Deferred auction-price payment treated as capital gains consideration, not interest or income from other sources.

Amount received for deferred payment of the auction price was treated as additional consideration for transfer of a capital asset, not as interest in the statutory sense under the Income-tax Act. Because it did not arise from a borrowing or debt, it was included in the full value of consideration for capital gains under sections 45 and 48, rather than taxed under the head of income from other sources. The assessment as income from other sources was set aside and reassessment directed on the basis that the receipt formed part of capital gains.

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Issues: Whether the amount received by the Official Liquidator, though described as interest for deferred payment of the auction price, was part of the sale consideration chargeable under the head of capital gains or was taxable as income from other sources.

Analysis: The amount was received in connection with transfer of the capital asset and was not interest in the legal sense under section 2(28A) of the Income-tax Act, 1961, because it did not arise from money borrowed or debt incurred. Under sections 45 and 48 of the Income-tax Act, 1961, the full value of consideration for transfer includes amounts accruing on account of the transfer, whatever nomenclature is adopted by the parties. Section 2(47)(v) of the Income-tax Act, 1961 creates a notional transfer only when possession is taken in part performance under section 53-A of the Transfer of Property Act, 1882; here, possession was not transferred in that manner and title passed only upon completion of payment and issuance of the sale certificate. The amount, though labelled interest, therefore represented additional consideration for the transfer and not a separate source of income under section 56.

Conclusion: The amount was held to form part of the sale consideration and was taxable only as capital gains, not as income from other sources.

Final Conclusion: The assessment treating the amount as income from other sources was set aside, and the matter was sent back for reassessment on the basis that the amount formed part of the capital gains arising from the transfer.

Ratio Decidendi: An amount received for deferred payment of the price of a capital asset, if it is not interest in the statutory sense and is not referable to a separate borrowing or debt, must be included in the full value of consideration for capital gains and cannot be assessed as income from other sources.

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