Taxability of interest received

[shyamal roychowdhury]

An architect entered into a contract / agreement with P.U.C FOR WORKS . THE CONTRACT CARRIED an arbitration clause , after compleating Job , there was a dispute on Bill settlement . the matter was referred to Arbitrator who in his award in addition settlement of bills also allowwed an amount for loss of profit & also directed payment of X amount as interest on loss of profit amount . The question is taxability of the amount 7 interest received in respect of LOSS OF PROFIT , Is it a capital receipt & not taxable or it is a revenue amount as normal receipt in business . opinion supported bycase laws/ circular / prvision of section /rule will be appriciated since we hv claimed as capital receipt which the A.O IS NOT AGREEING . he is likely to include it under income . Thanks

AI Summary

Architect's Arbitration Award Dispute: Is Interest on Loss of Profit Taxable Income or Capital Receipt? An architect faced a dispute over bill settlement after completing a contract with a public utility company, which was resolved through arbitration. The arbitrator awarded an additional amount for loss of profit and interest on that amount. The query concerns whether the interest on the loss of profit is taxable as a capital receipt or as regular business income. The architect claims it as a capital receipt, but the assessing officer disagrees, considering it taxable income. A respondent suggests it is a revenue receipt, citing a Supreme Court decision, and the architect requests further details on the case.