Enhanced open-offer payment treated as share sale consideration, not interest, where no debtor-creditor relationship existed.

An enhanced open-offer payment received for tendering shares was held to form part of the share sale consideration, not separate interest. The additional amount arose from a SEBI-approved revised offer price and was linked to delay in completing the acquisition process, but it was not paid on any debt, loan, or credit facility. As there was no debtor-creditor relationship, the receipt could not be split into principal consideration and penal interest. It therefore did not fall within the definition of interest under the Income-tax Act or the relevant tax treaty and was treated as part of the transfer consideration.

---

---

Issues: Whether the additional consideration received on tendering shares under the open offer was taxable as interest or was part of the sale consideration and therefore not separately assessable.

Analysis: The additional sum arose from the revised offer price under a SEBI-approved open offer and was enhanced because of delay in completing the offer process. It was not paid on any debt, loan, or credit facility, and there was no debtor-creditor relationship between the assessee and the acquirer. The amount could not be detached from the share transfer transaction and split into original consideration and penal interest. The receipt therefore did not fall within the definition of interest under section 2(28A) of the Income-tax Act, 1961 or within Article 11 of the India-Mauritius DTAA. The amount was in substance an integral part of the consideration for the shares tendered under the open offer.

Conclusion: The additional consideration was not taxable as interest and was to be treated as part of the share sale consideration, in favour of the assessee.

Ratio Decidendi: A payment received as an enhanced open-offer price, made in connection with a SEBI-approved share acquisition transaction and not arising from any debt claim, is part of the consideration for the transfer of shares and not interest.

---