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TMI Blog2016 (11) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... I Regulations, that it had received additional consideration of Rs. 1.60 crores or delay in making payment of sales consideration. He held that the additional consideration was not linked to original consideration and hence it was to be treated separately, that amount received by the assessee was penal in nature, that while making the payment of additional consideration the deductor i. e. , OGML had deducted TDS, that the deduction of tax proved that it was not part of sales consideration, that the 'penal interest' had to be taxed as interest income. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). After considering the submission of the assessee and the assessment order he held that the AO were justified in his action in taxing the additional consideration under the head interest income. 3. During the course of hearing before us, the Authorised Representative (AR) stated that identical issue was decided by the Tribunal in the case of Morgan Stanley Mauritius Company Ltd. (ITA/1625/Mum/2014-AY. 29/01/2016, assessment year 2007 - 08). The Departmental Representative (DR) left issue to the discretion of the Bench. 4. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni Steel Works & Press Works Ltd. (152 ITR 39); K. G. Subramaniam (195 ITR 199) and Hindustan Conducors P. Ltd. (247ITR 762). XXXXXX The Department Representative (DR) contended that additional consideration was received for delay in making the payment of sales consideration, that it could not be taken as part of total sale value, that Oracle had deducted TDS while making payment to the assessee, that deduction of tax at source indicated that the amount was not part of sale consideration but represented the interest portion for delayed payments, that same had to be treated as income from other sources, that the letter of offer made by Oracle talked about interest payment of Rs. 11.35 per share, that the assessee had accepted the open offer, that there was debitor/creditor relationship between the assessee and Oracle, that the buyer of the share should have paid the whole amount as per the scheduled dates of payments, that the nature of all consideration received by assessee was in the nature of interest that it was governed by Article-11 of the India Mauritius DTAA Treaty, that it could not be taxed under Article-22 of the treaty under the head "other income', that the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acle had revised the offer price. Considering all these factors, we are of the opinion that additional consideration received by the assessee is part and parcel of the total consideration. It cannot be segregated under the heads 'original sale consideration' and 'penal interest received from Oracle'. The business world is governed by its own rules and conventions. If considering the time factor Oracle decided to increase the share price in the offer letter it has to be taken as a part of original transaction. It is noteworthy that in the original offer interest @ Rs. 11.35 per share was offered by Oracle. After considering the delay in dispatch letter and other relevant factors if it decided to increase the interest @ of 16 per share it was a business decision. The assesse had no control over the decision making process of Oracle. If we see the transaction from the debtor/creditor angle it is clear that there was no such relationship between the assesse and Oracle. The assesse owned shares of I-flex and in response to the open offer by Oracle it decided to sell the shares-it was a pure and simple case of selling of shares. The assesse had not entered in to any negotiations with Ora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the minimum offer price taking 14. 3. 2000 as the relevant date and the price as on that date is Rs. 350.02. The holding company challenged the order of SEBI by filing an appeal before the Securities Appellate Tribunal (SAT). The Securities Appellate Tribunal upheld SEBI's directions vide order dated 27.4.2001 against which the holding company filed an appeal before the Hon'ble Jurisdiction High Court. In the mean time, on 23. 7. 2001 the SEBI directed the merchant banker to proceed with the offer formalities and pay interest @ 15% per annum on offer price period from 14.3.2000 till the actual date of payment of consideration. The Hon'ble High Court upheld the SEBI directions to revise the offer price based on the price on 14.3.2000 @ Rs. 350.02 per equity share vide its decision dated 8.8.2001. The holding company also challenged the direction of the SEBI to pay interest @ 15% before the Securities Appellate Tribunal but could not succeed. The Tribunal held that Castrol UK is liable to pay interest to the successful offer at 15% per annum on open offer price however from 8.8.2000 till the actual date of payment of consideration instead of 14.3.2000 directed by the SE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termined at Rs. 350.02 which was the market price as on 14.3.2000 when the holding company made a public announcement of acquisition. However, the case in hand the interest received by the assessee is for the period prior to the tendering of shares and acceptance of the same therefore, the interest relates to the delay in completing the process of buy back of shares under open offer. There is a difference between the interest which can be treated at par of consideration and the interest which is different form compensations or consideration. If the interest is paid for delay in making the payment then it cannot be treated as part of consideration. In the case in hand the delay for which the interest has been received by the assessee is in the process of buy back of shares in the open offer after announcement of the intention of acquiring of shares. It is not a case of delay in making the payment of the determined consideration after the transaction of purchase of sale is over. Therefore, in our considered view this amount of interest which relates to the period prior to tendering and acceptance of the shares falls within the ambit of consideration received by the assessee against t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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