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TMI Blog2010 (7) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... r liquidation. The same is now represented by the Official Liquidator of this Court. A Mill belonging to the petitioner company was ordered to be sold by the Company Court in public auction. Accordingly, it was sold in public auction for a sum of Rs.4.49 Crores. The bidder in whose favour the sale was confirmed filed two applications before the Company Court in C.A.Nos.979/1991 and 980/1991 praying the Company Court to permit him to pay a part of consideration of Rs.2.23 Crores in 80 instalments and further praying to grant lease of the Mill namely, Cauvery Spinning and Weaving Mills Limited. He further submitted that he was ready to pay a sum Rs.2.26 Crores towards part sale consideration. The Company Court by order dated 12.8.1991 accordingly granted permission to the bidder to pay Rs.2.26 Crores within six months without interest and to pay the balance of Rs.2.23 Crores in 80 monthly instalments regularly commencing from 1.12.1991. He was further directed that for the said amount, the bidder shall pay flat rate of interest of 18% per annum on reducing balance from 1.1.1991. It was only in pursuance of this order, the bidder paid Rs.2.23 Crores within six months which carried no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 14.12.2000 dismissed the said petition as not maintainable, however, with a direction to the Official Liquidator to challenge the order of assessment by filing a Writ Petition before this Court. It was also directed that in fairness, the Income Tax Department should not raise the plea of availability of alternative remedy or the delay in challenging the order of assessment. It is in pursuance of the said direction issued, the petitioner/Official Liquidator has come forward with this Writ Petition. 3. The foremost question involved in this Writ Petition is as to whether the amount in question received by the Official Liquidator forms part of the sale consideration so as to fall within the head of "Capital Gain" or the same is interest, pure and simple, so as to fall within the head of "income from other sources" for the purpose of assessment for payment of income tax. 4. The contention of the learned Senior Counsel for the Petitioner is that though in the orders of the Company Court, it has been mentioned that the amount represents the interest, as a matter of fact, in legal sense, it is not interest, but it is only a part of sale consideration. In this regard, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the lands acquired under the Land Acquisition Act would form part of the sale consideration or the income from other sources. The learned Senior Counsel would submit that the various High Courts have taken the consistent view that the Solatium forms part of only the sale consideration and therefore, it is not an income from other sources for the purpose of income tax. To put it in nutshell, the learned Senior Counsel would submit that the order of assessment made by the 1st respondent which was later on confirmed by the 2nd respondent wherein they have assessed the said amount, treating the same as income from other sources is not at all sustainable and therefore, the same requires interference at the hands of this Court. 6. The learned Counsel for the respondent would have a different stand. He would also take me through various proceedings of the Company Court wherein two different expressions viz. consideration and interest have been employed. According to him, the intention of the Company Court itself was to treat the bid amount as consideration and any amount received from the bidder for the delayed payment towards interest is only as an income from other sources. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease, that is immaterial. He would point out that from the date on which the tender was confirmed in favour of the bidder, what was paid on account of the deferred payment is interest which is an income on the capital amount. The learned Counsel would take me through various provisions of Income Tax Act about which I will make appropriate reference during the course of this order. 8. Let me now examine the rival contentions. Indisputably, the amount in question was received by the Official Liquidator in the name of interest only. Regarding this, there is no doubt. A perusal of various proceedings of the Company Court would clear all possible doubts in this regard. However, as pointed out by the learned Senior Counsel for the Petitioner, the Company Court in more than one place in the orders passed on various dates has directed that the interest received from the bidder shall be part of the sale consideration. This direction issued by the Company Court also cannot be lost sight of. With these undisputed facts, let me now look into the provisions of the Act. 9. At the outset, I may refer to Section 45(1) of the Income Tax Act dealing with Capital Gains which reads as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as follows: "2(47) Transfer in relation to a capital asset includes; i. the sale, exchange or relinquishment of the asset; or ii. The extinguishment of any rights therein; or iii. The compulsory acquisition thereof under any law; or iv. In a case where the asset is converted by the owner thereof into or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; (or) (iva) the maturity or redemption of a zero coupon bond or) v. any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882); or vi. Any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation : For the purposes of sub-clauses (v) and (vi) 'immovable property' shall have the same meaning as in clause (d) of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned Senior Counsel as to what the term interest means. Section 2(28 A) of the Act defines the same as follows: "Interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised." A close reading of the above provision would make it clearly understandable that to call an amount received as interest, atleast one of the conditions should be satisfied, namely, the same should have been received as a due on account of any money either borrowed or debt incurred. Here, in this case, the amount which was agreed to be paid, though by way of interest by the bidder as per the order of the Company Court, is not on account of any money either borrowed or debt incurred. Therefore, the amount in question cannot be treated as interest at all as defined in the above provision. 15. Now coming to the judgment relied on by the learned Senior Counsel for the petitioner in the Judgment of Kerala High Court in Karvalves Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffee Plantation V. Commissioner of Income Tax reported in (1999) 239 ITR 489 that is a case where this Court has held that though possession was not transferred on account of agreement for sale, still the amount received by way of interest for the sale consideration mentioned in the sale agreement will be only income through other sources. But the facts are distinguishable. In that case, the Court had to consider as to whether the amount received by the seller forms part of the sale consideration or it was under a different transaction where interest for a fixed amount was calculated and received by him. In the given set of facts and circumstances of that case, it has been held that the amount received by way of interest was not on account of transfer of capital asset, but on account of a different transaction under which interest was received. Therefore, the principles stated in the said case do not come to the rescue of the respondents. 17. In view of the foregoing discussion I hold that the amount in question, in this Writ Petition received by the Official Liquidator as per the orders of the Company Court, though repeatedly referred to as interest, for the purpose of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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