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TMI Blog1978 (7) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... 442. Under the sale deed, the assessee received the full price he also received interest at the rate of 6 3/4% from May 1, 1958, on the sale price till the date of payment. Certain movables were sold under the agreement and for the said movables a sum of Rs. 53,105.66 was received. It is further provided in the sale deed that right from May 1, 1958, the assessee, who was the vendor, had given possession to the vendee and thereafter, as the agent of the vendee, he carried on agricultural operations on behalf of the vendee until the date of the execution of the sale deed and khas or actual possession of the land was given to the vendee on the execution of the sale deed. Thus, between May 1, 1958, and January 25, 1959, being the date of execution of the sale deed, as the agent of the vendee the assessee had incurred expenses amounting to Rs. 53,870,08, and received income of Rs. 26,309.09 in respect of agricultural operations. The difference in the amount of Rs. 27,561, in respect of these agricultural operations, was also paid to the assessee by the vendee. By way of interest, an aggregate amount of Rs. 15,083 was received by the assessee from the purchaser Rajendrakumar. For the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources " for the assessment year 1959-60, and gave directions to the ITO to take action for including this sum in the assessment for the assessment year 1959-60. In second appeal before the Tribunal, it was pointed out that the consideration for the immovable property was Rs. 2,28,442, and the consideration for movable property was Rs. 53,136 making a total of Rs. 2,81,728 and that interest of Rs. 15,083 at 6 3/4 per cent. was provided by the deed of sale for the period May 1, 1958 to January 25, 1959, when the sale deed was executed. It was urged that the said amount of interest was part and parcel of the sale consideration for the agricultural farm is on January 25, 1959, though the consideration was otherwise expressed at a lower figure. According to the assessee, the sale price became due to him on January 25, 1959, when the sale deed was executed and possession of the farm given to the vendee. It was contended that before January 25, 1959, no debt was due from the purchaser and no interest in fact could have been charged. On the other hand, on behalf of the revenue, it was contended before the Tribunal that if regard be had to the provisions of the sale deed, the sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of the year ending July 31, the view that has been taken by the AAC was right and since the amount of Rs. 10,214 was received by the assessee on January 27, 1959, the same was rightly brought to tax by the AAC. He therefore, submitted that the Tribunal was in error in treating the amount of interest as part and parcel of the sale consideration and in taking the view that no part of the interest amount that was received, accrued in the accounting year relevant to the assessment year 1960-61. Mr. Dastoor, on the other hand, on behalf of the assessee, submitted that the sum of Rs. 15,083 that was received was part and parcel of the purchase consideration, and, even though, it was described in the sale deed as and by way of interest, it formed part of the purchase price payable by vendee under the sale deed. In short, he submitted that the view that has been taken by the Tribunal on this aspect of the matter was correct while the view that has been taken by the taxing authorities was not justified. So far as the year in which the income can be said to have arisen, he submitted, that so far as the assessee is concerned, the view that has been taken by the Tribunal that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ped receipt has already been obtained. AND WHEREAS in pursuance of the said agreement the vendee having acquired title to and possession of the vended properties from the 1st May, 1958, would be entitled to and be liable for all profits and losses relating to the properties under sale from the said date ; AND WHEREAS it was also agreed between the parties that the vendor will receive interest at the rate of 6 3/4 per cent per annum from the vendee on the aforesaid consideration of Rs. 2,28,442.80 besides the interest on the value of movables from the 1st May, 1958, till the date of execution of this sale deed which upon calculation has been found to be Rs. 13,975.32 only and has already been paid by the vendee to the vendor and duly stamped receipt obtained ; Now THIS DEED OF SALE WITNESSES as follows : 1. On consideration of having received the sum of Rs. 2,28,442.80 only, being full consideration of the properties hereby sold and described in Schedule 'A'.......the vendor hereby transfers by way of absolute sale to the vendee .......... 3 (b). The sale of the properties described in Schedule 'A' hereunder has been effected and possession thereof has been delivered to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fact paid by the purchaser to the assessee. It is not possible for us, therefore, having regard to the recitals and the operative part of the sale deed, to accept the contention of Mr. Dastoor that this item of Rs. 15,083 should be regarded as part and parcel of the sale price. Mr. Dastoor invited our attention to a decision of the Allahabad High Court in the case of CIT v. J. K. Cotton Spinning and Weaving Mills Ltd. [1975] 98 ITR 153 and a decision of the Gujarat High Court in the case of CIT v.Tensile Steel Ltd.[1976] 104 ITR 581. In both these cases,the question related to calculation of depreciation and development rebate, to which the purchaser may be entitled when he has purchased plant, machinery, etc., on deferred payment basis and agreed to pay interest. We are not concerned in this case, how actual cost so far as the purchaser is concerned is to be calculated for the purpose of calculation of development rebate or depreciation. The case before us is a simple case of an agreement to sell immovable properties and the recitals in the sale deed as well as the operative part thereof distinctly point out that what particular amount of price is payable by the purchaser bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arded as having been received by the assessee and in which assessment year it can be subjected to tax. We are concerned with the assessment year 1960-61. For this assessment year, there are three relevant possibilities, which may have to be considered for the accounting period. The financial year relevant to the assessment year 1960-61 is April 1, 1959 to March 31, 1960. It appears from the statement of case that ordinarily the assessee was having Muru year as the accounting year and for the assessment year 1960-61, the relevant Muru year will be S.Y. 2015-16, corresponding to the period 12th November, 1958, to 31st October, 1959. So far as the income and expenditure from the farm was concerned, he used to maintain books of account from August to July and for the assessment year 1960-61, the relevant accounting period, so far as the books of account are concerned, will be August 1, 1958 to July 31, 1959. It appears from the order of the AAC that so far as the farm was concerned, as the assessee was maintaining his books for the period ending July 31, he treated the assessable income on the footing of the amount received in the relevant accounting year on the basis of these books. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March. For this, the assessment year will be April 1959 to March 31, 1960. No part of interest was received by the assessee during any part of this accounting period. As indicated in the order of the Tribunal as well as that of the AAC, part of the interest was received on July 31, 1958, and the rest of the interest was received on January 27, 1959. Both these dates are outside the financial year relevant to assessment year 1960-61. As in the present case, the amount of interest was received on July 31, 1958 and January 27, 1959, they were received in the financial year relevant to the assessment year 1959-60, and the Tribunal, in our opinion, was right when it took the view that the interest was received during the financial year 1958-59, the same would be assessable in the assessment year 1959-60, and not in assessment year 1960-61. Thus, no part of the amount of interest that has been received by the assessee can be subjected to tax in the assessment year 1960-61. Accordingly, our answers to the questions referred to are as under : Question No. 1 :--The amount of Rs. 15,083 received by way of interest was not part of consideration of sale but was received by way of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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