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2017 (4) TMI 1430 - HC - Income TaxAccrual of income - Compensation awarded by the Motor Accident Claims - whether sum payable to the claimants on the death of victim falls within the ambit of interest within the meaning of Sec. 2 (28A) and can be subjected to tax? - HELD THAT:- On plain reading of Section 2-(28A), it is very clear that originally compensation was received by the claimant was not income but once the amount received, it has become capital and interest on capital is liable to be taxable. In that view of the matter, the issue is required to be answered in favour of the department and against the assessee. The contention that revenue income of compensation interest is also compensation, in our considered opinion, is misconceived inasmuch as they are entitled benefits only for the compensation, the rest of the amount of interest is deferred amount of compensation, therefore, the interest income is to be calculated from the date of application which was preferred and they are entitled for the interest from the date of application as directed by all courts but subject to income liable to be taxed every year. In that view of the matter, the income of interest is to be counted on accrual basis year wise. The first issue is accordingly answered in favour of the department that interest income is taxable. In the second issue, it is held that taxability of interest would be attracted on year wise accrual basis. The assessee will calculate the interest year wise and will submit the same calculation to the assessing officer within a period of 30 days. The amount which has been received by him will bekept in a separate FDR year wise and statement of year wise will be submitted to the AO. It is made clear that FDR interest will be allowed to be accrued in favour of the assessee and only amount of interest kept in FDR will be refunded to the department within 30 days from the date of judgment of the First Appeal which is pending in the High Court, the assessee inform the disposal of the appeal and will deposit the amount. If the amount is not paid within 30 days of the judgment of the High Court, the department will be entitled for statutory interest prevailing on that day from the date of the judgment of the High Court, in first appeal. With the aforesaid observations, the appeals stand disposed of.
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