TMI Blog2012 (5) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee-company was awarded a work contract by M/s. Krishna Bhagya Jal Nigam Ltd. (KBJNL) vide agreement dated 13.12.1989 for construction of canal. During the course of execution of work, the assessee raised an arbitration claim on KBJNL which was not accepted. The matter was referred to the arbitrator who awarded the claims of the assessee vide order dated 24.1.2003. On appeal filed by the KBJNL, District Court confirmed the award partially. On further appeal filed in the Hon ble Karnataka High Court, the Hon ble Court vide its interim order dated 21.12.2005 stayed the order of the District Court and also asked KBJNL to remit a sum of Rs. 3 crores to the assessee in the interim. Accordingly, KBJNL paid the said amount to the assessee after effecting TDS there from. The assessee claimed that the said receipts were not taxable in the year of receipt since the same did not accrue to the assessee as income. It was an ad-hoc and interim payment, pending final adjudication on merits. The Assessing Officer did not concur with the claim of the assessee and held that since the Hon ble High Court did not attach any conditions or riders with the payment, the said receipts were taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also relied on the judgement of Supreme Court in the case of Polyflex (India) Pvt. Ltd. vs. CIT, reported in 257 ITR 343 wherein it was held as under: "In 1986 the assessee had paid excise duty on certain goods. Pursuant to the decision of the CEGAT a sum of Rs. 9,64,206 was refunded in September, 1988. Thereafter the excise department filed an appeal to the High Court and, on the appeal being dismissed, a petition for special leave to appeal to the Supreme Court ; but the fate of that petition was not known. For the assessment year 1989-90, the Assessing Officer brought to tax the amount by invoking section 41(1) of the Income-tax Act, 1961, but the appellate authority and the Appellate Tribunal held that there was no remission or cessation of trading liability so long as the petition for special leave to appeal was pending in the Supreme Court. The High Court, on a reference, held that the amount was assessable to tax but observed, on the basis of counsel s argument, that the Tribunal ought to consider the question whether the excise duty was actually refunded to the assessee or not and pass proper orders in the light of its finding. The assessee preferred an appeal to the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Hindustan Housing Land Development Trust Ltd. (161 ITR 524)(SC) , Godhra Electricity Company Ltd. (225 ITR 746)(SC), Highway Construction Company (225 ITR 52) (Gauhati), Darapaneni Chinna Krishnaiah (HUF) vs. CIT (291 ITR 98)(AP) and Padmasundra Rao (Decd.) vs State of Tamil Nadu (SC) (255 ITR 147 at 153) . 8. He further submitted that there was an amendment to section 45(5) but there is no corresponding amendment to section 28. Being so, according to him, what is stated in section 45(5) cannot be imported for the purpose of application of section 28 where the income is assessed under the head 'Income from business or profession'. 9. We have heard both parties and perused material or record. According to Shri C.P. Ramaswamy, learned counsel for the assessee, the amount was collected by the assessee in terms of interim orders of the court. The amount though received by the assessee , could not have been appropriated by it as its own. The receipt did not accrue to the assessee. It was liable to be refunded to the concerned party in the event of the judgement of Supreme Court against the assessee and, therefore, it was a liability of the assessee-company. The Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment scheme. This security deposit was also returned as and when the bottles were returned. This additional sum was entered by the assessee under the heading Empty bottles return deposit account . A question arose whether the assessee could be assessed to tax on the balance of the amounts of these additional sums left with the asses- see after the refunds were made. This court held that in realising the additional amount described as security deposit, the assessee was really charging an extra price for the bottles. The additional amounts taken were an integral part of the commercial transaction of the sale of liquor and bottles and when they were realised they were the moneys of the assessee and remained thereafter the moneys of the assessee. They were the assessee s trading receipts and, therefore, the balance of these additional sums left in the hands of the assessee after the refunds were assessable to tax. This court further held that it did not make any difference that the additional amount was entered in a separate ledger under the head Empty bottles return deposit account as the assessee s style of writing up the account books in a particular manner could not alter th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases, one common feature of all the orders is that the realisation of the amount by the respective assessees was hedged by several conditions one of which was that the assessee shall refund the amount received in excess of the amount in the event of the pending dispute being decided adversely to the assessee by the court. Thus the receipt of the amount by the assessee was clearly associated with a liability to refund the amount, which liability was ascertainable and quantified. Such is not the case at hand. We have also gone through the judgment of Supreme Court in the case of CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524 . The facts of the case before the Supreme Court were that certain lands belonging to the assessee-company were first requisitioned and then compulsorily acquired by the State Government. On an appeal preferred by the respondent-company, the arbitrator made an award directing compensation to be paid for requisition and acquisition. The arbitrator s award was promptly challenged by the State Government before the High Court. Pending the appeal, the State Government deposited the amount in the court which the assessee-company was per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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