TaxTMI 
TaxTMI 
2017 (12) TMI 1882
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....as under :- "(a) that from the funds deposited into Court by the Respondent, this Hon'ble Court be pleased to order and direct the Prothonotary & Senior Master, High Court, Bombay to pay to the Claimant in US $ currency the decretal amount of US $ 6,57,850/- together with interest at 8% from 13th April 2009 to 5th July 2010 and further interest on the total amount @ 8% till payment and/or realization by making payment into the Claimant's Bank Account, viz., SINO OCEAN LIMITED, BANK OF INDIA, HONGKONG BRANCH, RUTTONJEE CENTRE, 2ND FLOOR, 11 DUDDELL STREET, HONG KONG (ACCOUNT NNO.; 0 2 3 3 0 3 7 2 3 0) SWIFT CODE : BKIDHKHHXXX." Though the prayer is for payment of US $ 657,850/- together with interest at 8% from 13th April 2009 to 5th July 2010 and further interest on the total amount at 8% per annum till payment and/or realization by making payment into the claimant's bank account, on or around 31st July 2013, a sum of US $ 662,362/- has been paid over by Prothonotary and Senior Master, High Court, Bombay to claimant. According to claimant, this amount as on 31st July 2013 had increased to US $ 900,107/- and that left a short fall of US $ 237,475/- which, as on 23rd November ....
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....$ 385,000. Subsequently, on 24th September 2008 an agreement was entered into and signed between the parties. The record of the agreement is reduced to a document which is styled as an "Agenda Of Meeting" (AOM). The agreement between the parties as reflected in the document was that respondent had agreed to give a discount of US $ 4.5 per kg. to respondent towards each of the above three shipments/invoices. The disputes arose as to whether the discount was given or not given but the fact is goods were shipped by the claimant and received by respondent. 4 As respondent did not make payment, petitioner filed a petition for winding up of respondent under the provisions of Companies Act, 1956. The said petition was disposed by an order dated 7th April 2010 whereby respondent was directed to deposit a sum of Rs. 1,50,00,000/- with the Prothonotary and Senior Master, High Court, Bombay within a period of four weeks and dispute between the parties was referred to arbitration. The order of course also provided for consequences of default which is not relevant because the amount of Rs. 1,50,00,000/- was deposited by respondent. The Arbitrator published an Award dated 21st February 2011 in ....
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....r summons was taken up for hearing on 7th May 2013. Respondent agreed, without prejudice to their rights and contentions, for payment of the amounts deposited by them with the Prothonotary and Senior Master to claimant, except an amount of Rs. 10 lakhs, which, according to respondent, would cover the Tax that they had to deduct (TDS) on the interest component awarded by the Arbitrator. This Court was pleased to pass the following order on 7th May 2013 :- "1 Heard. 2 Without prejudice to the rights and contentions of both the parties, the following order is passed by consent as a present arrangement between the parties: i) The Prothonotary and Senior Master, High Court, Bombay is directed to retain/withhold a sum of Rs. 10,00,000/- from the amounts deposited in Court by the Respondent and remit forthwith the balance amount together with all accrued interest that is admittedly due to the Applicant in US $ currency into the Applicant's bank account viz. Sino Ocean Limited, Bank of India, Hongkong Branch, Ruttonjee Centre, 2nd floor, 11 Duddell Street, Hong Kong A/c No. 0233037230, Swift Code: BKIDHKHHXXX in accordance with law. ii) All issues between the parties in t....
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....nterest should cease to run on the deposit made by the judgment debtor and notice given or on the amount being tendered outside the Court. Applying the same principle, Shri Mishtra submitted that in this case, respondent had deposited Rs. 1,50,00,000/- on 28th April 2010, Rs. 1,46,40,725/- on 22nd July 2011, Rs. 35,00,000/- on 23rd August 2011 and Rs. 10,00,000/- on 17th September 2012 which would mean the amounts have been paid under the Award by the judgment debtor and the rates of exchange to be applied, should be the date on which these amounts were deposited. Mr. Mishra added, when those rates are applied, that would result in claimant having to refund a sum of US $ 12,387.52 to respondent. It will be useful to reproduce the statements given by Shri Narichania for claimant and Shri Mishra for respondent. (I) The statement given by Shri Narichania reads as under :- M/s Sino Ocean Ltd., Amount to be received from M/s Salvi Chemicals Amount (in US $) Particulars Opening Balance Interest Balance Opening Balance as on 13.04.2009 657,850.00 -- 657,850.00 Add: - Simple Interest @ 8% p.a. for 448 days i.e., from 13.04.2009 to 05.07.2010 657,850.00 64,595.00 722,445.00 ....
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.... 329969.01 12. Total 83465.19 (83940.44) 13. Add : Interest on USD 83465.19(83940.44) at 8% p.a. from 22.7.2011 to 22.8.2011 (i.e. the date of award) (32 days) 585.39 (588.73) 14. Total 84050.58 (84529.17) 15. Less : Rs. 35,00,000/- paid on 23.8.2011 (Rs. 35,00,000/- divided by USD 44.37 = 78882.12 The said part payment is firstly adjusted towards interest(588.73) and balance amount of USD 78296.73(78293.39) is adjusted towards principle (83465.19 - 78296.73 = 5168.46)(83940.44 - 78293.39= 5647.05) 585.39 78296.73 (588.73 78293.39) 78882.12 16. Total 5168.46 (5647.05) 17. Add : Interest on USD 5168.46 (5647.05) at 8% p.a. 23.8.2011 to 16.9.2012 (391 days) 442.93 (483.94) 18. Total 5611.39 (6130.99) 19. Less : Rs. 10,00,000/- paid on 17.9.2012 (10,00,000 divided by 54.00 I.s. the rate of USD as on 17.9.2012). The said payment is adjusted towards interest 18518.52 20. Total - 12907.13 -12387.52 10 Shri Mishra relied upon a judgment of the Apex Court in Forasol Vs. Oil & Natural Gas Commission 198....
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....e Single Judge, carried the same on intra-court Appeal where again they lost and carried the same to the Apex Court where their challenge was dismissed. At no point of time, respondent paid any amount in satisfaction of the decree but the amounts were deposited only to avoid execution or any action being taken against respondent. Respondent never accepted the decree and therefore, the deposits made by respondent can never be accepted as payment in satisfaction of award or decree. It should be kept in mind that the first amount of Rs. 1,50,00,000/- was deposited only to avoid a winding up petition being admitted against respondent. Even when respondent consented to release all amounts except Rs. 10,00,000/-, it is recorded in the order dated 7th May 2013 "by consent as a present arrangement". It was only protem, not final 12 The amounts deposited by respondent, were not the decretal amount. As stated earlier, the first amount of Rs. 1,50,00,000/- was deposited on 28th April 2010, even before the arbitration was commenced. After the Award was given, respondent challenged the award but on an application made by petitioner, deposited a sum of Rs. 1,46,40,725/- on 22nd July 2011. Furth....
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....otary and Senior Master in a special dollar account or remit the award amount into an escrow account in claimant's country, i.e., Hongkong, to be released if ordered by this Court. 16 In the circumstances, claimant is well within its right to claim the difference in the amounts payable as on date of payment/realization and the amounts received, which works out to US $ 319,816/- as on 23rd November 2017 increasing at US $ 144 per day. 17 So far as the balance amount of Rs. 10 lakhs which is lying invested with the Prothonotary and Senior Master towards TDS, this Court in Islamic Investment Company (supra) has held that there is nothing in the Income Tax Act which supports the plea that in respect of the amount payable under a judgment-debt of the nature sought to be enforced, the debtor is entitled to deduct income-tax. The Court has also held that if the amount is paid as interest to a non-resident in the usual course of business then at the time of credit of such amount to the account of the payee, the payer would be bound to deduct income tax at the rate in force. However, when such amounts becomes part of a judgment debt, they lose their original character and assume the chara....
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....which the decree was passed was the contract of employment and a part of the claim decreed represented amount due to the employee as salary or damages in lieu of salary. 9 Having regard to this observation, I am of the view that the argument of the learned. Counsel on behalf of the Food Corporation of India that since the amount of Rs. 10,31,344/- has admittedly been paid on account of interest, it retains its character as interest and therefore the Food Corporation of India must be allowed to deduct interest thereon at the rate in force is not tenable. There is no doubt that if the amount is paid as interest to a nonresident in the usual course of business then at the time of credit of such amount to the account of the payee or at the time of payment thereof in cash, or by issue of a cheque or draft the payer would be bound to deduct income tax at the rate in force. However, as observed by the Supreme Court when such amounts becomes part of a judgment debt they lose their original character and assume the character of a judgment debt. Once such an amount assumes the character of a judgment debt, the decree passed by the Civil Court must be executed subject only to the deductions....