Interest on sale consideration under Chapter XX-C held unsustainable after a pre-emptive purchase order

Interest was held not payable on sale consideration required to be kept available under Chapter XX-C where an earlier Division Bench had ruled that, after a pre-emptive purchase order, it would be inequitable to charge purchasers interest on the balance amount. Applying that binding principle, the Delhi High Court found the interest demand unsustainable and rejected the demand.

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Issues: Whether interest was payable on the sale consideration amount directed to be deposited under Chapter XX-C of the Income-tax Act, and whether the demand for interest could be sustained.

Analysis: The dispute was covered by an earlier Division Bench decision holding that, where the appropriate authority had passed an order of pre-emptive purchase and the purchasers were compelled to keep the balance consideration available, it would be inequitable to require payment of interest on that amount. That decision was binding on the present Bench. Applying the same principle, the demand for interest on the amount of Rs. 22,50,000 was not sustainable.

Conclusion: The demand of interest was rejected and the writ petition was allowed in favour of the assessee.

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