TMI Blog2011 (11) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... ngh and others vs. Land Acquisition Collector and others (1996 - TMI - 5560 - Supreme Court) it was held that though it was termed as interest on delayed payment, it was actually a revenue receipt and therefore the provisions of Section 194A of the Income tax Act would have no application – Decided in favor of assessee. - Income-tax Appeal No. 36 of 2006 - - - Dated:- 28-11-2011 - Mr.Justice Deepak Gupta, Mr. Justice V.K.Ahuja, JJ. For the appellant: Mrs. Vandana Kuthiala, Advocate. For the respondent: Mr. M.M.Khanna, Sr. Advocate with Shri Vayur Gautam, Advocate. Per Deepak Gupta, J. 1. The following interesting questions arise for decision in the present case: - 1. Whether on the facts and in the circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had not deducted tax at source and he held that the amount paid by the assessee to the allottees was in the nature of interest within the meaning of Section 2(28A) of the Income-tax Act and in terms of Section 194A of the Income-tax Act, tax had to be deducted at source. He decided the case accordingly. 3. The assessee filed an appeal and the Commissioner of Income-tax held that the amount paid by the Board was not really interest within the meaning of Section 2(28A) but actually compensation for the delay in construction of the house and handing over possession of the same to the allottees. It came to the conclusion that the interest was merely a convenient method to calculate the amount of compensation in order to standardize it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeds to include in the terms money borrowed or debt incurred, deposits, claims and other similar right or obligation and further includes any service fee or other charge in respect of the moneys borrowed or debt incurred which would include deposit, claim or other similar right or obligation, as also in respect of any credit facility which has not been utilized. This statutory definition regards amounts which may not otherwise be regarded as interest as interest for the purpose of the statute. Even amounts payable in transactions where money has not been borrowed and debut has not been incurred are brought within the scope of the definition as in the case of a service fee paid in respect of a credit facility which has not been utilized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise. 8. In the case in hand it stands proved that in case the houses were ready within the stipulated period the Board would not be liable to pay interest. When construction of a house is delayed there can be escalation in the cost of construction. The allottee looses the right to use the house and is deprived of the rental income from such house. He is also deprived of the right of living in his own house. In these circumstances the amount which is paid by the Board is not payment of interest but in our view is payment of damages to compensate the allottee for the delay in the construction of his house/flat and the harassment caused to him. It may be true that this compensation has been calculated in terms of interest but this is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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