2000 (9) TMI 23 - HC - Income Tax

High Court rules interest as income, not capital gain. Appeal dismissed.

The PATNA High Court upheld the decision of the Appellate Tribunal, ruling that the interest received by the assessee should be treated as income from ... Capital Gains, Land Taken On Lease Issues:1. Dispute over whether interest received by the assessee should be treated as income from other sources or as capital gain.Analysis:The judgment involves an appeal under section 260A of the Income-tax Act, 1961, where the Commissioner of Income-tax and the mother of the assessee challenged the order of the Appellate Tribunal. The case revolved around the receipt of interest by the assessee and his mother, legal heirs of the late Shashi Bhushan Singh, following a legal dispute with the Patna Regional Development Authority (PRDA). The High Court had directed the PRDA to pay interest at the rate of 12% per annum from December 23, 1981, to August 1986, due to the cancellation of a lease agreement. The main issue was whether the interest received should be considered as income from other sources or as capital gain.The Assessing Officer treated the interest as capital gain, while the Commissioner of Income-tax argued it should be considered income from other sources. The Appellate Tribunal sided with the Assessing Officer, stating that the receipt of money by the assessee was in compliance with the High Court's order, which was issued due to the failure to hand over the land despite the deposit made by the assessee. The Appellate Tribunal held that such receipt could not be categorized as income from other sources.The appellant contended that the interest amount was not paid in exchange for the extinguishment of the right, title, and interest in the leased land, thus should not be considered as capital gain. However, the court disagreed, stating that the High Court's order clearly indicated that the interest was to be paid for the specified period and was not compensation for the extinguishment of rights over the property. The court found that the interest amount was not paid as compensation or price for extinguishing the right and title over the property.After considering the arguments and the impugned order, the court upheld the decision of the Appellate Tribunal, dismissing the appeal for lack of merit. The court concluded that the interest received by the assessee should not be treated as capital gain but rather as income from other sources. The judgment was delivered by Judges N. Pandey and I. P. Singh of the PATNA High Court.