizing that the disputed parties' share in the interest would arise only after payment of due taxes.

4. The dispute between the parties involved an amount exceeding Rs.190 crores, with a final settlement agreement reached between the Assessee Company and another party. The ownership of fixed deposits was established by a consensual order passed by an Arbitral Tribunal, determining that until the final award was passed, the interest income could not be considered as income of the respondent-assessee under Section 5(1) of the Income Tax Act, 1961.

5. The court found that the interest income had not crystallized in the respondent's hands pending the final award by the Arbitral Tribunal, leading to the dismissal of the appeals as no substantial question of law arose for consideration in the present case.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the court's decision and the reasoning behind it.