K. S. KRISHNAMURTHY VS COMMISSIONER OF INCOME-TAX, 2001 PTD-MADRAS-HIGH-COURT-INDIA 3618 (1998)

Income‑tax‑‑‑

‑‑‑‑Capital or revenue receipt‑‑‑Compensation‑‑‑Interest‑‑‑Non‑supply of tippers in time‑‑‑Finding that compensation received by contractor was for work done‑‑‑Compensation was a revenue receipt‑‑‑Interest for delayed payments‑‑‑Revenue receipt‑‑‑Indian Income Tax Act, 1961.

The assessee claimed that receipt of Rs.7,66,242 awarded as compensation by the arbitrator for non‑supply of tippers in time and interest of Rs.2,67,170 for delayed receipt of contract amounts were not revenue receipts. The Tribunal after considering the arbitration award held that the amount of Rs.7,66,242 received by the contractor was for the work done and hence was a revenue receipt and that the interest of Rs.2,67,170 awarded by the arbitrator for delayed receipt of contract amounts was also a revenue receipt. On a reference:

Held, that in view of the finding of fact by the Tribunal the receipts of Rs.7,66,242 and Rs.2,67, 170 by the assessee must be held to be revenue in character.

P.P.S. Janarthana Raja for Subbaraya Aiyar, Padmanabhan and Ramamani for the Assessee.

Mrs. Chitra Venkataraman for the Commissioner.

JUDGMENT

R. JAYASIMHA BABU, J.‑‑‑ The questions referred to us at the instance of the assessee arise out bf the assessment made the assessee for the assessment years 1977‑78 and 1978‑79:

"(1) Whether the Appellate Tribunal was right in coming to the conclusion that the receipt of Rs.7,66,242 awarded as compensation by the arbitrator for non‑supply of tippers in time was revenue in nature and hence taxable?

(2) Whether the Appellate Tribunal was right in law in holding that the interest of Rs.2,67,170 awarded by the arbitrator for delayed receipt of contract amounts could be brought to charge as revenue receipt?"

The Tribunal has in the course of the order found that the payments were made to the assessee for the work done and not by way of damages. The interest awarded has been found by the Tribunal was for the period of delay in the receipt of the contract amounts. In view of these findings of fact, the character of those receipts is clearly revenue receipts and not receipts of capital nature. Counsel for the assessee submitted that the amounts paid were paid pursuant to the award made in an arbitration proceedings and that the amount awarded was on the ground that the contractor/assessee has become entitled to damages by reason of breach of contract committed by the other party to the contract. The Tribunal, however, after considering the arbitration award and in the claim made by the assessee for the amounts awarded were for work done and as interest on delayed payments that the amount of Rs.7,66,292 was found to have been paid for the work done by the assessee and the sum of Rs.2,67,170 was paid by way of interest on the amount due to the assessee/contractor and the payment of which amount had been delayed. In view of the findings of fact recorded by the Tribunal that the payments were made for the work done and as interest for delay in paying the amount to the contractor the receipts must be held to be revenue in character.

The questions referred to us are, therefore, answered against the assessee and in favour of the Revenue. Parties are directed to bear their respective costs.

M.B.A./568/FC

Reference answered.