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TMI Blog2024 (9) TMI 1722X X X X Extracts X X X X X X X X Extracts X X X X ..... i). That the Ld. CIT(A) has wrongly categorized the amount paid to DLF Company for purchase of property as investment. (iii). The appellant craves to right to add, alter or change any of the grounds of appeal at the time of hearing." 3. We have heard the rival submissions and perused the material available on record. The assessee is an advocate by profession. The return of income for A.Y. 2010-11 was filed by the assessee on 13.10.2010 declaring total income of Rs.30,79,624/-. During the year under consideration, the assessee received an amount of Rs.24,15,137/- as compensation from DLF Commercial Complexes Ltd. on account of settlement of damages due to non delivery of property No. DTS 637 in DLF Tower, Shivagi Marg, New Delhi. These damages were calculated by DLF in the form of interest. The assessee had offered these damages received as income from other sources by treating it as interest income. Against this interest income, the assessee claimed deduction towards interest paid on bank loans. During the course of assessment proceedings, the assessee furnished the entire details before the learned AO with regard to receipt of damages from DLF and also justifying the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the same was merely interest income chargeable to tax in the hands of the assessee. Hence, the learned CIT(A) held that amount received in the sum of Rs.24,15,137/- was not to be treated as compensation in the hands of the assessee and the same needs to be treated as interest income in the hands of the assessee. Apart from this, the learned CIT(A) also proceeded to uphold the disallowance of interest expenditure Rs.5,17,206/- made by the learned AO in the assessment. Aggrieved, the assessee is in appeal before us. 5. The short issue that arises for our consideration is whether the compensation received by the assessee from DLF for non delivery of property in time could be construed as capital receipt not chargeable to income-tax or not ? Vide Clause 16 of the Agreement dated 29.10.2007, the assessee would be entitled for compensation if delivery of the property is not handed over to the assessee within 3 years from that date. It is pertinent to note that the determination of compensation would be in the form of interest calculated @ 13% per annum. Accordingly, the assessee has received interest till 31.01.2010 calculated @ 13% per annum amounting to Rs.24,15,137/- from DLF Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the houses and thereafter the Housing Board paid interest at the agreed rate to the allottees in terms of the letter of allotment. The ITO (TDS) carried out a survey and found that the assessee had not deducted tax at source and he held that the amount paid by the assessee to the allottees was in the nature of Interest within the meaning of s. 2(28A) of the IT Act and in terms of s. 194A of the IT Act, tax had to be deducted at source. He decided the case accordingly. 3. The assessee filed an appeal and the CIT held that the amount paid by the Board was not really interest within the meaning of s. 2(28A) but actually compensation for the delay in construction of the house and handing over possession of the same to the allottees. It came to the conclusion that the interest was merely a convenient method to calculate the amount of compensation in order to standardize it. The Revenue filed an appeal against the said judgement, which was dismissed. Hence, this appeal. 4. To appreciate the rival contention of the parties, it would be appropriate to refer to the relevant portion of ss. 2(28A) and 194A of the IT Act, which read as follows: "Sec. 2(28A).-Interest means Inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was interest within the meaning of s. 2 (28A) and in terms of s. 194A of the Act tax at source had to be deducted by the Board. 7. In our view this judgement is not applicable to the facts of the present case. In the case before the High Court the assessee was a company engaged in retail finance services. It had assured the investors that if they invest money with the assessee company they would be refunded guaranteed repayment of amount Invested within 36 months at a minimum return of 1.5 percent. The return could be more than 1.5 percent but the company had promised that under no circumstance the return would be less than the guaranteed return of 1.5 percent. It was in this context that the Madras High Court held that what was paid by the company was interest and nothing else. There can be no dispute with the law laid down by the Madras High Court but the question which arises in the present case is whether the amount paid by the assessee is by way of interest or otherwise. 8. In the case in hand it stands proved that in case the houses were ready within the stipulated period the Board would not be liable to pay Interest. When construction of a house is delayed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59496 Rs.16,63,650/- 29.11.2007 249207 Rs.11,09,100/- 30.01.2008 249252 Rs.11,09,100/- 03.04.2008 320126 Rs.11,09,100/- Loan from Citi Bank Rs.56,98,840/- Total Rs.1,06,89,790/- 8. The assessee was given alternative site in DLF, Okhla Project, wherein the compensation received in the sum of Rs.24,15,137/- together with amounts already paid by the assessee as detailed (supra) were sought to be adjusted with the payments due for the new flats. It is not in dispute that DLF Commercial Complexes Ltd. could not obtain the necessary approval and accordingly, the construction of the property could not commence even after lapse of more than 2 years from the date of booking of the property by the assessee. Accordingly, the assessee having lost confidence in the behaviour of the DLF Commercial Complexes Ltd., resorted to invoke Clause - 16 of the Agreement dated 29.10.2007 and seek compensation thereon which was determined in the form of interest. It is to be understood that though the compensation was calculated by considering interest @ 13% per annum from the date of respective payments till 31.01.2010, what is to be seen is interest is only a parameter tha ..... 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