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TMI Blog2000 (11) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... n the AO had included the entire amount of interest of Rs. 2,06,863 in the assessee's total income of the year. The learned CIT(A) referring to the decision of Hon'ble Supreme Court in the case of CIT vs. T.N.K. Govindrajulu Chetti (1967) 66 ITR 465 (SC) directed the AO to verify from the perusal of contract as to whether there was any clause or agreement regarding payment of interest in the contract, and the same providing for payment of interest on delayed/disputed payment, and if so to decide in view of decision of Hon'ble Supreme Court. In respect of this appeal of Revenue, the assessee has filed CO No. 10/Jdpr/1998 supporting the impugned order of the learned CIT(A). 4. ITA No. 1491/Jp/1996 is an appeal by the Revenue for asst. yr. 1992-93 and is directed against the order of CIT(A), Jodhpur, dt. 16th May, 1996, passed in Appeal No. 6/1996-97 whereby he set aside the AO's rectification order, dt. 15th March, 1996 on assessee's application dt. 2nd March, 1996, passed under s. 154 with the direction to AO to pass an order on the assessee's rectification application under s. 154 taking into consideration the decision of the Hon'ble Supreme Court in the case of Rama Devi vs. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal No. 219/1993-94 set aside the original assessment and restored the matter to AO with the direction to verify from the contract as to whether there was any clause or agreement regarding the payment of interest on delayed/disputed payment and if so to decide in accordance with Hon'ble Supreme Court's decision in the case of TNK Govindarajulu Chetti. 6. The Department having not accepted the aforesaid decision of the learned CIT(A), dt. 22nd March, 1994 has filed ITA No. 1360/Jp/1994 before the Tribunal and the assessee filed CO No. 10/Jdpr/1998 in respect of the said order of learned CIT(A). 7. In pursuance of the CIT(A)'s set aside order dt. 22nd March, 1994, the AO reframed the assessment on 12th Feb., 1996, under s. 143(3)/set aside wherein the AO also held the interest payment to the revenue receipt and thus added the entire interest amount of Rs. 2,06,863 in the assessee's income, as was done in the original assessment. The assessee preferred appeal against the said reframed assessment, dt. 12th Feb., 1996, before the CIT(A). The learned CIT(A) decided the said appeal bearing No. 493/1995-96, vide his appellate order, dt. 12th March, 1996. Whereby he set aside the AO's r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was payable under the law and, therefore, the addition should have been sustained." The learned Departmental Representative of Revenue has contended that the assessee being a contractor was awarded an interest of Rs. 2,06,863 on the delayed payment of the contract work of PWD executed by the assessee by the judgment of the Court resulting from civil suit filed by the assessee, and the assessee received this interest payment during the period relevant to asst. yr. 1992-93, and so the AO, while passing the original assessment order under s. 143(3), dt. 29th July, 1993, included the aforesaid entire amount of interest of Rs. 2,06,863 in the total income of the assessee for the assessment year under appeal. He has, in this regard, referred to pp. 2 and 3 of the said assessment order. He has contended that the learned CIT(A) vide his impugned appellate order, dt. 22nd March, 1994, set aside the issue of taxability of said interest and restored the issue to AO with the directions as contained in para 3.6 on p. 4 of his order. He has contended that the Revenue is aggrieved against the setting aside of the issue by the learned CIT(A) and that he should have himself decided the issue on m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikaner, in compliance of Board's circular as placed on p. 8 of the said P.B. In the alternative the learned authorised representative of assessee has contended that this interest amount of Rs. 2,06,862 is not taxable in one year but is to be spread over the respective assessment years involved in the period for which the interest has been paid. For this he has cited--Rama Bai vs. CIT, Bikkam Singh & Ors. vs. Land Acquisition on Collector & Ors. (1997) 139 CTR (SC) 475 : (1997) 224 ITR 551 (SC) and CIT vs. N.K. Zanjale (1991) 91 CTR (Bom) 54 : (1991) 191 ITR 223 (Bom). He has also contended that because of the pendency of matter of interest in the Court the interest amount is not taxable and has cited CIT vs. Hindustan Housing and Development Trust Ltd. (1986) 58 CTR (SC) 179 : (1987) 161 ITR 524 (SC) in his support. He has contended that if his other pleas are not accepted then also interest amount received by the assessee is not taxable in this year. 12. In rejoinder the learned Departmental Representative of Revenue has contended that interest has been awarded by the Court under s. 34, CPC, and that the same was claimed by the assessee stating that the interest is payable. He ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n regarding exemption is contained in s. 10 of IT Act wherein there is no provision that disputed income is exempt from tax. He has also contended that while receiving payment of the amount of interest by the assessee in pursuance of the orders of the Court the assessee has given only bond and no security has been pledged to Government. 13. We have considered the rival contentions, relevant materials on record as also the cited decisions, copies of which have been furnished on record. As regards the taxability of interest the legal position is quite settled. In (1964) 53 ITR 151 (SC) the Hon'ble Supreme Court has clearly propounded that the amount of interest paid for use of money by the State and the claimant being kept out of his money, the interest is chargeable to tax as income. In (1967) 66 ITR 465 (SC) the Hon'ble Supreme Court has laid down that the principle of Dr. Shamlal Narula's case will apply if interest is payable under agreement express or implied. In the instant case the assessee was contractor and payment in respect of contract works of PWD executed by him remained outstanding and it was for the delayed payment of such amount that the interest was awarded by Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntions as well before us which we shall deal with ahead and only thereafter we will draw our ultimate conclusion in the matter. 14. As regards the contention of the learned authorised representative of the assessee that the entire amount of interest of Rs. 2,06,863 is not taxable in one year but should be spread over the respective assessment years, the Hon'ble Supreme Court has held in the case of Ramabai that the interest on compensation order by Court accrues not on the date of the order of the Court granting compensation but from the date when possession of land was taken over and the accrual is year after year. It has also been held that such interest cannot be assessed to income-tax in one lump sum in the year in which the order is made by Court. Similarly, in the case of Bikram Singh also the Hon'ble Supreme Court has held that the appellants were entitled to spread over the income (interest received on delayed payment of compensation) for the period for which the payment came to be made so as to compute the income for assessing tax for the relevant accounting year. As such respectfully following the aforesaid decisions of the apex Court we hold that the assessee is legally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra amount of compensation of Rs. 7.24 lacs was not income arising or accruing to the respondent during the previous year relevant to asst. yr. 1958-59. In the instant case also we find that the State Government has preferred appeal before Hon'ble Rajasthan High Court and a copy of the appeal memo is placed on pp. 19 to 33 of the P.B. From the perusal of the said memo appeal we also find that the entire judgment and decree of the Court have been challenged in the memo of appeal and the award of interest by the Court is a part of the decree and judgment of the Court of ADJ. As such the ratio decidendi of the cited case does apply in the instant case also inasmuch as the payment of interest stand disputed in appeal by the State Government filed before Hon'ble High Court and here also the assessee has been permitted to withdraw the amount of decree deposited in the Court on furnishing a bond undertaking thereby to refund the amount as and when the Court decides against him. In the circumstances in view of the principle laid down by the Hon'ble Supreme Court in the above cited judgment the present assessee's right to receive interest cannot be said to have become absolute and according ..... X X X X Extracts X X X X X X X X Extracts X X X X
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