TMI Blog2017 (4) TMI 1430X X X X Extracts X X X X X X X X Extracts X X X X ..... t and against the assessee. The contention that revenue income of compensation interest is also compensation, in our considered opinion, is misconceived inasmuch as they are entitled benefits only for the compensation, the rest of the amount of interest is deferred amount of compensation, therefore, the interest income is to be calculated from the date of application which was preferred and they are entitled for the interest from the date of application as directed by all courts but subject to income liable to be taxed every year. In that view of the matter, the income of interest is to be counted on accrual basis year wise. The first issue is accordingly answered in favour of the department that interest income is taxable. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal whereby Tribunal partly allowed the appeal of the assessee and dismissed the appeal of the department in D.B. Income Tax Appeal No.199/2015, appeal of the assessee was dismissed. 3. Counsel for the department Mr. Mathur has argued in Appeal No.162/2012 which was filed prior in time wherein while admitting the appeal, this Court framed the following substantial question of law:- Whether the component of interest received on compensation awarded by the Motor Accident Claims Tribunal payable to the claimants on the death of victim falls within the ambit of interest within the meaning of Sec. 2 (28A) of the Income Tax, 1961 and can be subjected to tax ? 4. Counsel for the appellant has drew our attention to para 10.1 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 maount 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. This is a case of death by accident and if the legal heir directed to refund the compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t view of the matter, he contended that he is not liable to tax if he is required to refund the amount as in several cases the amount has been ordered to be refunded by the tribunal alongwith interest and capital amount. 7.1 He has cited the following judgment:- (A) Interest amount is of Contingent nature 1. ITR VOL 161 page 524 Commissioner of Income-Tax, WestBengal II versus Hindustan Housing and land development trust ltd. 2. ITR VOL 144 page 367 Commissioner of Income-Tax, A.P. IIIVersus Syed Khadruddin Ali Khan and another (A.P. High Court) 3. ITR VOL 274 page 414 Paragon Constructions (i) PVT LTDVersus Commissioner of Income-Tax and another (Delhi High Court) 4. ITR VOL. 246 page 622 Commissioner of Income-Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers 18. (2007)1 Supreme Court Cases 508 Tejinder Singh Gujral vs. Inderjit Singh Ors. (D) Discretionery Interest Amount Not Amenable to Tax 19. ITR VOL 264 page 617 Commissioner of Income-Tax Versus B.Raj (Punjab and Haryana High Court) 20. ITR VOL 270 page 173 Commissioner of Income-Tax VersusCharanjit Jawa (Punjab and Haryana High Court) 21. ITR VOL 157 page 69 Commissioner of Income-Tax Versus A.B.V. Gowda ( Deceased) (E) Interest is part and parcel of Compensation 22. 2008 A.C.J. 2041 SC Dharampal Others Vs. U.P. State Road Transport Corporation. 23. (2003) 3 SC Cases 148 Abati Bezbaruah vs. Dy. Director General, Geological Survey of India and Another 24. (2007) 1 Supreme Court Cases 508 Tejinder Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reading of Section 2-(28A), it is very clear that originally compensation was received by the claimant was not income but once the amount received, it has become capital and interest on capital is liable to be taxable. In that view of the matter, the issue is required to be answered in favour of the department and against the assessee. 10. The contention of Mr. Kasliwal is that revenue income of compensation interest is also compensation, in our considered opinion, the contention is misconceived inasmuch as they are entitled benefits only for the compensation, the rest of the amount of interest is deferred amount of compensation, therefore, the interest income is to be calculated from the date of application which was preferred and they ..... X X X X Extracts X X X X X X X X Extracts X X X X
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