TMI Blog2011 (6) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... id not crystallize in the three assessment years 1996-97, 1997-98 and 1998-99, but only came to be crystallized in the year 2000-2001, when this court passed decree on 28-1-2000 and, therefore, the assessee could not claim deduction for the same in the assessment years 1996-97, 1997-98 and 1998-99 - Thus, answer question in affirmative in favour of the revenue and against the assessee and consequently dismissed the appeal. - IT APPEAL NOS. 1096, 1138 AND 1146 OF 2008 - - - Dated:- 3-6-2011 - A.K. SIKRI AND M.L. MEHTA, JJ. S. Ganesh and Satyen Sethi for the Appellant. Ms. Prem Lata Bansal and Deepak Anand for the Respondent. JUDGMENT M.L. Mehta, J. These appeals are against the order dated 25-1-2008 of the Income-tax Appellate Tribunal (for short "the Tribunal") pertaining to the assessment years 1996-97, 1997-98 and 1998-99. These appeals were admitted on the following substantial questions of law : (i) Whether on the facts and circumstances of the case and in law, the Tribunal was right in holding that liability to pay interest on damages awarded for breach of agreement dated 12-1-1980 to supply 50,000 metric tonnes HPS Groundnut to M/s. Alimenta SA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under the award, interest was to be paid for the specific period, i.e., 13-2-1981 to 15-11-1989. It was observed that there was no specific order to allow interest beyond 15-11-1989 and since rate of interest for the subsequent period was also not fixed, the liability remains uncertain and it cannot be said to have crystallized during the year. The assessee carried out an appeal before the Tribunal who vide its impugned order dated 25-1-2008 held that as per the appellate award dated 14-9-1990, interest on damages awarded was payable only up to the date of award i.e., 14-9-1990. Alimenta, in suit before the Delhi High Court had claimed interest from the date of award till the date of payment by the appellant. However, the liability was disputed by the appellant who had challenged the said order of the High Court. Therefore, the Tribunal held that on the last date of the previous year for the assessment year under consideration, there was no legal liability on the part of the appellant to pay interest and that liability was crystallized only on 28-1-2000 (i.e., assessment year 2000-01) when decree was passed by the Delhi High Court. It is against this order that the assessee is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the amount of compensation. He submitted that though the decision was rendered in the context of land acquisition, however, the ratio is applicable to award made by the Arbitrators. Learned counsel also relied upon the cases of R.C. Gupta v. CIT [2008] 298 ITR 161/166 Taxman 191 (Delhi); Bharat Earth Movers v. CIT [2000] 245 ITR 428/112 Taxman 61 (SC); Navjivan Roller Flour Pulse Mills Ltd. v. Dy. CIT [2009] 315 ITR 190 (Guj.); J.K. Industries Ltd. v. Union of India [2008] 297 ITR 176/[2007] 165 Taxman 323 (SC) and Fazilka Electric Supply Co. Ltd. v. CIT [1983] 143 ITR 551/14 Taxman 264 (Delhi). 5. On the other hand, learned counsel for the revenue submitted that it was only with the passing of award by the appellate authority on 14-9-1990 that the interest was confirmed. She submitted that even the interest at the rate of at the rate of 18 per cent from the date of award till the date of realisation accrued only on 28-1-2000, when the High Court passed the order making the award rule of the court. Learned counsel placed reliance on Central India Electric Supply Co. v. CIT [2001] 247 ITR 54/115 Taxman 686 (SC); P. Mariappa Gounder v. CIT [1998] 232 ITR 2 (SC); CIT v. Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed deduction of the amount. This court referred to the principle as laid down in Bharat Earth Movers' case (supra) wherein it was held that the liability was capable on being estimated with reasonable certainty when a recovery suit was filed by HSL against the assessee. Merely because the liability was not a statutory one, it cannot be said that the liability was not certain, but was merely a contingent one. 8. In the case of Navjivan Roller Flour Pulse Mills Ltd. (supra) also relied upon by the assessee, it was held that the liability to pay the damages was incurred by the assessee when the trade association passed an award for damages for breach of contract. Merely because the award was challenged in the appeal could not be a ground for holding that the assessee did not incur the liability. The mere fact that the assessee disputes a liability, is no ground for denying the claim for deduction in respect of such liability. 9. Learned counsel for the assessee also placed reliance on matching principle stating it to be basic and settled principle of accounting and/or of the Income-tax laws. In this regard, reliance was placed on the case of J.K. Industries Ltd. (supra) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore the enhanced compensation did not become income arising or accruing to the assessee. Likewise, in the case of Paragon Constructions (India) (P.) Ltd. (supra), this Court held that income accrued to the assessee only on the date on which decision was rendered by the Court. To the same effect was the decision of the Kerala High Court in N. Sundareswaran's case (supra) that in the absence of any material evidencing the finalization of proceedings and quantification of damages payable by the assessee, the claim for deduction of damages payable cannot be allowed. 11. Referring to the aforesaid judgments, it comes to be an established fact that there would be difference in the statutory interest which is mandatorily payable by virtue of the provisions of statute as in the case of Land Acquisition Act and the interest which may be awarded by an arbitrator in relation to any dispute between the two parties. It also comes out to be an established fact that even if the assessee does not accept the award, as given by the Arbitrator, and challenges the same, the liability of the assessee still remains. But in such a case, it may not be said with certainty as to the amount of l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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