TMI Blog2023 (6) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of account of account ended on 31.03.2011. The break up of this liability is at is appearing in the audited account of the assessee and the other related notes to the audited accounts. Assessee has even though the amount received in 2010-11 recorded the same income in the year under consideration i.e. 2011-12. Both the parties not disputed about the chargeability of the income the same is considered as chargeable to the year under consideration i.e. F.Y. 2011-12, relevant to assessment year 2012-13. The bench noted that the assessee is aware that even though the assessee facing similar dispute in the past has not shown the interest income as business receipt and has considered it as capital receipt and credited to the capital account as per note no. 5 of the audited account in Schedule-IV. The bench also noted the assessee in the profit loss account has offered only contract receipt and offered profit @ 8 % and interest amount shown as capital receipt. The income in this case is not the interest on compensation or interest on enhanced compensation chargeable to tax as per provision of section 56(2)(viii) which is chargeable to tax on receipt of such interest irr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue raising only one ground is dismissed. - ITA No. 662/JP/2018 - - - Dated:- 14-6-2023 - Shri Sandeep Gosain, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Sh. Siddharth Ranka (Adv.) And Sh. Saurav Harsh ( Adv.) For the Revenue : Smt Runi Pal (Addl. CIT) ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by the revenue aggrieved from the order of the Commissioner of Income Tax (Appeals), Kota [ Here in after referred as Ld. CIT(A) ] for the assessment year 2012-13 dated 21.02.2018 which in turn arises from the order passed by the ITO, Ward-1(1), Kota passed under Section 143(3) r.w.s 147 of the Income tax Act, 1961 (in short 'the Act') dated 28.12.2016. 2. In this appeal, the revenue has raised following grounds: - 1. On the facts and in the circumstances of the case, the CIT(A) has erred in deleting the addition of Rs. 1,76,41,574/- out of total addition of Rs. 1,93,23,858/- made on account of arbitration receipts. 2. The appellant craves liberty to raise additional ground and to modify/amend the ground of appeal at the time of hearing. 3. The assessee has raised a preliminary objection agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the deceased assessee by legal heir, therefore, the revised form no. 36 filed by the department on 26th July, 2018 is as per the leave granted by the Tribunal for bringing the legal heir on record. There is no quarrel on the point that the appeal filed against the deceased assessee is not maintainable, however, the said invalid appeal filed by the revenue will not forfeit the right to file a fresh appeal against the legal heir subject to the leave of the court. In the case in hand, since the revenue was allowed to take the necessary steps, therefore, the delay in filing the Memorandum of Appeal against the legal heir of the deceased assessee has been found to be explained by the revenue due to inadvertent mistake and, therefore, even if the said revised form no. 36 is filed belatedly, the Tribunal is satisfied with the reasons and cause of delay explained by the ld. D/R. Accordingly, the delay in filing the form no. 36 is condoned. 5. As regards the decisions relied upon by the ld. Counsel for the assessee, there is no dispute that the appeal filed against the deceased assessee is not covered under the provisions of section 292B and, therefore, the same is an invalid appeal l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, has escaped assessment should be chargeable to tax under section 147 of the Income-Tax Act, 1961. I, therefore, have reason to believe that the assessee has concealed the particulars of his income for the above-mentioned year. Therefore, Notice under section 148 of the Income-Tax Act, 1961 is to be issued for initiating the escaped assessment proceedings under section 147 of the Act. 6. In response assessee contended that there is no understatement of income and no income has escaped assessment to tax as envisaged u/s. 147 of the Act. Therefore, assessee stated to vacate the notice and drop the re-assessment proceedings. Without prejudice assessee also submitted that the return filed on 28.05.2012 be treated as a return filed in compliance to the impugned noticed dated 08.03.2016. Thereafter the notice u/s. 143(2) of the Act issued on 08.04.2016 for compliance on 25.04.2016 with notice u/s. 142(1) of the Act duly served upon the assessee along with a copy of reasons recorded u/s. 148(2) of the Act. 6.1 The assessee objected to issue notice u/s. 148 which was rejected by letter dated 08.04.2016. The assessee again objected to the issue of notice u/s. 148 vide letter dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd part of the receipt to the tune of Rs. 58,46,714/- pertain to works executed in the assessment year 1989-90 1990-91 but was not paid in those assessment years. Further it is submitted that it was because of these facts and nature of the case that the books of account were rejected and income was determined by way of net profit of 8.5% of the receipt. 6.3 The ld. AO taken into consideration the submission of the assessee and stated that receipts to the tune of Rs. 58,46,714/- pertain to work executed by the assessee on Anandpuri Canal Work and Annas Syphone Works. These receipts are in respect of works executed by the assessee in Assessment Year 1989-90 1990-91 but were not released on account of arising of disputes. The matter went to arbitration and it is after more than 20 years that the amount has been released to the assessee during the A. Y. 2012-13. The assessee has also received interest of compensatory nature for delay of payment of long delay of 20-22 years in settling the disputes. 6.4 Based on the detailed discussion in the assessment order, a final show cause notice dated 18.11.2016 was issued to the assessee and the assessee filed reply on 28.11.2016 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30/- over these periods. On perusal of these bills the ld. AO noted that these expenses are not having nexus with the court proceedings related to the arbitration awards and he has discussed the purposes of each legal expenses bills in his order in para 9.5. Finally, the ld. AO made an addition of Rs. 1,93,23,858/- [ 58,46,714 + 1,39,44,881 less 4,67,737/- income already offered ] charged to tax. 7. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). Before the ld. CIT(A) the assessee has challenged the reopening proceeding and the addition made by the AO. The ld. CIT(A) upheld the reopening proceeding. But in respect of the addition made by the ld. AO the relevant finding of the ld. CIT(A) is reiterated here in below: As regards Ground of appeal no. 8 to 14 (Except 10 11), objecting to treating of gross receipts as income by the A.O. when these pertained to A.Y. 1989-90 1990-91 where the books were already rejected by the A.O. u/s 145 profit estimated, it is apparent that though the facts are as above, however the A.O.'s stand on this has to be seen in the light of department's earlier stand. On his part the assessee, in the cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of High Court decision (setting aside order of CIT (A) who had allowed part relief to the assessee. The issue decided in AY. 2004-05 which was referred by ITAT was regarding verification of claim of expenses against the reward (claimed in A.Y. 1993-94 or not). The ITAT treated the entire contract receipt as income of the assessee. Hence in A.Y 2006-07 also the A.O. took the same stand held that since the assessee could not prove with documentary evidence that expenses pertaining to A.Y. 1993-94 1990-91 were not claimed in those years, the entire arbitration receipts were liable to be brought to tax. In further appeal, the ITAT reversing the order of CIT(A) held that the expenditure was not allowable even if incurred as it was never a part of audited P L account for A.Y. 1990-91 1993-94. The assessee explained in the present assessment under appeal here that receipts in AY. 2006-07 which pertained to two years did not contain contract related receipts to but for illegal termination of contract work. However in A.Y. 2012-13 the award receipts were related to contract works. He summarized the difference accordingly mentioned that the ratio for A.Y. 2006-07 was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions, the income which has been incurred in the year 2006-07 is required to be allowed as expenses were not claimed in the earlier year. Since no finding arrived by the A.O. whether the expenses are claimed or not for the AY 2004-05. Taking into consideration the above, the issue is answered in favour of the assessee and against the department. The agreement of the High Court on the Apex Court decision in the case of CIT us. Govind Chaudhary Sons 203 ITR 881 (SC) other High Court decisions cited to reach its findings mentioned above shows that while the income from interest contract work were both revenue receipts the interest being attributable to the contract receipts disputed ( received later) it was totally de hors the contract business and could not be from other sources as the A.O. has also agreed here. In the present case also, therefore the entire receipts of contract interest amounts covered by the award pertaining to the A.Ys. 1989-90 1990-91 will be considered as business receipts only. Now coming to the issue of what amount out of the above required to be taxed, firstly it is clear from the High Court order for A.Y. 2006-07 in the appellant s o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts as well. THE ITAT CHANDIGARH BENCH B in Mit Mohan Singh Kahlon v. Deputy Commissioner of Income-tax 39 taxmann.com 145 (Chandigarh - Trib.) held- Section 143, read with section 139, of the Income tax Act, 1961-Assessment - General Revised computation of income Assessment year 2007-08 Whether when a notice under section 143(2) has been issued and proceedings of assessment under section 143/3) are in progress, assessee can put forth any claim for deduction or exemption or relief, which was not claimed in return of income and same shall have to be considered by Assessing Officer Held, yes - Whether similarly, in case assessee files and produces correct computation of his income, and can convince Assessing Officer that income disclosed in original return is not actually correct income and correct income is one which is being furnished during assessment proceedings, such a revised computation has to be considered and acted upon by Assessing Officer-Held, yes Whether, therefore, where assessee had inadvertently offered higher income in his return but during assessment proceeding assessee filed reused computation of his total income to show that he had Tower income than de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the assessee records, it notices that the assessee has received interest on arbitration receipts of Rs. 1,39,44,881/- which has credited in capital account, but he has not pay tax thereon or he did not disclose such receipts as revenue receipts. Further, he has received contract receipts of Rs. 58,46 714/- and the same has shown in P L account, out of which he has transferred of Rs. 53,78 977/- in his capital a/c without forming part of his total income. Thus, it is a clear that the assessee has capitalized Such sums without paying a single penny as a tax thereon. In view of the above facts and circumstances, such income i.e. Rs. 1.93,23,858 (Rs 1,39,44,881+ Rs 53,78,977) to the extent of such receipts which is not forming part of his total income, has escaped assessment should be chargeable to tax under section 147 of the Income-Tax Act, 1961. Therefore, have reason to believe that the assessee has concealed the particulars of his income for the above-mentioned year. Therefore, notice under section 148 of the Income-Tax Act, 1961 is to be issued for initiating the escaped assessment proceedings under section 147 of the Act. Thereafter, assessment proceeding was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered in books of account is not allowable as per proviso to section 69C of the Income-Tax Act, 1961. 9.3 That the assessee has also stated to consider his interest receipts of Rs. 1,39 44,881/- as business receipts held by the Apex Court in the decision of Govinda Choudhary Sons 1993 203 TA 881 (SC) and income is to be of Rs. 11,85,314/- as per revised computation filed on 14.06.2016 The assessee's contention regarding to treat business receipts is acceptable However, his contention regarding to treat income of Rs. 11,85,314/- against such interest receipts of Rs. 1,39,44,881/- is not acceptable. As the assessee did not furnish and/or explain for incurring any expenditure Against such interest receipts. Moreover, it is pertinent to mention here that Interest receipts of the assessee on compensation/enhances compensation is being deemed to be the income of the year in which received under the provisions of section 145A(b) of the Act. In the instant case of the assessee, he has received interest of Rs. 1,39,44,881/- an arbitration receipts of Rs 58,46,714/- security refunds of Rs 3,62,059/- during the year under consideration is legally treated as income of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration. 3 CIT(A): 3. The Id CITIA) upheld the reopening of the case u/s 148 of the Act hut restricted the addition to Rs. 16,82,284/- by applying net profit rate 8.5% of Rs. 1,97,91,595(58,46,714+1,39,44,881) by following the decision of Hon'ble Rajasthan High Court In this case for AY 2006-07 wherein the Hon ble Court has directed to allow the expenses in the same year in which arbitration receipts have been brought to tax. The CIT(A) has observed as under: In the present case also, therefore the entire receipts of contract interest amounts covered by the award pertaining to the A. Ys. 1989-90 1990-91 will be considered as business receipts only. Now coming to the issue of what amount out of the above required to be taxed, firstly it is clear from the High Court order for A.Y. 2006-07 in the appellant's own case (on which ITAT order reversed by High Court as referred above, the A.O. had relied), the entire income could not be brought to tax. The issue will then arise as to whether any expenses were there in respect to the same? Although the appellant in the course of the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is considered as acceptable. The balance addition of Rs. 1,76,41,574/- is therefore, directed to be deleted. 4. AO's comments:- The decision of the Id.CIT(A) is not acceptable. The decision of the Hon'ble High Court in AY 2006- 07 was based on the fact that the expenses incurred on contract work were not being reflected in audit report for the year in which the work was executed and hence, the expenses were allowed in the same year in which arbitration receipts were declared by the assessee. In the year under consideration, no such finding has been given by the Id.CIT(A). Further, the decision of the Hon'ble High Court in AY 2006-07 was not further challenged due to the fact that the tax effect involved was below prescribed limits. The AO has clearly held that the assessee did not produce any evidence regarding non claiming of expenses in relevant year. It has been further held by the AO that the expenses in the year under consideration may not be allowed in view of the proviso of Section 69C of the Act even though the expenses were not claimed in the year of work. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Depreciation on motor cycles Rs. 355/- instead Rs. 709/-, Depreciation on mobile phone at Rs 1,135/- instead of Rs. 1,814/- 4. Deleted the addition of Rs. 3,83,111/- considering the ITAT decision for A.Y. 2001-02 and 2003-04. Out of above balance addition was confirmed by CIT(A) in his appellate order. Details of the same are as under: 1. Disallowance out of tractor hire charges Rs. 70,000/-, 2. Disallowance out of drilling and blasting expenses Rs. 25,000/-, 3. Addition on a/c of low house hold withdrawals Rs. 24,000/-, 4. Addition on a/c of accrued interest on NSCs Rs. 9,575/-, 5. Undeclared contract receipt Rs. 5,71,422/-, 6. Bogus current liability/ undeclared receipts Rs. 35,83,978/-. B. Against order u/s 143(3)/254 dated 21.04.2008 of the AO. CITIA) passed order on 28.01.2015 in appeal No 2895/2008-09 as under- 1. Confirmed the addition of Rs. 4,65,212/- out of Rs. 5,71,422/- stating that the assessee failed to produce any evidence regarding claim of proportionate expenses and deleted the addition of Rs. 76,210/- (refund of security deposit) and Rs. 30,000/-(reimbursement of litigation expenses) 4. ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs 2,17,141/, 2 Unexplained credit at Rs. 10,500/-, 3. Diesel expenses at Rs. 11,56,314/-, 4. Purchase of material like stone and rubble, sand and gritt at Rs. 3,96,580/-, S. Arbitration Award receipts at Rs. 8,13,194/ 6. Telephone Mobile expenses at Rs 16,651,7. Depreciation on Cars and Motorcycle at Rs. 22,680/-, 8.Vehicle Insurance expenses at Rs 2,948, 9. Labour payment at Rs. 2,00,000/-, 10, Payment in contravention of 40A(3) at Rs 1,66,942/-. 3 CIT(A), reasons for deleting the addition:- The ld CIT(A) vide order dated 24.06.2009 in appeal No.392/2008-09 has decided the case as under:- Deleted the additions: 1. Diesel expenses at Rs. 11,56,314/-, 2.Arbitration Award receipts at Rs. 8,13,194/, 3Purchase of material like stone and rubble, sand and gritt at Rs. 3,96,580/-, 4.Depreciation on Cars and Motorcycle at Rs 22,680/-, 5.Vehicle insurance expenses at Rs. 2,948/-, 6.Labour payment at Rs. 2,00,000/-, 7.Payment in contravention of40A(3) at Rs. 1,66,942/-. Confirm the addition: 1.Unexplained credit at Rs. 10,500/-, 2.Telephone Mobileexpenses at Rs. 16,651/- 3.Capital contribution Rs. 2,17,141/-(partly accepted) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Services Pvt. Ltd. 357 ITR 642 (All) in which SLP was dismissed by Hon'ble Supreme Court stating that the section 40(a)(ia) are applicable only when the amount is payable and not when the amount is already paid. 4. ITAT:- The Hon'ble ITAT vide its order in of Revenue appeal of ITA No. 11/1P/201528.02.2017 passed order as under:- 1 Dismissed the appeal on the issue of deleting the addition of Rs. 91.59,305/- by CITIA),stating that matter is pending adjudication on merits before the Hon'ble Rajasthan High Court for Arbitration receipts and the assessee cannot be regarded as income which has accrued unless and until the proceedings relating to arbitral award attains finality. 2. Dismissed the appeal on the issue of deleting the addition of Rs. 755542/- by CITA). stating that we do not see any infirmity in the order of Id.CIT(A) in deleting of Rs. 7,55,642/ 5. High Court:- High Court: 1. The Hon'ble High Court in DBIT AppealNo 210/2017 dated 06.11.2017 dismissed revenue appeal on addition of Rs 91 59,305/- stating that taking into account the observations made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) reasons for deleting the addition The Id CIT(A) vide his order dated 21.02.2018 upheld the reopening of the case u/s 148 of the Act but restricted the addition to Rs. 16,82,284/- by applying net profit rate 8.5% of Rs. 1,97,91,595(58,46,714+1,39,44,881) by following the decision of Hon'ble Rajasthan High Court in this case for AY 2006-07 wherein the Hon'ble Court has directed to allow the expenses in the same year in which arbitration receipts have been brought to tax. 4. ITAT Appeal is pending before Hon'ble ITAT. 5. High Court NA 6. Remarks: 7. AO s comments:- Appeal is pending before Hon ble ITAT. 8.2 In addition, the ld. DR submitted that the assessee has not disclosed the award amount consist of contract amount of Rs. 58,46,714/- and interest of Rs. 1,39,44,881/- in the return of income filed for the year under consideration. The assessee also in response to notice u/s. 148 offered only 8 % of the amount of the contract receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,91,595/- on account of arbitration award towards work executed by the assessee respondent in the Assessment Year 1989-1990 1990-1991 out of which a sum of Rs. 4,67,737/- was disclosed by the assessee respondent as income liable to be taxed during the year under consideration. 1.3. That subsequent to disposal of objections the assessee respondent filed revised computation of income vide letter dated 14.06.2016 increasing the total income from contractual receipts to a sum of Rs. 16,82,284/- as against Rs. 4,67,737/- (increased by Rs. 1214547) as was declared in the return filed originally. Thus, revised computation of income was Rs. 25,04,440/- and paid due tax and interest thereon. 2. The assessee was granted contracts (i) concerning the excavation of Anandpuri Canal from RD 780M to 3390M; and (ii) concerning the construction of Annas Syphon for Anandpuri Canal at RD 3330M. The said works were executed. Bills were submitted. Claims were made. But rejected. Part of the payment was received during the assessment years 1989-90 and 1990-91. Bills as accepted by the department and for which payment was received, were shown as receipts for the said assessment years and assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rajasthan through the Executive Engineer, DISTY DN No.2 LMC, Mahi Pariyojana, Banswara and the Hon ble District Judge, Banswara vide his order no. 92/268 dated 8.6.1992 appointed Shri K.C. Jain, retired Superintending Engineer, Irrigation as sole arbitrator to arbitrate in the matter of disputes. 3.1. Similarly in respect of Annas Syphon for Anandpuri Canal, similar dispute arose between the assessee and State of Rajasthan through Executive Engineer Anandpuri Canal Division Mahi Pariyojna Bagidora Distt Banswara and the Hon ble District Sessions Judge, Banswara vide his order No. Civil/92/496 dated 29.7.1992 appointed Shri K.C. Jain, retired Superintending Engineer, Irrigation as sole arbitrator to arbitrate in the matter of disputes. The sole arbitrator examined the facts, scrutinized the supporting material placed by the parties and ultimately made two separate awards on 12.3.1997. In terms of the award, following amount was awarded: Details of Award of Anandpuri Canal work: Refund of Security Deposit 1,00,639.00 Compensation, extra items and forItems disputed 8,32,148.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt have deposited the draft of Rs. 1,69,37,559/- for Anas Syphon work and a draft of Rs. 32,16,095/- deposited against the work of Anandpuri Canal work on 01.11.2010 in the Hon ble DJ Court Banswara for which assessee requested to Hon ble DJ Court Banswara to release the said amounts as deposited by the department but Hon ble DJ Court Banswara did not release the amount by saying that the department has already filed review petition in Hon ble High Court Jodhpur and advised to wait up to decision which is indicated in the note sheet of Hon ble DJ Court Banswara of dated 19.11.2010 for Anas Syphon work and similar for Anandpuri Canal Work. 3.5. After Hon ble High Court Jodhpur decision of dated 10.11.2010, on review petition filed by the department, the Hon ble DJ Court Banswara demanded from the assessee that the payment can only be released if the assessee submit affidavit/undertaking that if any further orders from any of the courts comes, the same will be refunded / deposited back again by the claimant as mentioned in Note Sheet of dated 19.11.2010. 3.6. On this assessee submitted 2 No. affidavit / undertaking for each case as per instructions of the Hon ble DJ Court Bansw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss means (i) any business except the business of plying, hiring or leasing goods carriages and whose total turnover or gross receipts in the previous year does not exceed an amount sixty lac rupees. (C) Interest has been allowed by the Arbitrator on equity, ex-gratia and of discretion. It is not statutory or in terms of the agreement. Its nature is revenue receipt attributable to and incidental to contract business carried on by the assessee and it bear the same character as business receipts. 6. Position of expenditure relating to receipts: 6.1. The second part of the receipts to the tune of Rs. 58,46,714/- pertain to works executed by the assessee in Assessment Year 1989-90 1990-91 but was not paid in those Assessment Years. Further it is submitted it was because of these facts and nature of the case that the books of accounts were rejected and income was determined in Assessment Year 1989-90 1990-91 by way of NP rate application of 8.5%. NP rate of 8.5% as submitted by the assessee in the revised computation of income should be applied because of once the books of accounts are rejected by the assessing officer while completing the assessment and after rejecting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Apex Court. 9.6. The facts of judgements relied upon by the assessee are distinguishable and assessee s facts are similar to the one as were involved in A.Y. 2004-2005. Para No. AO Reasoning Assessee s Submissions 9.6. The facts of judgements relied upon by the assessee are distinguishable and assessee s facts are similar to the one as were involved in A.Y. 2004-2005 Addition was made by the ld. Assessing Officer Addition was sustained by the Hon ble CIT(A) Matter was remanded by the Hon ble ITAT back to the ld. Assessing Officer Addition was again made by the ld. Assessing Officer Addition was partly deleted by the Hon ble CIT(A) Matter was left undecided by the Hon ble ITAT by its order dated 18.03.2016 with the following observation: Since the identical issue was decided by the Coordinate Bench for A.Y. 2006-2007 has already been challenged before Hon ble Jurisdictional High Court and the Hon ble High Court has also framed question of law in the case of the assessee, which is pending for disposal. When similar issue already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd against the department. 9. The appeal stands allowed . 9.2. Expenditure for which no details provided, nor entered in books are disallowable as per proviso to section 69C of the Act It is submitted that the same was inserted for the first time by Finance (No. 2) Act, 1998 w.e.f. 01.04.1999 and hence the same is not applicable for the relevant year 1989- 1990 1990-1991 for which the award pertains . 9.3. Though the interest income is treated as income from business, however the same is treated as taxable in the year of receipt in light of section 145A(b) of the Act It is submitted that the same pertains to compensation or enhanced compensation relating to acquisition of properties whereas the instant case nowhere falls under the definition of compensation but the same pertains to award granted under contractual difference between the contracting parties. For ready reference: Explanatory Circular issued for Finance (No. 2) Act, 2009 is reproduced as hereunder: 46. Rationalizing the provisions for taxation of interest received on delayed compensation or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income (accepted by the department with income of Rs. 4,67,737/-) and on the interest portion @ 8.5% amounting to Rs. 11,85,314/- thus revising his total income to Rs. 16,82,284/- passing the additional tax interest thereon voluntarily. The fact involved was that the assessee received an amount of Rs. 32,16,195/- as award for Anandpuri Canal Work Rs. 1,69,37,559/- for Annas Syphon Work vide order of Supreme Court in SLP No. 11185-86 of 2011 (order dt. 16/08/11) in civil suit filed against the irrigation department. The amount of award became final as it was finally decided by Apex Court dismissing the irrigation department s appeal on limitation. The award constituted refund of security, compensation, extra disputed items interest etc. Since the award was pertaining to A.Y. 1989-90, the assessee referred to the order in that year s assessment proceedings mentioning rejection of books there application of N.P. rate @ 10% (against 1.48% shown by him) by the A.O., which was upheld by CIT(A) upto 8.5% and also confirmed by ITAT. For the A.Y. 1990-91, similarly the books were also rejected and N.P. rate of 11% adopted by the A.O. which was again reduced by CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted N.P. rate applied. The A.O. has however, not considered the explanations of the assessee held the entire receipt as taxable based on ITAT s order for A.Y. 2006-07 regarding claim of expenses secondly on the interest receipts while agreeing that these were business receipts in view of Apex Court order in Govinda Chaudhary Sons (1993) 203 ITR 881 (SC), he has not accepted rate application on the basis of no claim of expenses evidenced against these receipts. He has therefore also rejected the assessee s revised computation of income filed in the assessment proceedings as discussed earlier. He also rejected the calim of expenses of Rs. 26,29,000 for A.Y. 2011-12 to 2017-18 as legal expenses Rs. 3,49,30/- for A.Y. 2001-02 to 2012-13 as travelling expenses since nexus of these with arbitration award could not be established order of Apex Court was dated 16.08.2011 this claim was made afterwards vide order sheet entry dated 16.12.16 (Page 49 50 of assessment order). Since the A.O. has broadly relied on the ITAT s order in the appellant s own case for A.Y. 2006-07 in which the ITAT had mentioned that no claim of expenses will be allowable as per the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied), the entire income could not be brought to tax. The issue will then arise as to whether any expenses were there in respect of the same? Although the appellant in the course of the proceedings did mention about legal travelling expenses which the A.O. did not consider in absence of nexus with the arbitration award, but in any case the analogy is that these awards pertained to works done for A.Ys 1989-90 1990-91 only reflected in the return for A.Y. 2012-13 because they were received in financial year 2011-12, when the matter of award was finalized by the Apex Court. Various Tribunals High Courts have opined that in the case of contractors, estimation of income on such arbitration awards was a reasonable view on facts involved. In the present case also, it is observed that on the regular receipts for A.Y. 1989-90 1990-91, the department had resorted to rejection of books of accounts u/s 145. Since the receipt of award is from those very contracts related books rejected by the department then estimating the profits, the contract the interest awarded are also deemed to be of the same character whatever be the receipt it was duly covered by the Net Prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on basis of revised computation of income Held, yes THE ITAT MUMBAI BENCH F in Furniture Concepts (I) Ltd. v Assistant Commissioner of Income-tax, Range-9 (1), Mumbai 64 taxmann.com 47 (Mumbai Trib.) held Section 139 of the Income-tax Act, 1961 Return of income (Revised computation) Assessment year 2007-08 Assessee filed its return declaring certain taxable income Subsequently assessee filed revised computation wherein deduction was claimed on account of remission by bank under one time settlement Assessee did not raise said claim by filing a revised return because prescribed time for filing return had already elapsed Assessing Officer refused to consider revised computation submitted by assessee Whether since mandate of Constitution is to levy and collect due taxes, issue raised by assessee was to be restored to file of Assessing Officer to examine it afresh and decide in accordance with law Held, yes This additional amount of income comes to Rs. 16,82,284/- and has been disclosed by way of revised computation filed in the course of assessment proceedings. This is over and above the income disclosed in the regular/revised return. The same i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,77,692 was not at all taxable in its hands. However, it also took an alternative contention that, even if it is treated as a trading receipt or as a revenue receipt, it should be treated as part of trading receipts accruing to the assessee from the contract. The assessee's assessment had been completed by applying a net profit rate of 10 per cent, to the trading receipts. The assessee's contention was that this amount of Rs. 2,77,692 should be treated as part of the trading 'receipts and that what was assessable in his hands as income was only 10 per cent, of this amount. The Tribunal did not accept either contention of the assessee. It held that the sum of Rs. 2,77,692 was a revenue receipt and not a capital receipt. It was also of the opinion that the amount of interest was fully taxable as income from other sources and that it had to be delinked from the other trading receipts for this purpose. This brings us to a consideration of the second question. The sum of Rs. 2,77,692 was received by the assessee as interest on the amounts which were determined to be payable by the assessee in respect of certain contracts executed by the assessee and in regard to the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we do not think there is any scope for considering the decision relied on by the learned counsel for the Revenue in United Construction Contractors v. Commissioner of Income Tax (1994) (1) KLT 880). In light of above fact submissions, it is thus kindly requested that the departments appeal be dismissed the order passed by the ld. CIT(A) may be confirmed and upheld. 9.1 The ld. AR of the assessee also relied upon the following judgment to support the contentions so raised. The judgment relied upon are: SNo. Particulars Page No. From To 01 Written submission before Hon ble ITAT 01 16 02 Hon ble Rajasthan High Court in Chandi Ram (Deceased) v. DCIT (2017) 11 TMI 1420 17 27 03 Hon ble Supreme Court in CIT v. Govinda Choudhary (1992) 4 TMI 8 28 29 03 Hon ble Kerala High Court in CIT v. N.C. Kaladharan (2008) 1 TMI 952 Hon ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee he supported the order of the ld. AO and prayed to uphold the same. 11. We have heard the rival contentions and perused the material placed on record and the decisions relied upon by the parties to drive home to their respective contentions, both the learned DR and the AR before us vehemently supported the order of the authorities below as favorable to them. The bench noted that the assessee collected the demand draft on 20.11.2010 and the same was deposited in the bank account and the assessee has shown his amount in the books of account of account ended on 31.03.2011. The break up of this liability is at is appearing in the audited account of the assessee (APB-118) and the other related notes to the audited accounts which reads as under: (a) The assessee has followed the Mercantile System of accounting and recognized income and expenditure on accrual basis. (b) Assessee has not charged any Depreciation on fixed assets. (c) Balance of Sundry Debitors, Creditors, Loans Advances are subject to their confirmation. 3. Opening Balances is taken on the basis of Unaudited Balance sheet Provided to us duly signed by the Representative of the Assessee. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the estimated expenditure and considering the income as business receipts based on the detailed finding and after considering the judgment of the jurisdictional high court in the assessee s own case. The bench also noted that even though the amount received in 2010-11, assessee recorded the consequential income in the year under consideration i.e. 2011-12 for which both the parties did not disputed about the chargeability of the income the same is considered as chargeable to the year under consideration i.e. F.Y. 2011-12, relevant to assessment year 2012-13. The bench also noted that the income in this case is not the interest on compensation or interest on enhanced compensation chargeable to tax as per provision of section 56(2)(viii) which is chargeable to tax on receipt of such interest irrespective of method of accounting followed by the assessee. But in this case the interest is on delayed payment of the contract amount executed by the assessee and as decided by the apex court in the case of CIT Vs. Govinda Choudhury this interest is only an accretion to the assessee s receipts from the contracts. It is obviously attributable and incidental to the business caried on by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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