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

[Surender Gupta]

On the basis of apparent wording of the it is assumed that issue is related to loss of revenue / profit. The basic issue makes is apparently clear that the amount received with interest is a revenue receipt. You may refer the decision of honorable Supreme Court reported in 2008 -TMI - 6351 - SUPREME Court.

[shyamal roychowdhury]

FOR SRI SURENDRA GUPTA . THANKS FOR THE REPLY .CAN U PLEASE GIVE ME THE CASE DETAIL & ALSO WHERE IN TMI I WILL GET TEXT OF THE JUDGEMENT THANKS

AI Summary

Interest on loss of profit deemed taxable revenue rather than capital, includible in business income. Interest awarded on loss of profit in an arbitration award is characterised as an income/ revenue receipt for income tax purposes rather than a capital receipt, and may be included by the Assessing Officer in taxable business income, consistent with the precedent cited by the advisory respondent.