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TMI Blog1997 (8) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... capital asset within the meaning of section 45 of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the unpaid sale consideration was nothing but a loan and the interest accruing thereon was on money lent by the assessee ? 3. Whether, the Appellate Tribunal was right in law in rejecting the contention of the assessee that the receipt of Rs. 1,65,596 should be treated as capital receipt as it was in the nature of damages or moneys withheld between the date of sale and date of payment of full consideration ?" The assessee is a registered partnership firm and it sold a tea estate together with a building thereon and machinery on June 15, 1977, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of that year. The Income-tax Officer noticed that the receipt of Rs. 1,65,596 had not been credited to the interest account, but had been adjusted to the partners' respective accounts. He rejected the claim of the assessee that as the said sum was referable to deferred payment of the sale price, it was part of the consideration and hence not assessable as revenue receipt. However, the officer took the view that the entire sum of Rs. 1,65,596.62 received represented the interest and hence, would have to be brought to tax under other sources. The Income-tax Officer passed a draft assessment order dated March 18, 1982, under section 144B of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), proposing to treat the applicant as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains" arising from the transfer of a capital asset. 3. No sooner than the delivery of possession is made by the seller to the purchaser and the purchaser has taken it, the sale is complete and if any part of the sale amount, as agreed, is not paid, then the purchaser's non-payment is nothing else other than a loan by the seller to the purchaser. 4. Therefore, the interest payable to the seller for lending the money which the purchaser failed to pay, as he was required to pay, was to be taxed as revenue receipt. 5. The purchaser of the tea estate being the debtor, the interest amount in dispute was nothing else than compensation for the use of the moneys of the assessee. Accordingly, the Tribunal accepted the view taken by the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration as recited in the sale deed does not include interest payment and it is outside the sale consideration and, therefore, it cannot be clubbed with the sale consideration, so as to say that the interest is also capital in nature. Therefore, according to learned standing counsel, interest was not the subject-matter of section 45 of the Act, as it could not be taken as profits and gains arising from the transfer of a capital asset, and, therefore, the payment of interest is revenue in nature and assessable as a revenue receipt. We have heard learned counsel for the assessee as well as learned standing counsel for the department. In order to support the contentions put forward by learned standing counsel, reliance has been placed upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of Rs. 15,083 was paid by way of interest and this amount was not part of the purchase price but was a payment by way of interest and constituted a revenue receipt in the hands of the assessee. Learned counsel for the assessee submitted that the facts arising in the abovesaid decision are different from the facts arising in the present case. Learned counsel for the assessee, submitted that according to the facts of the said case, interest was paid for the period between the execution of the sale agreement and the execution of the sale deed, but in the present case, interest was paid as per clause contained in the sale deed itself on the balance of the unpaid purchase money, Therefore, the abovesaid decision is distinguishable on facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual conveyance. On a reference, the Bombay High Court held that if the assessee is held to be the owner of the bungalows until the sale deed were actually executed on August 28, 1956, then the interest credited to the interest account in respect of the various purchasers who had not paid the full consideration was legitimately due to the assessee and could not be excluded from the income of the assessee and that the assessee was entitled to charge the interest and could therefore be taken into account. Thus, considering the facts of the present case in the light of the judicial pronouncement cited supra, we hold that the Tribunal was correct in coming to the conclusion that the interest received was nothing other than interest on the no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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