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TMI Blog2013 (12) TMI 776X X X X Extracts X X X X X X X X Extracts X X X X ..... t received is chargeable to tax as income will also apply where the interest is payable under the terms of the agreement, express or implied, and the court or arbitrator gives effect to the terms of the agreement and awards interest which has been agreed to be paid - The part of amount is chargeable u/s 56 as interest income - Partly allowed in favour of assessee. - I.T.A. No. 7231/Mum/2010 - - - Dated:- 23-10-2013 - Shri I. P. Bansal, JM And Shri Sanjay Arora, AM,JJ. For the Appellant : Shri Mandar Vaidya For the Respondent : Mrs. Jothilakshmi Nayak ORDER Per Sanjay Arora, A. M. This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-29, Mumbai ('CIT(A)' for short) dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly, brought the entire excess amount of Rs.7,14,737/- to tax as income from other sources. 2.2 In appeal, the ld. CIT(A) confirmed the A.O.'s action, stating that there was no transfer of a capital asset or embedded right, and what had been received, i.e., in excess of the amount paid, was only interest, treating the former as a deposit. Aggrieved, the assessee is in second appeal. 3. We have heard the parties, and given our careful consideration to the matter. 3.1 The matter arising for our adjudication is principally factual, i.e., the nature of the amount received by the assessee from the Builder, so that whether it is wholly, or only partly, i.e., to the extent of the amount paid, on capital account and, thus, a capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus not transferred his right under the AFS in favour of anyone, in which case all his rights, including the right to seek performance, would get transferred to, and vest in the transferee. Rather, as we see it, the assessee has no right to seek performance under the terms of the contract, and the only recourse available to him, in the event of non-performance or deficiency in performance by the Builder, is to seek compensation by way refund with interest at the stipulated rate, and which he actually does. The deed of cancellation dated 14/11/2005 (PB pgs. 160-168) is toward cancellation of the Agreement dated 02/7/1994, and not of any sale deed. The assessee's case of having transferred his 'capital asset' and, therefore, the amount receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld include a deposit, claim or other similar right or obligation. Toward the essential ingredients or requisites of a debt, we may refer inter alia to the decisions in the case of Keshoram Inds. Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 (SC) and CWT v. Pierce Leslie Co. Ltd. [1963] 48 ITR 1005 (Mad). The interest paid, it may be appreciated, is only compensatory in nature, i.e., with reference to the period over which the assessee's monies stood availed of by the payee-vendor. The Builder might have itself incurred losses on the project, or may have even not utilized the money thereon, with reference to which the assessee claims to have realized a capital asset. On the other hand, it may well be that the buyer looses interest in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the Builder, enforce the same through a court, is unfortunate, though would not in any manner alter the position or the nature of the transaction and, thus, of the amount received thereunder. The decision in the case of DDA v. ITO [1995] 53 ITD 19 (Del) is in the context of compensation paid by the Developer to the allottees under a self-financing scheme, for delay in the construction, which was considered by the Revenue as income in the nature of interest u/s. 2(28A) and, thus, liable for tax deduction at source u/s. 194A of the Act. The payer having not deducted any tax was considered as in default and thus liable u/ss. 201(1) 201(1A) qua the tax deductible at source. The Tribunal held it to be not an interest u/s. 2(28A), exclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, the liability to tax will depend upon the meaning and content of the language used, interpreting the same in accordance with the ordinary rules of construction; d). in T.N.K. Govindaraju Chetty vs. CIT [1967] 66 ITR 465 (SC), the apex court, affirmed its decision in the case of Dr. Shamlal Narula (supra), further clarifying that the proposition that interest received is chargeable to tax as income will also apply where the interest is payable under the terms of the agreement, express or implied, and the court or arbitrator gives effect to the terms of the agreement and awards interest which has been agreed to be paid; and e). CIT v. Vijay Ship Breaking Corpn. [2003] 261 ITR 113 (Guj), holding usuance interest to be 'interest' in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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