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TMI Blog1989 (4) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... State Government challenged the decree and the Honble Rajasthan High Court stayed the operation on 1st Dec., 1981 the Hon ble High Court ultimately confirmed the decree vide order dt. 14th Nov., 1983 but modified the rate of interest from 15 per cent claimed and awarded to 9 per cent per annum from the date of filling of the suit to the date of decree. 3. The learned IAC (Asst) noted that as per the auditor s note to the share holders under the head loans and advances secured it was mentioned: A sum or Rs. 23,84 lakhs due from a party the company has filed a suit against the State Government of Rajasthan which guaranteed the loan It is stated that under orders of the Court, the State Government has deposited the principal sum of Rs. 19,82,650 in the court and that the case has been heard and the loan. It is further stated that under orders of the Court, the State Government has deposited the principal sum of Rs. 19,82,650 in the Court outstanding since1st April, 1978." 4. The learned IAC (Asst) thus computed the interest due to the assessee on the basis of the decree @ 15 per cent per annum on the principal amount from the date of filling of the suit i.e. 19th Sept., 1979 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was the assessees case that the interest was not chargeable during the year under appeal and that the action of the learned IAC (Asst) in so far as it certained to charging of interest was without any legal basis. The learned CIT (A) confirmed the order of the learned IAC (Asst) but restricted the period to 31st Dec., 1980 relevant to the year under consideration It was further held by the learned CIT (A) that the interest rate at, 9 per cent should be relevant not at 15 per cent. Thus the order of the learned IAC (Asst) on the point was modified to this extent. 7. Assessee s present appeal before us is against that action of the learned CIT (A). It was the assessee s case before us that the learned IAC (Asst) was not justified in assessing interest from the date of filing of the suit to the close of the accounting period. According to the learned counsel of the assessee before us, the right to interest accrued after the court decree on 23rd May, 1981 which date was after the expiry of the accounting period and therefore, no interest income could be taxed during the year under consideration It was further contended that even the court decree was subsequently stayed by the Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im, There was thus not g improper in his finding. The assessee s stand that no interest accrued in the relevant period is without any basis as the interest was ultimately to be computed with reference to the period no doubt the rate was confirmed at a later date. Thus learned IAC (Asst) s finding was slightly erroneous on account of the period and the rate, that error was rectified by the learned CIT (A) when he sanctioned the inclusion of interest for the period under consideration at rate of 9 per cent per annum. It is indeed difficult to find any fault with that finding with such discussion we confirm the learned CIT (A) s order on the point. 11. The paper book has been considered 12. In the result the appeal is dismissed ANAND PRAKASH, A.M.: 25th June, 1987 I have gone through the order of my learned Brother As I Have not been able to perused myself to his viewpoint, I write a separate order as below: 2. The accounting period of the assessee company is calendar year 1980 In May, 1975 the assessee company agreed to advance a loan or Rs. 44 lacs @ 15 per cent interest to Jaipur Udyog Ltd. Against the guarantee of the Government of Rajasthan executed by the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year beginning on 1st Jan., 1980 and ending on 31st Dec., 1980, but interest relatable to the calendar year 1980 was rightly included in the assessee s total income. 4. This order of the CIT (A) was challenged before us by the assessee to be erroneous and it was the assessee s plea that the interest for the calendar year 1980 was no doubt payable to it but the right to receive it accrued in favour of the assessee only when the High Court passed its decree, and as that happened on 24th Nov., 1983 the interest for 1980 could not be included in the total income of asst, yr. 1981-82 5. This plea of the assessee has been negatived by my learned Brother. According to me however, this plea is correct is supported directly by the following authorities.; 1. CIT vs. BENGAL JUTE MILLS CO LTD (No. 1) (1986) 56 CTR (Cal) 267; (1987) 165 ITR 631 (Cal). 2. CIT vs. RAIGARH JUTE MILLS LTD. (1982) 26 CTR (Cal) 25 ; (1981) 132 ITR 702 (Cal). The following observations in (1981) 132 ITR 702 (Cal) are worth quoting to bring out the position in law: "In a case, where a suit has been filed the right to get interest for the period subsequent to the institution of the suit would depend not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year of the assessee ended on 31st Dec., 1980 relevant for the assessment year under appeal After the end of the accounting year, i.e. 23rd May, 1981 the Civil Court had passed decree in favour of the assessee in the following terms. I pass decree in favour of plaintiff and against the defendant for a sum of Rs. 28,86,239,50 The plaintiff shall be entitled to pendent little on future interest @ 17 per cent per annum payable quarterly for the date of the suit i.e., 1978-79 till realisation and shall also be entitled to legal costs of the suit the plaintiff shall also receive the amount deposit by defendant in compliance to this court order dt.27th Nov., 1979and the High Court order dt,29th Jan., 1980to wards the decretal amounts. 3. On an appeal filed by the State Government the Rajasthan High Court stayed the operation of the order of theCivil Courtbut reduced the rate of interest to 9 per cent as pendent lite and future interest. The assessee before the assessing officer submitted that during the asst. yr. 1981-82, no interest had accrued to it, although it was maintaining its accounts on mercantile system because of the fact that after the suit was filed no interest accrued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent that interest accrued even during the accounting period under appeal Even though the rate of interest was reduced the factum that interest accured was not disputed and when it was granted for the entire period and when that period covered the year under appeal it could not be said that the authorities below erred in including that interest on accrual basis. He also justified in the inclusion of the interest based upon the alternate contention raised by the assessee s counsel before the commissioner (a) (viz) that if all interest was required to be included, it should be @9 per cent and not 15 per cent From this the learned judicial member inferred that the assessee had almost agreed to the inclusion of interest on its own stand such being the case the plea that interest did not accrue in the relevant period was without any basis but the learned Accountant Member after referring to the entire and the relevant law on this subject held that the plea taken by the assessee was correct and on the authority of the Hon ble Calcutta High Court reported in the case of CIT vs. BENGAL JUTE MILLS CO. LTD. reported as (1986) 56 CTR (Cal) 267 (1987) 165 ITR 631 (Cal) and CIT vs. RAIGARH JUT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for any period prior to the institution of the suit (with further interest at such rate not exceeding six per cent per annum as the Court deems reasonable on such principal sum) from the date of the decree to the date of payment, or to such earlier date as the Court thinks fit. Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction the rate of such further interest may exceed six per cent, per annum, but shall not exceed the contracted rate of interest or where there is no contractual rate the rate at which money are lent or advanced by nationalised banks in relation to commercial transactions. Explanation-I. In this sub section Nationalised bank means a corresponding new bank as defined in the Banking companies (Acquisition and Transfer of Undertaking). Act, 1970. Explanation-ii For the purposes of this section transaction is a commercial transaction if it is connected with the industry, trade or business of the party incurring the liability (2) where such a decree is silent with respect to the payment of further interest, (on such principal sum), from the date of the decree to the date of payment or other earlier da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income tax Tribunal held that after the filing of the suit the agree to between the debtor company and the assessee company had come to an end it could not be said that the interest had accrued to the assessee from the debtor company in the relevant assessment year and in this view of the legal position whether the assessee maintained its account on mercantile or cash basis had become irrelevant on a reference filed at the instance of the commissioner. (A) the Calcutta High Court held (Justice Sabyasachi Mukherjee, as he then was, speaking for the Court) that in a case where a suit had been filed, the right to be a get interest for the period subsequent to the institution of the suit was dependent not on the para gain between the parties but on the discretion of the Court as contemplated by s. 34 of the CPC 1908 In coming to his conclusion the learned Judge placed reliance on the observations of the Supreme Court as contemplated by s. 34 of the CPC 1908 In coming to this conclusion the learned Judge placed reliance on the observations of the Supreme Court in the learned Judge placed reliance on the observations of the Supreme Court in the case of SOLI PESTONJI vs. GANGA DHAR AIRR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court of Rajasthan by its judgment on 14th Nov., 1983 categorically stated in its decree. "A decree is passed in favour of the plaintiff and against the defendant for a sum of Rs. 19,82,650 as per principal and simple interest at the rate of 15 per cent per annum, from 1st, Jan., 1979, amounting to Rs. 7,58,159.93 p. The plaintiff shall be further entitled to pendente lite and further interest at the rate of 9 per cent per annum on the principal amount till realisation. The plaintiff shall be entitled to the costs of the suit and the appeal in the court on the amount decreed in its favour. Thus, the right to receive the interest accrued to the assessee only when the award was passed and not earlier even though the interest was to reckon contracted rate of 15 per cent but at a reduced rate of 9 per cent which is the result of exercising the discretion of the Court. I am given to understand during the course of hearing, that the interest for this entire period was offered by the assessee in the asst. yr. 1984-85. It is, therefore, not a case where the assessee is trying to avoid payment of tax on the interest but was only urging its right to be taxed in the asst. yr. 1984-85 on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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