TMI Blog2018 (9) TMI 2113X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing officer was supposed to assume that the assessee was not required to file the return of income as per the provisions of section 115A sub-section (5) or that the AO was of the view that the assessee has been receiving interest income only. In view of this, the reopening of the assessment is held valid. Additions upon the definition of interest as provided under article 12 of the India U.K. DTAA - As it was a financial transaction and the assured money return received by the assessee was nothing else than the interest received by the assessee on the finances made by the assessee to the Omaxe Ltd to be used for the construction of the property. Omaxe Ltd had rightly deducted the tax @ 15% of the interest / assured return paid to the assessee. Even the assessee on being asked to file the return has also treated the said receipts as interest income. Subsequently, the assessee changed his stand and come with a plea that the assured return is only in the nature of capital receipt. The assessee in this respect has placed reliance on several decisions of the High Courts and Supreme Court. Without referring to each of the decision, we may point out that the decisions refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2016 in the case of Jatinder Singh Chatta is taken as a lead case for narration of facts. 3. The brief facts of the case are that assessee is a tax resident of United Kingdom (U.K). During the financial year 2007-08, assessee invested in an upcoming project of Omaxe Ltd. along with four other investors. The assessee made payment of 95% of the sale price and was provisionally allotted fourth and fifth floors in a proposed commercial complex. In lieu of such 95% advance payment, Omaxe Ltd. was to pay assured return on monthly basis to assessee till the time possession of the commercial space was handed over. Such payment was made by Omaxe Ltd from assessment year 2008-09 to assessment year 2012-13 after deduction of tax u/s 195 @ 15% under the India-U.K. Double Taxation Avoidance Agreement (DTAA) The Assessing officer on the basis of information received by him had reopened the assessment and asked the assessee to file its return of income. The assessee accordingly filed is return of income and offered to tax the assured return received from M/s Omaxe Limited treating the same as interest income. Since the TDS @ 15% has already been deducted by Omaxe Limited in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, if his income consisted only of income referred to in clause (a) of sub section (1) of section 115A, which include interest income and further that the tax deductible at source under the relevant provisions has been deducted from such income. The contention of the Ld. counsel in this respect has been that since the assessee did not have any income other than the interest income received from Omaxe Ltd. and Omaxe Ltd had already deducted tax at source @ 15% as per the India - U.K. DTAA and, hence, the assessee was not necessarily required to file return of income. The Ld. counsel s submissions in this respect have been that the reopening cannot be done just to verify the source of investment in the absence of any information or reasons to believe of escapement of income. That the assessment cannot be reopened for making fishing and roving inquiries. Further, that the second reason recorded that the assessee had not filed the return, was not tenable as the assessee as per the provisions of the Income Tax Act was not necessarily require to file the return of income as discussed above. 8. We are not convinced with the above arguments of the Ld. Counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the company i.e. Omaxe Ltd will continue to have full authority over the proposed Unit and all the amounts paid by the allottee shall merely be a token payment and shall not give any lien or interest in the said unit to the allottee. Hence, as per the above clause (23), even after payment of 95% of the sale consideration, in advance, the assessee did not get any lien or interest in the proposed unit to be constructed by Omaxe Ltd. However, in lieu of the 95% of the total sale consideration settled, the Omaxe Ltd. agreed to pay a certain fixed monthly amount to the assessee in the name of assured return. Now the question arises what is the nature of the advance payment made by the assessee to the Omaxe Ltd and what is the nature of the amount received by the assessee as assured return. The facts and circumstances on the file reveal that the property for which the assessee had paid the money was not in existence at the time of making payment and even subsequently was not capable of yielding any income in the shape of rent, lease money and even otherwise was not capable to be commercially exploited. 11. Under the circumstances, it cannot be said that the assured return was any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vance money was paid by the assessee to get the commercial floors at some concessional rate or on an early date rather as discussed above, as per the clause of the agreement, even after payment of 95% of the price, the assessee did not get right or lien in the property and as discussed above, this was a financial transaction between the assessee and Omaxe Ltd. In view of this, we hold that the assured return received by the assessee was in the nature of interest and the assessee has rightly returned / offered the same as interest income. 13. In view of this, we do not find any justification on the part of the lower authorities in treating the receipts of the assessee as income from other sources . We, accordingly, set aside the impugned order and direct that the assessee in this case has rightly paid the taxes as India U.K. DTAA. No further addition is warranted. However, the claim of the assessee that it is a capital receipt not liable for taxation is rejected. The appeal of the assessee is, therefore, treated as allowed. 14. Since the facts and issue involved in all the appeals are identical, hence, the decision arrived at will apply mutatis-mutandis to all the captioned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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