TMI Blog1994 (11) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... rred by the assessee in the execution of the extra work carried out in the earlier assessment year ? (ii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that the pre-award interest component of the amount was not taxable ? " The short facts leading to the order of the Tribunal referring the two questions may be briefly stated. The assessee had executed some civil contract under the Government during the financial years 1961-62 to 1965-66. Disputes having arisen between the parties in accordance with the arbitration clause in the agreement the same were referred to the arbitrator. The arbitrator awarded a sum of Rs. 7,17,920 which comprised the principal amount of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same had been referred to the arbitrator for arbitration and the arbitrator awarded some amount which included the interest. In Govinda Choudhury's case [1977] 109 ITR 497, this court relying upon the observations made by the Supreme Court in the case of Govindaraju Chetty (T. N. K.) v. CIT [1967] 66 ITR 465 and on examining the nature of the award came to the conclusion that the interest awarded by the arbitrator though styled as payment of interest but it was indeed an ex gratia payment by way of compensation worked out through the medium of interest and, therefore, the same could not be treated as income exigible to tax. But against the aforesaid decision of this court in Govinda Choudhury and Sons v. CIT [1977] 109 ITR 497 the depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the basis of the concession of a party cannot be said to be the law on the subject. This contention of Mr. Rath cannot be said to be without any force. But while answering the second question, their Lordships of the Supreme Court have held that the interest awarded by the arbitrator is an accretion to the assessee's receipts from the contract and is obviously attributable and incidental to the business carried on by him and it partakes of the character of receipts for payment of which he was otherwise entitled to under the contract. This being the position, it is difficult for us to accept the contention of Mr. Rath appearing for the assessee that the Division Bench decision of this court in Govinda Choudhury's case [1977] 109 ITR 497 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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