TMI Blog2012 (12) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... on award was not a revenue receipt and therefore not taxable in the hands of the assessee. ii) allowing the depreciation on car amounting to ₹ 6.62.852/- though there is no business activities of the assessee. 2. The appeal in I.T.A. no.4168/Del./2000 in the AY 1997-98, earlier disposed of vide order dated 11.3.2004 was recalled vide order dated 19 th May, 2006 in M.A. no.133/Del./2006. Since similar issues are involved in these two appeals, accordingly, these were heard simultaneously for the sake of convenience and are being disposed of through this common order. 3. Facts, in brief, as per relevant orders for the AY 1997-98 are that return declaring income of ₹ 2, 51, 81, 700/- filed on 31.10.97 by the assessee, a construction contractor, after being processed on 31.3.1998 u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act), was selected for scrutiny with the service of a notice u/s 143(2) of the Act. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee received a sum of ₹ 2, 05, 06, 266/- in terms of award of an arbitrator in consequence of the arbitration proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 1, 99, 35, 431 was awarded to the assessee on account of the following: As per final biII, balance to be paid on account of work done. (for ₹ 3, 16, 24, 243) ₹ 1, 15, 46, 851.85 Claim on account of extra rate for quantities beyond 30% deviation limit. (for ₹ 20, 33, 088) ₹ 2, 08, 833.31 Payment due to on account escalation under the price variation clause 14(b). (for ₹ 76, 64, 572) ₹ 20, 11, 984.74 Payment due under contract clause 14(a) for labour escalation due to statutory order of the Government. (for ₹ 1, 43, 14, 791) ₹ 54, 76.302.34 Payment due on account of material procured for the work as per drawing and lying with IAAI store. (for ₹ 14, 99, 958) ₹ 6, 91, 459.34 Total amount of award - (i) + (ii) + (iii) ₹ 2, 05, 06, 266/- the AO observed that the awards were given to the assessee either as compensation for loss of profit as in (i), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent payment of interest, the claim and the amount of award and consequent payment of interest, the claim and the amount of award has been reproduced by the Assessing Officer in the assessment order for the sake of convenience, the same is reproduced here also. [In Rs. ] As per final bill. balance to be paid on account of work done (for ₹ 3, 16, 24, 243) 1, 15.46, 851/- Claim on account of extra rate for quanti- Ties beyond+30% deviation limit. (for ₹ 20, 33, 088). 02, 08, 833/- Payment due to on account escalation under the price variation clause 14(b). (for ₹ 76, 64, 332) 20.11.984/- Payment due under contract clause 14(a) for labour escalation due to statuary order of the Government. (for ₹ 1, 43, 14, 791/-) 54.76, 302/- Payment due on a/c of material procured for the Work as per drawing and lying with IAAI store.(for ₹ 14, 99, 958) 06.91, 459/- Total amount of award -(1)+( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is is totally unsupported by any material on the record. Various observations made by the Assessing Officer in the assessment order has been explained by the learned counsel successfully. Further, I find that the Assessing Officer has given a lot of stress on observations of Hon ble Supreme Court in the case of Govinda Chowdhry Sons reported in 203 ITR 881 contained at para 6 of the assessment order. On the other hand, the learned counsel has also referred to the same case but relied on the observation which is contained at para 5 of the order which has been quoted above and as submitted correctly that the Hon ble Supreme Court has not expressed considered opinion on the question before them. In the case of Govinda Chowdhary Sons, two following questions were referred to the High Court. 1. Whether on the facts and in the circumstances of the case, a sum of ₹ 2, 77, 692/- awarded to the assessee as interest was rightly held to be revenue receipt? 2. If the answer to question No.1 is in affirmative whether on the facts and in the circumstances of the case, the aforesaid sum of ₹ 2, 77, 692/- was rightly separated from the other amount under the head Awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court where it was conceded on behalf of the assessee that he was willing to proceed on the footing that the pre-award interest was in the nature of revenue receipt. Relying on this observation of the Supreme Court, it was ascertained by the learned DR that the pre-award interest is taxable. We are unable to give effect to this argument. The Supreme Court has taken note of the concession made on behalf of the assessee in the course of arguments and has not recorded any definite conclusion or any considered opinion regarding the taxability of the interest. This will be clear from the fact that the Court itself stated that in view of the concession they expressed no considered opinion on the question regarding the assessability of the interest. Since the matter was decided only upon the concession, the Supreme Court cannot be understood as having laid down the law . 15. Now coming to the actual nature of the receipt after going through various judgments of various High Courts on the issue, it is found that it is almost a settled proposition that if the interest is received on the basis of contract or under statute, the same is revenue receipt and is taxable otherwise not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, the AO brought to tax interest amount of ₹ 1, 96, 72, 751/-in the AY 1997-98 amount of ₹ 3, 33, 59, 343/- in the AY 1998-99 awarded by the arbitrator and endorsed by Bombay High Court as a revenue receipt, following the decisions of Hon ble Supreme Court in the case of Govinda Choudhary Sons reported in 203 ITR 881(SC); Rockwell Engineering Co. Ltd. 180 ITR 277 (Kerala), Abbasbhoy A. Dehgamwalla 195 ITR 681 (Bom) and Bishambarnath Swaroop Narain 119 ITR 681 (All). On appeal, the ld. CIT(A), however, allowed the claim of the assessee following the decision of the ITAT, Cuttuck Bench, Cuttuck in I.T.A. No.169/90 in the case of J.C. Budhraja Vs. Income-tax Officer, which in turn followed the decision in Govinda Choudhary Sons vs. CIT, 109 ITR 497(Orissa) regarding pre award interest. Whereas in the instant case interest was awarded by Hon ble Bombay High Court from date of decree till payment was made i.e .interest of ₹ 1, 96, 72, 751/-was paid by Airport Authority of India on 30.7.1996 to the assessee in the AY 1997-98. In the AY 1998-99, issue relates to interest of ₹ 3, 33, 59, 343/- for the period 1.8.1980 to 7.11.1992 i.e. date of award and from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession but we are of the opinion that it was a concession rightly made and is correct in law. Accordingly, we hold that interest is income and it has to be assessed as a business receipt. The question referred is accordingly answered in favour of the Revenue and against the assessee in the above terms. The appeals are disposed of accordingly. 9.1 Though the ld. AR on behalf of the assessee relied upon the decision in Ghanshyam(supra), we find that the question in that case was as to whether additional amount under s. 23(1A), solatium under s. 23(2), interest paid on excess compensation under s. 28 and interest under s. 34 of the 1894 Act, could be treated as part of the compensation under s. 45(5) of the 1961 Act? and what was the meaning of the words enhanced compensation/consideration in s. 45(5)(b) of the 1961 Act? would it cover interest ? year of its taxability. Hon ble Apex Court held that interest under s. 28 unlike interest under s. 34 is an accretion to the value, hence it was a part of enhanced compensation or consideration which is not the case with interest under s. 34 of the 1894 Act. So also additional, amount under s. 23(1A) and solatium under s. 23(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the claim for interest is compensation, for the reason that the claimant had been deprived of the use of the money and had not had his money at the due date, it would be income in his hands. It may be regarded either as representing the profit he might have made if he had had the use of the money in time or conversely the loss he had suffered because he had not had that use. 9.3. In view of the above discussion and the legal position emerging from the aforesaid decisions, it must be held that the receipt of pre-award and post-award interest is a revenue receipt attributable and incidental to the business carried on by the assessee and it bears the same character of receipts payment of which it was otherwise entitled to under the contract. The disputed amount of interest is only an accretion to the assessee's receipts from the contract business. Accordingly, we have no hesitation in reversing the findings of the ld. CIT(A) and upholding the order of the AO in the assessment orders for these two assessment years. Consequently, grounds raised by the Revenue in these two appeals are allowed. 10. As regards second ground in AY 1998-99, the AO disallowed depreciation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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