AI Drafter 
TaxTMI 
TaxTMI 
2022 (7) TMI 1058
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....ined cash deposits. We shall first adjudicate the common issue concerning all the appeal. Interest credited in Escrow Account 3. We shall consider the facts pertaining to ITA No.904/Bang/2017 and our decision rendered therein would apply mutatis mutandis to the other appeals as well. 4. The brief facts in relation to the above issue are as follow: For the assessment year 2012-2013, the assessee has filed his return of income on 31.03.2013 declaring a total income of Rs.2,65,018. The case was selected for scrutiny and notice u/s 143(2) of the I.T.Act and later notice u/s 142(1) of the I.T.Act was issued. During the course of assessment proceedings, it was noticed that as per 26AS a sum of Rs.71,97,569 was credited in the assessee's PAN but the same was not declared in the return of income filed by the assessee. The assessee's explanation for the said omission was called for. The assessee in his reply dated 04.12.2014 explained that during the financial year 2010-2011 the assessee along with his wife Smt.A.B.Devi and brother Mr.T.Rajkumar have transferred their shares in M/s.Leadage Alloys India Limited for a total consideration agreed to at Rs.20,63,88,000 and out of the....
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.... the relevant assessment year. The finding of the A.O. reads as follows:- "3.5 The assessee's submission has been carefully examined. The assessee has, by own submission, admitted that during the Financial Year 2010-11, the share of M/s.Leadage Alloys India Ltd were transferred to M/s.Exide Industries Limited for a total consideration of Rs.20,63,88,000/- out of which the assessee's share was Rs.9,40,12,200. So, the undisputed fact is that there is a transfer of asset .i.e., shares of M/s Leadage Alloys India Ltd for a valuable consideration. However, due to tax demand raised by the Commercial tax department on M/s Leadage Alloys India Ltd., the entire sale consideration has been deposited on an Escrow account by the purchaser. 3.6 This being the case, the assessee's contention that he has no right to receive any consideration towards share transfer or interest credited to the deposit in Escrow account is not acceptable. The company M/s Leadage Alloys India Ltd., whose shares were transferred, is disputing the demand raised by the Commercial Tax department. The assessee has a definite share in the sale consideration. Because of the tax demand, the sale conside....
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....tax liability, the case laws relied on, etc. The learned AR contended that the assessee has no right to receive the interest in the impugned year and mere credit of the interest in the Escrow Account would not result in accrual until there is a right to receive the same. It was submitted that on identical facts in the case of Sri.H.Shivanna, S/o Late Mallelingappa v. ACIT (2015) (10) TMI 953 (Karnataka High Court), it was held by the Hon'ble High Court that the interest that was credited in Canara Bank account, the assessee in that case was not entitled to receive the same, and therefore, not taxable. It was further contended that the assessee is following cash system of accounting and interest was offered to tax when the amount was received in the assessment year 2018-2019. The learned AR also placed on record copy of the assessment order in the case of both the assessees for assessment year 2018-2019 (wherein interest credited in Escrow Account over a period of time was declared in assessment year 2018-2019 and accepted in assessment completed u/s 143(3) of the I.T.Act). 8. The learned Departmental Representative, on the other hand, submitted that the judgment of the Hon'ble j....
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....chase of the shares in the following manner. The entire amount of Rs.20,63,88,000 (Rupees Twenty crores Sixty three lacs Eighty eight Thousand only) would be kept deposited by the Purchaser in an Escrow Account to be operated with HDFC Bank Limited, Kolkata. The amount so deposited can be withdrawn from the Escrow Account only after it is conclusively established that there are no claims or demands pending against the Company for periods prior to 1st April, 2008 in relation to the Notice dated 15th July, 2010 received from the Assistant Commissioner, Commercial Taxes (Enforcement)-8, Sough Zone, Bangalore. The parties shall execute a separate Escrow Agreement with HDFC Bank Limited, Kolkata to give effect to the above." 9.1 The relevant clause 5 in Escrow Agreement made on the same day states as follows:- "5.1 The Escrow Bank shall continue to hold such Share Purchase Consideration Amount lying in the credit of the Special Bank Account / Fixed Deposit Accounts for the Company and shall not permit any withdrawals / adjustments from the said Accounts except for the payment of legal or other expenses incurred by Leadage in connection with the demand notice dated 1....
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....f the assessee had filed Civil Suit claiming share of the property, which was being acquired, the Board required the assessee to furnish adequate security to protect its interest in case the Civil Suit filed by the cousins are decided in their favour. Consequently, a tripartite agreement was executed between the assessee (including his brother), Vysya Bank and the Board, which provided for fixed deposits of the amount credited in the account of assessee and his brother to be kept with the Bank as security on behalf of the Board, and would be payable either to the assessee (and his brother) or the cousins who had filed the Suit, after dispute was resolved by the Civil Court. On 09.03.2021, in exchange of Bank Guarantee, an Indemnity Bond was executed by the assessee in favour of the Board, according to which also the amount of compensation so deposited in the Bank, along with interest, was to remain as security in favour of the Board, till the Suit / appeal was finally decided. The Suit was finally decided in favour of the assessee and his brother on 23.07.2008. In the interregnum period, interest was credited in the Vysya Bank account and the question arose whether interest could b....
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....filed by the cousins of the assessee, the same cannot be said to be actual receipt of money in the hands of or in favour of the assessee. If a right over certain money is dependent on contingency, condition or restriction, because of which the assessee cannot enjoy the money, though in his name in the bank, then the income will be in the hands of the assessee only when such condition, contingency or restriction is overcome. It is thus the real income of the assessee which could be taxed, and in a situation like the present, prior to the contingency, condition or restriction having been removed or overcome, the same could only be presumed income, and not real income. 18. The submission of the learned counsel for the respondent, that since the interest income had been received or accrued in the name of the assessee, the same would become taxable, is not worthy of acceptance. The interest income, in the present case, though may be in the name of the assessee, but was never in the hands of the assessee because of the pendency of the case and the furnishing of Bank 'Guarantee/Indemnity Bond by the assessee, due to which, neither capital nor interest could be withdrawn by th....
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.... light of the above said factual situation, we deem it appropriate to delete the addition made by the A.O. and sustained by the CIT(A) with reference to the interest income that is credited in the relevant assessment year. 10. The issue of addition of interest credited in Escrow Account is common for all appeals, our decision rendered in para 9 to para 9.6 (supra) will apply for other appeals, as well. Cash Deposit of Rs.17,73,900 (Second issue in ITA No.692/Bang/2019) 11. The A.O. had made addition of Rs.17,73,900 being cash deposits made in Axis Bank, by observing as under:- "It is seen that the assessee has made cash deposit of Rs.17,73,900/- in Axis Bank. The assessee was asked to explain the source for the same vide letter dated 19.10.2016. In response to the same, the assessee has submitted that that "the cash deposits is made out of the withdrawals made during the year". The assessee's reply cannot be accepted for the following reasons: (i) The assessee did not explain the source for funds available in the bank account. (ii) The assessee did not furnish explanation regarding why cash was deposited again after withdrawing the same multiple ....