TMI Blog2022 (7) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... e s had disclosed for assessment, the entire interest income that was credited over a period of time and received by the assessee during the financial year relevant to the assessment year 2018-2019. In the light of the above said factual situation, we deem it appropriate to delete the addition made by the A.O. and sustained by the CIT(A) with reference to the interest income that is credited in the relevant assessment year. Unexplained Cash Deposit - assessee has furnished a copy of cash flow summary and the cash book along with the bank statement, wherein it is seen that there are cash withdrawals - HELD THAT:- In the interest of justice and equity, we restore the issue to the files of the A.O. The A.O. is directed to examine the cash flow summary and the cash book along with the bank statement and decide the matter afresh in accordance with law. Needless to state, the assessee shall be heard before a decision is taken in the matter. - ITA No.905/Bang/2017 And ITA No.691/Bang/2019 And ITA No.692/Bang/2019 And ITA No.904/Bang/2017 - - - Dated:- 15-6-2022 - Shri George George K, JM And Ms.Padmavathy S, AM For the Appellants : Sri.B.T.Shetty, CA For the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax liability of Rs.16,28,24,240, interest demand of Rs.10,13,58,089 and penalty demand of Rs.1,62,82,424) which far exceed the total consideration for the shares transferred fixed in the SPA between the parties. In view of this commitment on the part of the vendors it was also agreed between the parties, in the same agreement at clause 10, that the entire agreed consideration of Rs.20,63,88,000 was to be kept deposited by the Purchaser in an Escrow Account in respect of which either the assessee or the other two shareholders, who have sold their shares to the purchaser, have any right to either withdraw the said deposit amount or to utilize it for their needs. It was stated that the said deposit account is therefore a blocked account till the company s tax and commitments in pursuance to the notice issued by the Commercial Tax Department is finally settled. It was submitted that in the said Escrow Account an amount of Rs.71,97,569 was credited as interest against which neither the assessee nor the other two vendors of the shares have any right, as such, as on the close of the relevant assessment years. It was further stated that the company has not been successful in its appeal aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al tax liability is in the hands of the company M/s Leadage Alloys India Ltd, whereas the assessee has received sale consideration on sale of his shares and capital gains on this account in the capacity of individual. Thus both the transactions are different and the assessee's right over the share and any interest accrued thereon cannot be declined. 3.8 It is also noticed that assessee has nowhere forfeited his right over the share. Hence the assessee's claim that assessee has not acquired any right over his share and hence no right over the interest accrued on the same is not maintainable. 6. Aggrieved by the interest addition, which was credited in the Escrow Account, the assessee preferred an appeal before the first appellate authority. The CIT(A) rejected the claim of the assessee. The relevant finding of the CIT(A) reads as follows:- 5.2 The applicant has kept their sale consideration in Escrow Account which is interest bearing and accordingly the taxability on the interest has to be borne by the applicant along with two other vendors and the proportion of the sale of shares belonging to them before the transfer of share to M/s.Exide India Limited. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries Limited for a total consideration of Rs.20,63,88,000. The sale consideration for the shares of the assessee comes to Rs.9,40,12,200 and this amount is not in dispute. The assessee had entered into a SPA on 12.08.2010. As per the SPA, the assessee along with other sellers were liable for any claim, demand, expenses in relation to notice dated 15.07.2010 received by the company M/s.Leadage Alloys India Limited issued by the Sales Tax Department demanding the total sum of Rs.28,04,64,753 (i.e., tax liability of Rs.16,28,24,240, interest demand of Rs.10,13,58,089 and penalty demand of Rs.1,62,82,424), which far exceeded the total consideration of the shares transferred fixed in the SPA between the parties. It is also agreed between the parties in the SPA at clause 10 that the entire agreed consideration of Rs.20,63,88,000 was to be kept deposited by the purchaser in the Escrow Account. Accordingly, the Escrow agreement was made on the same day, i.e., on 12.08.2010 and the entire amount of Rs.20,63,88,000 was deposited by the purchaser in the Escrow Account opened with HDFC Bank Limited, Kolkata. The relevant clauses of the SPA, namely, clauses 5 and 10, read as follows:- 5. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Karasamadhan Scheme, 2017 and the appeal pending before the Hon ble jurisdictional High Court and before the CSTAA, New Delhi was withdrawn. The details of the payment of the withdrawal of the appeal and payments made for settling the sales-tax liability are placed on record at page 40 to 51 of the paper book. The assessee has also placed on record the assessment orders in the case of both the assssees for assessment year 2018-2019. The assessee has disclosed the entire interest credited over a period of time in the Escrow Account in the return of income filed for assessment year 2018-2019. The assessments were completed u/s 143(3) of the I.T.Act by disallowing the claim of set off of certain expenditure against the interest income that was disclosed amounting to Rs.6,63,39,548 in the case of Sri.Thyagarajan Rajkumar and Rs.6,95,34,412 in the case of Sri.Thyagarajan Arunkumar. Therefore, the admitted facts are that the entire interest income that accrued over a period of time has been assessed in its entirety for assessment year 2018-2019 in the case of both the assessees. 9.3 Viewed from the above backgrounds, we have to examine whether the interest has accrued in the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the Tribunal is right in law in holding that interest on fixed deposits representing compensation, pledged against bank guarantee given to KIADB pending resolution of dispute over title of land, is taxable in the respective years when such interest was credited by bank in its books? 9.4 In deciding the above question of law, the Hon ble High Court held as follows:- 16. Admittedly, the assessee does not maintain any books of accounts. He is an agriculturist, who had never filed any returns of income prior to the acquisition of the land, and until the search operations were conducted in his premises on 2-22001, whereafter also the return was filed in response to the notice issued by the Department and then too, in the said returns, he had disclosed his taxable income as NIL, as by then the Regular Second Appeal had not been decided and he had not acquired full and complete light over the compensation amount, as well as the interest, which was acquired only after the decision in the Regular Second Appeal on 23-07-2008, and that income of the assessee became taxable only in the assessment year 2009-10. 17. In the absence of the assessee maintaining any books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.5 The Hon ble High Court, after considering the judicial pronouncements on the issue, concluded that if the amount is received by the assessee on a certain condition or by imposing of any restriction, such as furnishing of security, the assessee does not become the real owner of the money, though received in his name, or the interest accrued, which could not be chargeable to tax till such dispute is resolved and the condition, or restriction, so imposed is removed or resolved. The conclusion of the Hon ble High Court at para 22 and 23 reads as follows:- 22. In our view, it is thus clear, that if an amount is received by the assessee on certain conditions or by imposing any restrictions, such as of furnishing security, the assessee does not become the real owner of the money, though received in his name, or the interest that accrues thereon would not be chargeable to tax, till such dispute is resolved and the condition, or restriction, so imposed is removed or resolved. 23. For the foregoing reasons, we decide the first question of law in favour of the assessee and against the Revenue. 9.6 In the instant case, the condition was imposed for withdrawal of the money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of withdrawals made on various dates. The learned AR has filed a cash flow summary and cash book along with bank statements for our perusal. 14. The learned DR supported the orders of the Income Tax Authorities. 15. We have heard rival submissions and perused the material on record. The assessee has furnished a copy of cash flow summary and the cash book along with the bank statement, wherein it is seen that there are cash withdrawals to the tune of Rs.36 lakh. The cash book summary are as follows:- Cash Book Summary: 1st April 2013 to 31st March, 2014 Date Particulars Gross Total (Cr) Cash (Dr) Dhanalaks hmi Bank 1224 (Dr) Axis Bank SB A/c 0309 (Dr) 01 April 2013 Opening balance 410773 -- -- -- 22 May 2013 Axis Bank SB A/c 0309 50000 50000 -- -- 29 May 2013 Axis Bank SB A/c 0309 50000 50000 -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 Mar 2014 Cash 100000 100000 12 Mar 2014 Cash 600000 600000 12 Mar 2014 Cash 900000 900000 12 Mar 2014 Cash 585000 585000 17 Mar 2014 Cash 250000 250000 -- 21 Mar 2014 Cash 100000 100000 21 Mar 2014 Cash 70000 70000 21 Mar 2014 Dhanalakshmi Bank 1224 70000 70000 -- -- 22 Mar 2014 Dhanalakshmi Bank 1224 65000 65000 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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