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TMI Blog2019 (8) TMI 311X X X X Extracts X X X X X X X X Extracts X X X X ..... e 22(3) is unambiguous. What falls within its ambit is only income received from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any nature. It is only such income which can be taxed, if at all, in India. Monies received towards arbitration costs and legal costs - HELD THAT:- The income tax department proceeded on completely erroneous view of the matter - The income tax department has treated monies received under the award towards arbitration costs and legal costs as income of the decree holder and thereby proceeded to take the stand that the same will be taxable as fee for technical services , both under the provisions of Income Tax Act, 1962 and the DTAA - th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this court dated 07.11.2016 stands sustained. 4. The record also shows that pursuant to the orders passed by this court, the judgment debtor deposited a cumulative sum of ₹ 4.50 crores, a part of which was released vide order dated 17.12.2018. The decree holder, presently, seeks release of the balance amount along with accrued interest. The reason that a certain portion of the amount was kept back was to ascertain the view of the income tax department as to whether the decree holder could be called upon to pay withholding tax. 5. Mr. Ajit Sharma, Advocate, who appears on behalf of the income tax department, has adverted to the affidavit dated 05.03.2018 filed by Dr. Prabha Kant, Commissioner of Income Tax (International Taxati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a facie, is also in nature of a windfall gain. However, whether it falls under the exceptions of Article 22(3) is to be determined by the Assessing officer pursuant to a detailed assessment under the Act. At this stage therefore, it would be fair to deduct tax at the rate of 42.024% on the award income under the provisions of the Act. Cost of Arbitration proceedings INR 53,47,775.5 This portion of the award is in lieu of expenses incurred by Decree Holder on a number of items which mainly include costs incurred on engaging professional experts like lawyers etc. for the purposes of arbitration. Therefore, Decree Holder has incurred these expenses for availing services which are prima-fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total INR 4,42,76,935.07 + interest As per above. 6. As would be evident, the income tax department appears to have taken a position with regard to four limbs of the aforementioned awards. The first limb pertains to the award of monies to the decree holder in respect of breach of contract. The second limb relates to costs of arbitration. The third limb pertains to legal costs. The last limb relates to interest. 7. To be noted, insofar as the last limb is concerned, which is interest, no figure has been mentioned by Dr. Prabha Kant. 8. Be that as it may, the stand of the income tax department is that compensation received by the decree holder towards breach of contract is liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to this aspect of the matter, as indicated hereinabove by me. 12. Insofar as the monies received towards arbitration costs and legal costs are concerned, the aforementioned tabular chart would show that the income tax department proceeded on completely erroneous view of the matter. 13. The income tax department has treated monies received under the award towards arbitration costs and legal costs as income of the decree holder and thereby proceeded to take the stand that the same will be taxable as fee for technical services , both under the provisions of Income Tax Act, 1962 (in short 1962 Act ) and the DTAA. 14. Clearly, nothing can be further from reality. Therefore, the stand taken by the income tax department on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Execution Application (Lodg.) No. 263/2012. (iv) American Home Products Corporation v. MAC Laboratories Pvt. Ltd. and Anr., (1986) 1 SCC 465. (v) Islamic Investment Company v. Union of India (UOI) and Anr., 2002 (4) BOMCR 685. (vi) S.S. Miranda Ltd. v. Shyam Bahadur Singh, (1985) 154 ITR 849. 18. As correctly argued by Mr. Banerji, this aspect of the matter need not detain me in view of what is stated hereinabove by me as regards Article 22(3) of the DTAA. I may, however, note that these judgments do enunciate the principle, which is, that once a claim merges into a decree of the Court it transcends into a judgment-debt and, therefore, only those adjustments and deductions can be made which are permissible u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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