TaxTMI 
TaxTMI 
2021 (8) TMI 1009
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....illage Malvani, Malad (West), Mumbai Suburban district. 2. The present petition has been filed seeking directions for the recovery of arrears due to the Petitioners under a Recovery Warrant dated 15th October 2018 passed by the Maharashtra Real Estate Regulatory Authority against Respondent Nos. 4 to 7. 3. It is admitted by the Petitioners that Respondent Nos. 4 to 7 have previously paid the Petitioners an amount of Rs. 1,80,00,000/- (Rupees One Crore Eighty Lakhs Only) as part payment under the Recovery Warrant. 4. Subsequently, in view of there being balance amounts due and payable by Respondent Nos. 4 to 7 under the Recovery Warrant, the Petitioners and these Respondent entered into consent terms dated 4th March 2021. By these Consent Terms, Respondent Nos. 4 to 7 undertook, jointly and/or severally, to pay the Petitioners a sum of Rs. 2,75,00,000/- (Rupees Two Crore Seventy Five Lakhs Only) along with simple interest at 10.05% thereon. Such sums were to be paid in the form of instalments and in the following manner: SCHEDULE OF PAYMENTS Sr.No. Date Amount (INR) Interest (INR) payable as on date of payment Total (INR) 1. 20.03.2021 50,00,000 ....
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.... The Learned Senior Counsel had further stated that the TDS has not been filed before the concerned authority and that they have no objection to paying the amount deducted as TDS, to the Petitioners, so far as it is in compliance with the statutory provisions and no penalties are imposed upon these Respondent Nos. 4 to 7 due to non- payment of the same. 10. The Learned Senior Counsel on behalf of the Respondent Nos. 4 to 7 has now considered the legal position with respect to deduction of the tax in the facts of the present matter and has tendered a Note dated 18th August 2021 in support of the contention that the provision for payment of interest to the flat purchasers/Petitioners in the present matter is by way of compensation, and hence outside the purview of Section 194A and Section 2(28A) of the Income Tax Act, 1961. The Learned Senior Counsel for Respondent Nos. 4 to 7 has no objection to this legal position being clarified. To supplement the judgments tendered by the Petitioners, the Respondent Nos. 4 to 7 have relied upon the following judgments (i) Estate Officer, Greater Mohali Area Development Authority v. Gaurav Mutneja 2020 SCC Online NCDRC 278; (i....
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.... that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed 49[one crore rupees in case of business or fifty lakh rupees in case of profession] during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.] Explanation.-For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called "Interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. ..." 15. The IT Act defines "interest" under section 2(28A) as: "2. In this Act, unless the context otherwise requires,- ... (28A) "interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee ....
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....paragraphs 11 and 12 that: "From the principles laid down in the decisions referred to above, it is obvious that section 2(28A) is not attracted to every payment made and that the provision can be attracted only in cases where there is debtor-creditor relationship and that payments are made in discharge of a pre-existing obligation. In so far as these cases are concerned, facts stated by us itself would show that the purchaser had paid certain amounts to the appellant. At a later point of time, the purchaser opted out of the agreement and the appellant entered into fresh agreements with new buyers for prices that are higher than what was agreed with the purchasers. Out of the receipts from the new buyers, the appellant refunded to the purchasers the amount paid by them and a portion of the excess amount received. The amount thus refunded to the purchasers represents the consideration the purchasers paid towards the undivided shares in the property agreed to be purchased and also the cost of construction of the apartment, which work was entrusted to the appellant, being the builder. Such a relationship does not spell out a debtor-creditor relationship nor is the pa....
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...., and all questions of doubt will be resolved against the government and in favour of the citizen, and because burdens are not to be, imposed beyond what the statute expressly imparts". 22. In the case of Commissioner of Income-tax Shimla vs. M/s HP Housing Board, Shimla (supra), wherein the assessee Board was liable to pay interest to allottees for the delay in construction, the High Court of Himachal Pradesh held as follows - "8. In the case in hand it stands proved that in case the houses were ready within the stipulated period the Board would not be liable to pay interest. When construction of a house is delayed there can be escalation in the cost of construction. The allottee looses the right to use the house and is deprived of the rental income from such house. He is also deprived of the right of living in his own house. In these circumstances the amount which is paid by the Board is not payment of interest but in our view is payment of damages to compensate the allottee for the delay in the construction of his house/flat and the harassment caused to him. It may be true that this compensation has been calculated in terms of interest but this is because the p....
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....ct is not that interest as was directed to be paid to the Complainant by the GDA. Interest to the Complainant (here Dr.Gupta) has not been awarded on the basis of any deposit made by the Complainant or GDA being the borrower of any money of the Complainant. Here interest payment is by way of damages. Merely describing the damages as by way of interest do not make them as interest under the Income Tax Act. ..... The word interest used in the order of the State Commission is not what interest is as defined in Section 2(28-A). There in the order of the State Commission interest means compensation or damages for delay in construction of the house or handing over possession of the same causing consequential loss to the Complainant by way of escalation in the price of the property and also on account of distress, disappointment faced by him. Interest in the order has been used merely as a convenient method to calculate the amount of compensation in order to standardise it. Otherwise, each case of the allottee will have to be dealt with differently. Nomenclature does not decide the issue. In our view, therefore, considering the definition of 'intere....
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....missed the SLP filed by the Department against this judgment. In coming to this conclusion we are also supported by the well settled principle that taxing statutes must be read strictly and in the event of there being any ambiguity an interpretation favouring the tax payer ought to be adopted. 26. Coming to the admitted facts of the present case we hold that the amounts payable being in effect a refund of the amounts paid by the Petitioners to the Respondent No. 4 to 7, along with compensatory interest thereon, such a relationship does not spell out a debtor-creditor relationship nor is the payment made by the Respondent Nos. 4 to 7 to the Petitioners one in discharge of any pre-existing obligation, so as to attract Section 2(28A) of the IT Act. We are in respectful agreement with the Judgment of the Kerala High Court in Beacon Projects (P) Ltd v CIT (supra) which takes the same view, in facts similar to those that we are dealing with in the present matter. 27. In view of the above, we hold that the compliance of the Respondent Nos. 4 to 7 with the Schedule of Payments under the Consent Terms dated 4th March, 2021 and our Order dated 4th March 2021, is to be made without maki....