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2015 (10) TMI 1010 - HC - Income TaxAccrual of income - Taxability of enhanced award pronounced by the arbitrator - whether is to be taxed during the previous year, relevant to the assessment year in which the finality of the decision of the Hon’ble High Court of Andhra Pradesh, is delivered? - Whether the Appellate Authorities were correct in holding that the interim award of ₹ 80 lakhs received by the assessee pursuant to the order of Hon’ble Andhra Pradesh High Court on 16/11/2001 and 24/12/2001 is not liable to tax during the current assessment year 2002-03 as the same had not accrued and the same will be liable to tax only when the final award is passed by the Andhra Pradesh High Court ? Held that:- As emerges from the judgment of COMMISSIONER OF INCOME TAX , WEST BENGAL – II VS . HINDUSTAN HOUSING AND LAND DEVELOPMENT TRUST LTD [1986 (7) TMI 10 - SUPREME Court] when an assessee receives money, either under an award or by a decree of the court, or under an award passed by the arbitrator, if the amount paid to him is not in dispute, then that amount represents his income. He should offer it to tax in the previous year of the date of payment of the said amount. But if the amount due to him is in dispute and it is subject-matter of a litigation and during the pendency of the litigation, if any interim order is made for payment of the said amount, the said payment is subject to the final result of the said proceedings. In the event the assessee looses the legal battle, the amount received by way of interim payment, has to be repaid. The amount to which he is entitled to, out of the disputed amount, would crystallize only when the litigation ends and payment is made after the finality of the litigation, then that amount is to be offered to tax in the previous year of the date of payment. Merely because by virtue of an interim order, with or without conditions, some payment is made for the purpose of Income tax Act, it would not constitute income and therefore there is no liability to pay tax on the day such interim payment is received. Therefore, in the instant case, the assessee is liable to pay the amount covered under the cheques, only after a final conclusion of the dispute before the Andhra Pradesh High Court, as rightly held by the Appellate Authorities. Substantial question of law is answered in favour of the assessee and against the Revenue.
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