9911796707
TMI Blog2000 (5) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case are that assessee-company carried on some construction on contract for Government of Gujarat. Certain disputes arose relating to amount due to the assessee and such disputes were resolved through, arbitrator who gave an award in favour of the assessee. The said award became rule of court as per decree of Civil Judge, Mirzapur dated 23rd March, 1992. The assessee was entitled to receive more than Rs. 37 lakhs with interest. 2.1 The aforesaid decision was challenged by Government of Gujarat in Appeal No. 1531 before Hon'ble Gujarat High Court and the Hon'ble High Court was pleased to modify the operation of order of Civil Court vide its order dated 18-8-1992. The operative portion of above order is under :--- "Heard the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in entirety, the right to' payment of amount of the decree/awarded to us would fall altogether and we would be required to refund the whole amount deposited by the Contractee before the Court with interest and received by us for which due Bank Guarantee has already been furnished by us as per the directions of Hon'ble Gujarat High Court and then only the amounts have been released..." 2.3 The Assessing Officer vide order dated 26-3-1996 made the assessment as under :--- 'The case was selected for scrutiny and a notice under section 143 was issued to the assessee on 11-8-1994. Another notice under section 142(1) was issued on 22-12-1995 calling for certain details. In response to notice Smt. M.G. Amin, Advocate attended from time to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally determined by competent court the interest income cannot be said to have accrued to the assessee. When the Bench asked the learned counsel for the assessee to show any agreement under which the assessee had liability to return interest on FDRs interest to the opposite party, Shri J.P. Shah said the legal proposition to be examined is as under :--- "Is there a provision either in contract or in law that the assessee is not liable to pay interest on the money used by it which ultimately is held not to belong to the assessee ?" 3.1 It was again repeated that unless the dispute was finally determined regarding retainability of principal amount which was utilised for obtaining FDR, the question of accrual of interest on such FDR could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case to revise the assessment under section 263 of the Income-tax Act. 4. Shri R.K Gupta, the ld. DR argued in support of the impugned order. It was submitted that the assessee could not point out any agreement under which interest earned on FDR obtained by the assessee was liable to be returned to State of Gujarat in case the matter is decided in appeal by the Hon'ble Gujarat High Court. 5. We have given careful thought to the rival submissions of the parties and examined them in the light of relevant material. We have no quarrel with the proposition that amount received under a decree or order which is subject matter of appeal and tights of assessee in such amount are inchoate, the amount received is not taxable. This proposition has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Hon'ble Gujarat High Court. The assessee was entitled to and bank was obliged to give interest to the assessee as per terms of the deposit with the bank. No material is available on record to show that the bank in any manner was required to pay interest to State of Gujarat or any other party in case the matter is decided against the assessee. In our considered opinion, the assessee had absolute and unfettered right to receive interest from the bank and such right in no way affected in any manner on account of litigation pending before the Hon'ble Gujarat High Court. Therefore, the interest had accrued to the assessee and should have been charged to tax and in not doing so, the Assessing Officer committed an error which was liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein interest earned by an advocate on client's money was held to be not taxable as it was earned on amount held in a fiduciary capacity. 5.3 The aforesaid decision has no application to the facts of the present case. Here, the amount has been received by the assessee as per directions of court and cannot be treated to be received in fiduciary capacity. In the case cited by learned counsel for the assessee, it has been observed that solicitor (advocate) was not authorised to keep interest either by custom or by implied agreement. The relevant rules of High Court do not permit a solicitor to treat the money received by him from or on account of his client as his personal money and such moneys are held by him in fiduciary capacity. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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