Law: Income Tax Act, 1961

Section: 45,56

Income-tax--Capital gains---Income---Interest---Sale of property---Interest on unpaid sale price is not assessable as capital gains---Interest is a revenue receipt and assessable as such---Indian Income Tax Act, 1961, Ss.45 & 56. The assessee, a registered partnership firm, sold a tea estate together with a building thereon and machinery, on June 15, 1977 to N and the consideration for sale was Rs.35,00,000. As per the sale-deed, the assessee received a consideration of Rs. 25,00,000 during the year ended on March 31, 1978 and the balance consideration of Rs.10,00,000 was agreed to be paid alongwith interest thereon at. 18 per cent. per annum from June 1, 1977, till the date of settlement of the outstanding amount. During the year ended with March 31, 1979, relevant for the assessment year 1979-80, the assessee received a sum of Rs.1,65,596.62 from the said N. The Income-tax Officer took the view that the entire sum of Rs.1,65,596.62 recejved represented the interest and hence would have to be brought to tax under the head "Other sources". This was upheld by the Commissioner of Income-tax (Appeals) and the Tribunal. On a reference: Held, that the interest received was nothing other than interest on the unpaid amount of sale price and, therefore, it could not be taken as cost price of the tea estates sold. The said receipt was not assessable under section 45 of the Income Tax Act, 1961, as it could not be taken as "profits and gains" arising from the transfer of a capital asset. No sooner than the delivery of possession is made by the seller to the purchaser and the purchaser has taken it, the sale is complete and if any part of the sale amount as agreed to is not paid, then the purchaser's non-payment is nothing else other than a loan by the seller to the purchaser. The interest was a revenue receipt. CIT v. Union Land and Building Society (Pvt.) Ltd. (1972) 83 ITR 794 (Bom.) and CIT v. Vishnudayal Dwarkadas (1980) 123 ITR 140 (Bom.) ref. THIS JUDGMENT DELIVERED BY: K. A. THANIKKACHALAM, J.---At the instance of the assessee, the Tribunal referred the following questions for the opinion of this Court under section 256(2) of the Income Tax Act, 1961: "(1)…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492