TMI Blog2016 (5) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... ember These two appeals, of which one is filed by Revenue and the other i.e. Cross Objection by assessee, are against the order of CIT(A)-II, Baroda, dated 01.09.2011 for the assessment year 2008-09. 2. The relevant facts as culled out from the materials on record are as under: 3. The assessee is an individual carrying on business as a proprietor of M/s. Super Engineering Services. Assessee filed its return of income for A.Y. 2008-09 on 29.09.2008 declaring total income at ₹ 4,50,040/-. The case was selected for scrutiny and thereafter, assessment was framed u/s.143(3) of the Act vide order dated 29.10.2010 and the total income was determined at ₹ 30,08,360/-. Aggrieved by the order of Assessing Officer, assessee carried the matter before the ld. CIT(A) who vide order dated 01.09.2011 (in Appeal No. CAB/II-205/10- 11) granted partial relief to the assessee. Aggrieved by the order of ld. CIT(A), Revenue and assessee are now in appeal before us and have raised following grounds: 3.1 The ground raised by the Revenue in the present appeal No.2863/Ahd/2011 reads as under:- 1. On the facts and in the circumstances of the case and in law, the ld.CIT (Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in dispute in various appeals of Revenue, the tax effect is less than ₹ 10 lacs and in the absence of any material on record by the Revenue to demonstrate that the issues in the present appeals are covered by exemptions specified in clause (8) of the CBDT Circular, we are of the view that the monetary limit prescribed by the instructions of the aforesaid CBDT Circular would be applicable to the present appeals of the Department and therefore the present appeals of Revenue are not maintainable on account of low tax effect. However, in case there is any error in the computation of the tax effect involved or if for any reason, the aforesaid CBDT Circular is not applicable, it would be open to the Revenue to seek revival of the appeal. In such circumstances, we dismiss the appeals of Revenue without expressing any opinion on merits of the case. 6. In the result, the appeal of Revenue is dismissed. Now, we take up Assessee s C.O. No.32/Ahd/2012 7. During the course of assessment proceedings, A.O. noticed that assessee had met with a motor vehicle accident on 18.04.1995 which rendered him totally and permanently disabled. The Motor Accident Claims Tribunal (MACT), Barod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest received on compensation or on enhanced-compensation referred to in sub-section (2) of section 145A shall be assessed as income from other sources in the year in which it is received. This amendment will take effect from 1st April, 2010 and shall accordingly apply in relation to assessment year 1998-99 and subsequent assessment years. Clause 26 of the Bill seeks to amend section 56 of the Income-tax Act relating to income from other sources. The existing provision of clause (vi) of sub-section (2) of the said section brings any sum of money, the aggregate value of which exceeds fifty thousand rupees, which is received without consideration by an individual or a Hindu undivided family from persons other than relatives as defined under that section within the purview of income-tax. Certain exceptions have also been provided under the proviso to the said clause. The proposed amendment seeks to tax specified properties, including a sum of money, received without consideration or for inadequate consideration. This amendment will take effect from 1st October, 2009. It is also proposed to amend sub-section (2) of said section so as to insert a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was disposed of by the Hon ble Gujarat High Court on 06.07.2015, wherein Hon ble Gujarat High Court held that the negligence of the driver of Mini Luxury Bus could be to the extent of 75% and that of the assessee could be to the extent of 25% and, accordingly, Hon ble Gujarat High Court held that assessee would be entitled to total compensation of ₹ 39,22,000/- and after deducting 25% towards contributory negligence of the assessee, the amount that the assessee will be entitled to recover from Insurance Company would be ₹ 29,41,500/- along with interest @ 9% per annum instead of 7.5% per annum ,from the date of application till realization. She pointed to the relevant order of the Gujarat High Court and also placed on record a copy of the same. She therefore submitted that since the rate of interest awarded by MACT was not final and the Insurance Company had filed appeal before the High Court, the interest awarded by MACT to assessee cannot be taxed as the amount had not attained finality and that the amount should be considered as income only when the award reached finality. She also placed reliance on the decision of Coordinate Bench of Jaipur Tribunal in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some compensation and has also directed to pay interest to the assessee. The Insurance Company has filed appeal before the Hon'ble Jurisdictional High Court and the Hon'ble Jurisdictional High Court has admitted the appeal of the Insurance Co. and Insurance Company has raised a very valid point which has been mentioned in the written submissions which is part of this order also. There may be possibility that compensation can be reduced can be cancelled in toto or can be upheld. Appeal is admitted, there is no dispute. If the compensation is upheld, then of course, interest is also to be upheld. However, the rate may be less or more. If the award granted by MACT is annulled or reduced, then in that case interest on that amount has to be annulled or reduced. There are so many cases also where interest granted by MACT or High Court was reduced by Hon'ble Supreme Court. We will discuss some of the cases in later paras. If the amount is reduced or annulled, then there is no provision under the IT Act for refund of tax paid by the assessee for a particular year. In that situation the assessee will be in a adverse position and no court has held in any case that any person aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest awarded by the MACT is not a part of compensation? 10.2. The Hon ble High Court after considering the various decisions cited in the order, held as under:- 20. In the context of compensation received under the Motor Vehicle Act, the compensation is either on account of loss of earning capacity on account of death or injury or on account of pain and suffering. Such receipt is not by way of earning or profit. Award of compensation is on the principle of restitution to place the claimant in the same position in which he would have been had the loss of life or injury not been suffered. In Gobald Motor Service Ltd. and another Vs. R.M.K.Veluswami and others AIR 1962 SC 1, it was observed:- The same principle was restated with force and clarity by Viscount Simon in Nance v. British Columbia Electric Railway Co. Ltd., 195l AC 601. There, the learned Lord was considering the analogous provisions of the British Columbia legislation, and he put the principle thus at p. 614: The claim for damages in the present case falls under two separate heads. First, if the deceased had not been killed, but had eked out the full span of life to which in the absence of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not the case with interest under Section 34 of the 1894 Act 25. In Central Bank of India Vs. Ravindra and others AIR 2001 SC 3095, the question was whether interest component of the principal sum could carry further interest. It was observed:- 44. We are of the opinion that the meaning assigned to the expression 'the principal sum adjudged' should continue to be assigned to principal sum at such other places in Section 34(1) where the expression has been used qualified by the adjective such , that is to say, as such principal sum . Recognition of the method of capitalisation of interest so as to make it a part of the principal consistently with the contract between the parties or established banking practice does not offend the sense of reason, justice and equity. As we have noticed such a system has a long established practice and a series of judicial precedents upholding the same. Secondly, the underlying principle as noticed in several decided cases is that when interest is debited to the account of the borrower on periodical rests, it is debited because of its having fallen due on that day. Nothing prevents the borrower from paying the amount of int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that interest allowed by the MACT in an accident case was income from interest and, thus, revenue in nature, is not sustainable. 10.3 We thus find that the Hon ble Punjab Haryana High Court held that the interest component in compensation awarded by MACT to be a part of compensation and, therefore, a capital receipt and not income till the claimant received the amount in pursuance to award. In view of the aforesaid facts and relying upon the decision of the Hon ble Punjab Haryana High Court, we hold that interest component in compensation awarded by MACT is part of compensation and has to be treated as capital receipt and not income till the assessee received the amount in pursuance of award. The interest earned by the assessee on the amount of compensation after its receipt will be taxed in accordance with law. In view of the aforesaid facts, we restore the issue back to the file of AO to rework the income in accordance with the aforesaid decision of Hon ble P H High Court and decide the issue. Thus, this ground of assessee s Cross Objection is allowed for statistical purposes. 11. In the result, the appeal of Revenue is dismissed and C.O. of assessee is allowed for s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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