Interest on share buy-back treated as income from other sources, not part of sale consideration for capital gains.

Interest received on buy-back of shares was treated as a compensatory payment for delay and loss of interest, not as part of the sale consideration for capital gains. The reasoning distinguished such delay-related compensation from amounts that enhance transfer value or form part of the price of shares. Because the payment did not arise from any right to interest on borrowed money or from an increase in the value of the transferred asset, it was held outside the sale price. The amount was therefore taxable as income from other sources.

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Issues: Whether the amount received by the assessee as interest on buy-back of shares formed part of the sale consideration for computing capital gains, or was taxable as income from other sources.

Analysis: The payment was made pursuant to directions arising from the public offer and was meant to compensate shareholders for the delay and consequent loss of interest, not as consideration enhancing the value of the shares. The distinction between compensatory payments forming part of compensation and interest paid only for delay was applied. The claimed analogy with compensation treated as part of acquisition or enhanced compensation was held inapplicable because the amount here did not arise from any right to receive interest on borrowed money or from enhancement in the value of the transferred asset. The amount therefore did not represent part of the sale price of the shares.

Conclusion: The interest received by the assessee was correctly assessed as income from other sources and not as part of the sale consideration for capital gains.

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