TaxTMI 
TaxTMI 
2024 (6) TMI 77
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.... that on 30.09.2011, the assessee filed its return of income amounting to INR 4,22,107/- for the Assessment Year ["AY"] 2011-12. Thereafter, the assessee's case was picked up for scrutiny and notice under Section 143 (3) of the Income Tax Act, 1961 ["Act"] was issued on 31.07.2012. 4. During the course of the assessment, it was found by the Assessing Officer ["AO"] that in the balance sheet of the assessee, INR 3,19,07,676/- was added in the capital reserve and the assessee has claimed tax deducted at source ["TDS"] credit of INR 54,41,122/-. Subsequently, when the AO inquired about the justification of the amount added to the capital reserve, the assessee apprised that it had acquired the right to purchase a property through an auction carried out by the Punjab National Bank. Thereafter, the assessee paid the entire purchase price, however, the said auction came to be annulled and the Punjab and Haryana High Court vide order dated 21.09.2010 passed in CWP No. 1470/2010 directed for refund of the whole amount deposited by the assessee along with the interest accrued thereon. 5. On 30.03.2014, the AO passed an assessment order, whereby, the amount of INR 3,19,07,676/-, was added t....
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..... He submitted that the amount in question was paid to the assessee in view of the order dated 21.09.2010 passed by the Punjab and Haryana High Court in CWP No. 1470/2010 on account of cancellation of the auction. He argued that the aforesaid amount was not in the nature of compensation and therefore, the question whether interest paid on such amount would be chargeable to tax or not would have no significance herein. To substantiate his arguments, he placed reliance on the decisions of CIT v. Saurashtra Cement Ltd. (2010) 11 SCC 84., and Pr. CIT v. Pawa Infrastructure Pvt. Ltd. 2022 SCC OnLine Del 5123. 12. We have heard the learned counsels appearing on behalf of the parties and perused the record. 13. At the outset, it is imperative to point out that the learned counsel appearing on behalf of the assessee had initially raised the objection on the maintainability of the appeal pursuant to low tax effect, which was also noticed in our orders dated 17.03.2023 and 06.11.2023, however, at this stage, the said contention was not pressed by him. 14. As the facts of the matter depict that undisputedly the amount in question was received by the assessee vide order dated 21.09.2010 pas....
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....held that merely because the damages are stated to be interest they cannot be subject to tax as interest, We have also carefully perused the order of the Debt Recovery Tribunal, Chandigarh dated 03.12.2008 wherein in para No. 22 has set aside the sale, and the bank was directed to refund the sale consideration originally accepted from the appellant along with any interest accrued on it, which has been kept in the office of the Debt Recovery Tribunal. Therefore, the Debt Recovery Tribunal has not awarded any interest to the appellant but it has just refunded the money deposited by the assessee in auction along with any interest earned by the bank on that sum in favour of DRT. The revenue could not show that at the time of auction there was any condition of payment of interest to the assessee in the case the auction is cancelled. In fact as per certificate of sale dated 02.03.2007 even the possession of the property was also given confirming the sale absolutely in favour of the assessee. Even otherwise as per the provisions of section 2 (28A) of the Act interest means interest payable in any manner in respect of money borrowed or debt incurred including a deposit, claim or other simi....
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....erein, it was held that damages with respect to the delay in the procurement of the capital asset were in the nature of the capital receipt and thus, not chargeable to tax. The relevant paragraphs of the said decision are reproduced herein for reference:- "14. The question whether a particular receipt is capital or revenue has frequently engaged the attention of the courts but it has not been possible to lay down any single criterion as decisive in the determination of the question. Time and again, it has been reiterated that answer to the question must ultimately depend on the facts of a particular case, and the authorities bearing on the question are valuable only as indicating the matters that have to be taken into account in reaching a conclusion. 15. In Rai Bahadur Jairam Valji [AIR 1959 SC 291 : (1959) 35 ITR 148] it was observed thus: (AIR pp. 292-93, para 2) "2. The question whether a receipt is capital or income has frequently come up for determination before the courts. Various rules have been enunciated as furnishing a key to the solution of the question, but as often observed by the highest authorities, it is not possible to lay down any single test as infallible ....
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....pment to which the items were delivered late, for each month of delay in delivery completion, without proof of the actual damages the assessee would have suffered on account of the delay. The delay in supply could be of the whole plant or a part thereof but the determination of damages was not based upon the calculation made in respect of loss of profit on account of supply of a particular part of the plant. 18. It is evident that the damages to the assessee were directly and intimately linked with the procurement of a capital asset i.e. the cement plant, which would obviously lead to delay in coming into existence of the profit making apparatus, rather than a receipt in the course of profit earning process. Compensation paid for the delay in procurement of capital asset amounted to sterilisation of the capital asset of the assessee as the supplier had failed to supply the plant within time as stipulated in the agreement and Clause 6 thereof came into play. The aforestated amount received by the assessee towards compensation for sterilisation of the profit earning source, not in the ordinary course of their business, in our opinion, was a capital receipt in the hands of the asses....
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....the balance of Rs. 10,05,000 with the accrued interest to the appellants after satisfying the decree of the fist respondent, namely, Punjab National Bank." Where the sum had to be paid together with interest, which was to be deposited in the Registry of the Supreme Court, it is not possible to the court to presume that the said sum constituted the interest on the auction sale consideration that had been paid by the assessees. Consequently, the court is not prepared to accept the plea of the Revenue that the above sum of Rs. 20 lakhs constituted revenue receipt in the hands of the assessees. Not a receipt taxable under section 10 (3) 23. 23.1 The settled legal position is that all receipts do not constitute income. For a receipt sought to be taxed as income, the burden lies upon the Revenue to prove that it is within the taxing provision. Among the earlier decisions of the Supreme Court is Parimisetti Seetharamamma v. CIT (1965) 57 ITR 532 (SC). There the assessee explained that the jewellery and the money received by her were the gifts made by the Maharani of Baroda. Disbelieving the assessee on the ground that she had failed to produce documents in support of her contention, t....