TaxTMI 
TaxTMI 
2010 (7) TMI 687
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....ed 12th Aug., 1991 accordingly granted permission to the bidder to pay Rs. 2.26 crores within six months without interest and to pay the balance of Rs. 2.23 crores in 80 monthly instalments regularly commencing from 1st Dec. 1991. He was further directed that for the said amount, the bidder shall pay flat rate of interest of 18 per cent per annum on reducing balance from 1st Jan., 1991. It was only in pursuance of this order, the bidder paid Rs. 2.23 crores within six months which carried no interest. The balance of amount, as per the order of the Court, he started paying in instalments and that also he could not carry out promptly. He filed another application in Civil Company Appln. No. 1762 of 1993 before the Company Court to pay the balance of Rs. 1.39 crores and to relieve him from payment of interest. In the said application, this Court by order dt. 2nd Nov., 1993 reduced the interest from 18 per cent to 15 per cent. Similarly in respect of the payment of the balance of consideration, some, concession was shown in the matter of time. Subsequently, there were few more such applications in respect of the payment. Ultimately, the entire sale consideration was paid and accordingl....
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....t of the sale consideration so as to fall within the head of "Capital gain" or the same is interest, pure and simple, so as to fall within the head of "Income from other sources" for the purpose of assessment for payment of income-tax. 4. The contention of the learned senior counsel for the petitioner is that though in the orders of the Company Court, it has been mentioned that the amount represents the interest, as a matter of fact, in legal sense, it is not interest, but it is only a part of sale consideration. In this regard, the learned senior counsel would submit that though the Company Court directed the bidder to pay a part of the bid amount in instalments, since there was no transfer effected immediately and since the possession was not also transferred in terms of section 53A of the Transfer of Property Act, whatever was received by the Official Liquidator until the transfer of title was effected, would only be a part of capital and the same will not fall within the ambit of income from other sources. The learned senior counsel would further point out that indisputably, when the bidder was permitted to pay the part of the bid amount in instalments, the Company Court by or....
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....nterference at the hands of this Court. 6. The learned counsel for the respondent would have a different stand. He would also take me through various proceedings of the Company Court wherein two different expressions viz., consideration and interest have been employed. According to him, the intention of the Company Court itself was to treat the bid amount as consideration and any amount received from the bidder for the delayed payment towards interest is only as an income from other sources. In this regard, the learned counsel would also submit that even in the sale certificate issued by the Company Court, it has been treated separately as consideration and interest, thereby denoting that the bid amount is the consideration and the amount in question is only interest. The learned counsel would further submit that in a catena of decisions, it has been held that any amount accrued as interest on the capital amount is only income from other sources as defined in the IT Act. In this case, according to the learned counsel for the respondent, the amount in question was received by the Official Liquidator from the bidder only by way of interest on the capital amount, namely, the consider....
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.... Company Court in more than one place in the orders passed on various dates has directed that the interest received from the bidder shall be part of the sale consideration. This direction issued by the Company Court also cannot be lost sight of. With these undisputed facts, let me now look into the provisions of the Act. 9. At the outset, I may refer to section 45(1) of the IT Act dealing with capital gains which reads as follows : "45(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54F, 54G and 54H be chargeable to income of the previous year in which the transfer took place." A close reading of section 45(1) of the IT Act would make one to clearly understand that any profit or gain arising out of the transfer of a capital asset shall be chargeable only as "capital gain". 10. Now turning to section 48 of the Act, it speaks of the mode of computation of capital gains as follows : "48. The income chargeable under the head 'Capital gains' shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of....
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....; or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other AOP or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation-For the purposes of sub-clauses (v) and (vi) 'immovable property' shall have the same meaning as in clause (d) of section 269UA." 12. Here section 2(47)(v) needs to be underscored. This provision creates a notional or artificial transfer on the day when possession is transferred in terms of section 53A of the Transfer of Property Act. It is common knowledge that transfer of title by way of sale takes place only on the execution of the sale deed as provided in section 54 of the Transfer of Property Act. But, for the purposes of the IT Act notional/artificial transfer is effected on the date when transfer of possession is made under section 53A of the Transfer of Property Act. The object of introduction of section 2(47)(iv) in this Act is easily discernible. In my considered opinion, it was only to make any amount which is received by transfer from the date of....
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....t which was agreed to be paid, though by way of interest by the bidder as per the order of the Company Court, is not on account of any money either borrowed or debt incurred. Therefore, the amount in question cannot be treated as interest at all as defined in the above provision. 15. Now coming to the judgment relied on by the learned senior counsel for the petitioner in the judgment of Kerala High Court in Kar Valves Ltd's. case (supra), the question, as I have already referred to, was as to whether the solatium paid as per the provisions of the Land Acquisition Act would be income through other sources or the same would form part of the consideration. The Courts have consistently held that it is only towards consideration and not towards any income through other sources. But at the same time, in these judgments, the interest paid by the Government as per the provisions of the Land Acquisition Act has been treated as income through other sources only for the purpose of income-tax assessment. This position is explained by the learned senior counsel to say that in those cases by operation of law, the property vests with the Government as soon as the declaration is made under sectio....