2015 (11) TMI 1722

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....O to treat the arbitration debt received of Rs. 26,79,266/- as business receipt instead of treating the same as "Income from Other Sources". 2. The appellant prays that the order of the CIT(A) on the above ground be reversed and that of the Assessing Officer be restored. 3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary. 2. The common issue raised in both the grounds of appeal relates to treating to the receipt from arbitration award (interest component) as income from other sources instead of business income. 3. The brief facts of the case are that the assessee filed its return of income on 31/10/2006 the declaration of income of Rs. 2,71,480/-. The assessment was framed u/s 143(3)....

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....d be treated as Income from business and profession as part of contract receipt. I am in agreement with the assessee that the amount received by virtue of the arbitral award relates to the contract receipts and that such interest also forms part of the said receipt as has been held by Supreme Court in case of Govinda Chaudhary and Sons (supra) where their lordship was pitted with the same question as to whether the interest was part of contract receipt and as such 10% income offered by the assessee in respect of the said interest in that case was correct. Dealing with the issue their lordship has held as under: "This brings us to a consideration of the second question. The sum of Rs. 2,77,692 was received by the assessee as interest on th....

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....om the other amounts granted to the assessee under the awards and treated as "income from other sources". The second question is, therefore, answered in favour of the assessee and against the Revenue. We are conscious that the second question has not been answered by the High Court in view of its answer to the first question. We have considered whether it is necessary to send the matter back for the decision of the High Court. But, having regard to the facts that the appeal relates to a very old assessment year (1972-73) and also that all the necessary facts and the decision of the Tribunal are available before us, we have also proceeded to answer the second question straightaway in order to avoid further unnecessary delay." Considering th....

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....ion in the case of CIT Vs. Govinda Chaudhary and Sons (SUPRA) was perfect, as per law and deserved to be upheld. 6. We have considered the rival submissions and perused the material on record. We note that the assessee received arbitration award of Rs. 38,45,155/- inclusive of TDS of Rs. 5,26,027/-. The said amount was inclusive of interest element. The assessee treated the entire amount as income from business and filed its return of income u/s 44AD of the Act by taking the net receipt after TDS and failed to gross up the same while filing the return of Income Tax. The ld.AO while framing the assessment order u/s 143(3) accepted the returned income however the assessment was re-opened by issuing notice u/s 148. While framing the order u/s....