TaxTMI 
TaxTMI 
1987 (5) TMI 84
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....t of tender rates in consequence of delay in settling the tender. (ii) Payment on account of difference in rates because of escalation of prices since 1971. (iii) Payment on account of losses incurred by the assessee for having been prevented by the Government from executing the works from May 1972 to June 1974 and June 1975 to September 1977. (iv) Payment on account of losses sustained by the assessee owing to wasteful and infructuous expenditure on the management and supervisory staff. (v) Payment on account of compensation for the deprivation of profits that would have been earned but for the fault of the State Govt. which had prevented the assessee from executing the works from May 1972 to June 1974 and June 1975 to Sept. 1977. (vi) Cost of out of pocket expenses in connection with the preparation and defending the case before the Arbitrator. The Arbitrator gave an award on 4-9-1979 in favour of the assessee in a sum of Rs. 99,00,000 made up as follows :--- Rs. 40,00,000 towards escalation of rates for the works executed up to date of award 5,00,000 towards the escalation of the rates payable for the balance of the works to be executed from the date o....
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....ere is no appeal, and Rs. 1,60,000 being 10% of Rs. 16 lakhs. He observed in para 6 of his order that this addition of Rs, 9,90,000 and the interest of Rs. 8,66,250 included in the assessment might undergo modification in the light of the judgment that might be delivered by the Supreme Court on the appeal filed by the assessee against, the High Court's judgment and thus threw a hint that the order of assessment might require rectification as a result of the judgment of the Supreme Court. 6. Sri N. Santhanam, learned departmental representative, submitted that the sum of Rs. 16 lakhs was awarded by the arbitrator towards loss of profit. This portion of the award was confirmed by the High Court. He submitted that the assessee had made several claims before the arbitrator and one of the claim was for compensation towards deprivation of profit. The other claims were for enhancement of tender rates, payment on account of difference in rates, payment on account of losses incurred by the claimant in having been prevented by the Government from executing the works and payment on account of losses sustained by the assessee due to wasteful and infructuous expenditure on management and sup....
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....account of the assessee in any of the years including the year in question. 8. Having regard to rival submissions and the materials on record, we uphold the order of the learned Commissioner of Income-tax (Appeals) restricting the addition to 10% of Rs. 16,00,000 as the income of the assessee. The facts of the case are as narrated in the preceding paragraphs. The only point for decision is whether the sum of Rs. 16,00,000 awarded by the arbitrator against item (v) mentioned in para 2 above should be considered as compensation for loss of profit only and, therefore, as the income of the assessee straightaway or whether it should be considered as forming part of the contract receipts out of which profit has to be estimated. Sri Santhanam for the revenue contends that the said sum is only a compensation for deprivation of profit in the ratio of the decisions relied on by him. In Manna Ramji & Co.'s case the assessee's premises were requisitioned in 1944 under the Defence of India Act. On a claim for compensation, the Civil Judge awarded in addition to rent for the premises a lump sum of Rs. 1,25,500 for loss of earnings. The question was whether the compensation constituted revenue....
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....since the said claim is conceded by the learned Advocate-General and also because of the express statement made by Mr. Mridul that any further remittance to the arbitrator or a fresh arbitration proceeding before the arbitrator is not in the interests of either party, and that we should ourselves give the matter a quietus, if possible, we are inclined not to interfere with the award of the arbitrator made under claim V. The learned Advocate-General pointed out that the loss of profit must be deemed to cover the bases of claims I to IV as well, and that the amount awarded under this head is a sufficient recompense for the delays or default if any, on the part of the State Government." In this view of the matter, the High Court confirmed the award of the arbitrator against the claim in item v. 9. From a comprehensive reading of the judgment of the High Court, we are inclined to take the view that the award was confirmed by the High Court only upon a concession being made by the State and the concession was that the loss of profit must be deemed to cover the bases of claims in items i to iv as well and that the amount awarded under this head is sufficient recompense for the dela....