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TMI Blog2010 (7) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... le consideration. The Company Court by order dated 12.8.1991 accordingly granted permission to the bidder to pay Rs.2.26 Crores within six months without interest and to pay the balance of Rs.2.23 Crores in 80 monthly instalments regularly commencing from 1.12.1991. He was further directed that for the said amount, the bidder shall pay flat rate of interest of 18% per annum on reducing balance from 1.1.1991. It was only in pursuance of this order, the bidder paid Rs.2.23 Crores within six months which carried no interest. The balance of amount, as per the order of the Court, he started paying in instalments and that also he could not carry out promptly. He filed another application in C.A.No.1762/93 before the Company Court to pay the balance of Rs.1.39 Crores and to relieve him from payment of interest. In the said application, this Court by order dated 2.11.1993 reduced the interest from 18% to 15%. Similarly in respect of the payment of the balance of consideration, some concession was shown in the matter of time. Subsequently, there were few more such applications in respect of the payment. Ultimately, the entire sale consideration was paid and accordingly, a Sale Certificate w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration so as to fall within the head of "Capital Gain" or the same is interest, pure and simple, so as to fall within the head of "income from other sources" for the purpose of assessment for payment of income tax. 4. The contention of the learned Senior Counsel for the Petitioner is that though in the orders of the Company Court, it has been mentioned that the amount represents the interest, as a matter of fact, in legal sense, it is not interest, but it is only a part of sale consideration. In this regard, the learned Senior Counsel would submit that though the Company Court directed the bidder to pay a part of the bid amount in instalments, since there was no transfer effected immediately and since the possession was not also transferred in terms of Section 53-A of the Transfer of Property Act, whatever was received by the Official Liquidator until the transfer of title was effected, would only be a part of Capital and the same will not fall within the ambit of income from other sources. The learned Senior Counsel would further point out that indisputably, when the bidder was permitted to pay the part of the bid amount in instalments, the Company Court by order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the same requires interference at the hands of this Court. 6. The learned Counsel for the respondent would have a different stand. He would also take me through various proceedings of the Company Court wherein two different expressions viz. consideration and interest have been employed. According to him, the intention of the Company Court itself was to treat the bid amount as consideration and any amount received from the bidder for the delayed payment towards interest is only as an income from other sources. In this regard, the learned Counsel would also submit that even in the Sale Certificate issued by the Company Court, it has been treated separately as consideration and interest, thereby denoting that the bid amount is the consideration and the amount in question is only interest. The learned Counsel would further submit that in a Catena of decisions, it has been held that any amount accrued as interest on the capital amount is only income from other sources as defined in the Income Tax Act. In this case, according to the learned Counsel for the respondent, the amount in question was received by the Official Liquidator from the bidder only by way of interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubts in this regard. However, as pointed out by the learned Senior Counsel for the Petitioner, the Company Court in more than one place in the orders passed on various dates has directed that the interest received from the bidder shall be part of the sale consideration. This direction issued by the Company Court also cannot be lost sight of. With these undisputed facts, let me now look into the provisions of the Act. 9. At the outset, I may refer to Section 45(1) of the Income Tax Act dealing with Capital Gains which reads as follows: "45(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54F, 54G and 54H be chargeable to income of the previous year in which the transfer took place." A close reading of Section 45(1) of the Income Tax Act would make one to clearly understand that any profit or gain arising out of the transfer of a capital asset shall be chargeable only as "Capital Gain". 10. Now turning to Section 48 of the Act, it speaks of the mode of computation of Capital Gains as follows: "48. The income chargeable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882); or vi. Any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation : For the purposes of sub-clauses (v) and (vi) 'immovable property' shall have the same meaning as in clause (d) of Section 269 UA)" 12. Here 2(47)(v) needs to be under scored. This provision creates a notional or artificial transfer on the day when possession is transferred in terms of Section 53-A of the Transfer of the Property Act. It is common knowledge that transfer of title by way of sale takes place only on the execution of the sale deed as provided in Section 54 of the Transfer of Property Act. But, for the purposes of the Income Tax Act notional/artificial transfer is effected on the date when transfer of possession is made under Section 53-A of the Transfer of Property Act. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as interest, atleast one of the conditions should be satisfied, namely, the same should have been received as a due on account of any money either borrowed or debt incurred. Here, in this case, the amount which was agreed to be paid, though by way of interest by the bidder as per the order of the Company Court, is not on account of any money either borrowed or debt incurred. Therefore, the amount in question cannot be treated as interest at all as defined in the above provision. 15. Now coming to the judgment relied on by the learned Senior Counsel for the petitioner in the Judgment of Kerala High Court in Karvalves Limited Vs. Commissioner of Income Tax reported in (1992) 197 ITR 95, the question, as I have already referred to, was as to whether the Solatium paid as per the provisions of the Land Acquisition Act would be income through other sources or the same would form part of the consideration. The Courts have consistently held that it is only towards consideration and not towards any income through other sources. But at the same time, in these judgments, the interest paid by the Government as per the provisions of the Land Acquisition Act has been treated as income th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a fixed amount was calculated and received by him. In the given set of facts and circumstances of that case, it has been held that the amount received by way of interest was not on account of transfer of capital asset, but on account of a different transaction under which interest was received. Therefore, the principles stated in the said case do not come to the rescue of the respondents. 17. In view of the foregoing discussion I hold that the amount in question, in this Writ Petition received by the Official Liquidator as per the orders of the Company Court, though repeatedly referred to as interest, for the purpose of assessment of income tax, it is part of sale consideration and therefore, the same cannot be treated as income from other sources as defined in Section 56 of the Income Tax Act. The said amount should be treated only as Capital Gain under Section 45 of the Income Tax Act for the purpose of assessment. 18. In the result, the Writ Petition is allowed, the impugned order passed by the 1st respondent and confirmed by the 2nd respondent is set aside and the matter is remitted to the 1st respondent for issuance of appropriate assessment order treating t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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