Andhra Bank Financial Services Ltd V. The Commissioner of Income Tax-I

ITTA/114/2012

AI Insights

The case involves multiple appeals by Andhra Bank Financial Services Ltd. against the orders of the Income Tax Appellate Tribunal, Hyderabad, concerning the taxability of interest accrued on bonds. These bonds were delivered to the assessee by Fair Growth Financial Services Ltd. before the notified date under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992. The primary legal issues revolved around the ownership of the bonds and the authority of the tax authorities to assess the interest income despite the bonds being under dispute and custody of the Special Court's Custodian. The court examined whether the Tribunal was justified in holding the assessee as the owner of the bonds and whether the tax authorities were competent to decide on the ownership during the assessment proceedings.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 685501 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 09-06-2023
• Assessment Year: misc
• Other Referred Cases: Bank of India v. The Custodian, CIT v. Hindustan Housing and Land Development Trust Limited, Mahamaya Dassi v. Commissioner of Income Tax, Champa Properties (Private) Limited v. Commissioner of Income Tax, CIT v. Eastern Investments Limited
• Laws Referred To: Income Tax Act, 1961, Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: B SARMA
• Assessee Lawyers: C P RAMASWAMI
• Keywords: Accrued interest; Assessment Year; Income Tax Tribunal Appeal; Ownership of Bonds; Special Court Act
• Section: 143(3); 260A; 3(3); 3(4); 3(2)

Judgement Text

"/ I 32ss I IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD FRIDAY ,THE NINTH DAY OF JUNE TWO THOUSAND AND TWENTY THREE PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE C.V. BHASKAR REDDY ITTA. NO: 424 425 AND 445 0F 2005 320 0F 2006 AND 114 0F 2012 ITTA. NO: 424 ot 2005 (lncome Tax Tribunal Appeal Under Sectlon 260-4 of the lncome Tax Act 1961, against the order of the lncome Tax Appellate Tribunal, Hyderabad Bench 'B', Hyderabad in ITA No 12614yd12000, for assessment Year '1996-97 dated 08-06-2005, preferred against the Order of the Commissioner of lncome Tax (Appeals)-V, Central Hyderabad, l.T.A No.B16/CC-3/CIT(A)V dated 29-11-1999, preferred against the Order of the Deputy Commissioner of lncome tax Central Circle-lll, Hyderabad, PAN/GlR No A-2lCC-lll/Hyd, dated 12-03-1 999. Between: Andhra Bank Financial Services Ltd, Hyderabad I Floor, 4-5-1 to 23, Andhra Bank Buildings, Sultan Bazar, Koti, Hyderabad - 195. ...APPELLANT AND The Commissioner of lncome Tax-|, Aayakar Bhavan, Basheerbagh, Hyderabad- 5OOOO1 ...RESPONDENT INCOME TAX TRIBUNAL APPEAL NO: 425 OF 2005 (lncome Tax Tribunal Appeal Under Section 260-4 of the lncome Tax Act, against the order of the lncome Tax Appellate Tribunal, Hyderabad Bench 'A', Hyderabad in llA No.115/Hyd/1999. for Assessment Year 1994-95 dated 06-06-2005, preferred against the Order of the Commissioner of lncome Tax Appeals, Hyderabad, Appeal No.SO/CC.3/C|T(A) (Cent)/98-99 dated 30-11-1998, preferred against the Order of { the Assistant Commissioner of Inccrne Tax, Central Circle lll. PAN/GlR No.A- 2/CC.lll dated 31 -03-1997) Between: Andhra Bank Financial Services L-td. Hyderabad I Floor, 4-5-1 to 23, Andhra Bank Buildings, Sultan Bazar, Kotr Hyderabad - 195 ...APPELLANT AND The Commissioner :f lncome Tax I 500001 Aayakar Bhavan. Basheerbagh, Hyderabad- RESPONDENT INCOME TAX TRIBUNAL APPEAL NO: 445 OF 2005 (lncome Tax Tnbunal Appeal Under Section 260-4 of the lncome Tax Act, against the order of the lncome Tax Appellate Tribunal, Hyderabad Bench 'A', Hyderabad in ITA No.116/Hyd/1999, for Assessment Year 1995-96, dated 06-06-2005, preferred against the Order of the Commissioner of lncome Tax Appeals-Central, Hyderabad, in Appeal No.119/C C3/ClT(A) (Central)/98-99 dated 30-11-1998, preferred against the Order of the Assistant Commissioner of lncome Tax Central Circle-lll, PAN/GlR No.-A-2lCC-lll, Hyderabad, dated 3'1-03-1998) Between: Andhra Bank Financial Services Ltd. Hyderabad I Floor, 4-5-1 to 23, Andhra Bank Buildings, Sultan Bazar, Koti. Hyderabad - 195. ...APPELLANT AND The Commissioner o{ lncome Tax-l 500001 Aayakar Bhavan, tr.n*'lfflSEJ,iitftl- INCOME TAX TRIBUNAL APPEAL NO: 320 OF 2006 (lncome Tax Tribunal Appeal Under Section 260-4 of the lncome Tax Act, against the order of the lncome 'fax Appellate Tr bunal, Hyderabad Bench 'A', Hyderabad in ITA No.562/Hyd12001 for Assessment Year 1993-94, dated 14-03-2006, preferred against the Order of the Commissioner of lncome Tax (Appeals) V (Central) Hyderabad, Appeal No 809/CC-3/C|T(A)V, (Cent )/1999-2000, dated 29'05'2001' preferred agarnst the order of the Deputy Commissioner (Appeals) of lncome-Tax and commissioner of lncome-Tax (Appeals) PAN/GIR No.A-2lCC-lll/Hyderabad, dated 12-03-1999.) Between: Andhra Bank Financial Services Ltd, Hyderabad I Floor, 4-5-1 to 23, Andhra Bank Buildings, Sultan Bazar, Koti, Hyderabad - 195 ..,APPELLANT AND The Commissioner of lncome Tax-1, Aayakar Bhavan, Basheerbagh, Hyderabad- 5OOOO1 ...RESPONDENT INCOME TAX TRIBUNAL APPEAL NO: 114 OF 211? (lncome Tax Tribunal Appeal Under Section 260-A of the lncome Tax Act, against ihe order of the lncome Tax Appellate Tribunal, Hyderabad Bench 'A', Hyderabad in ITA No.318/Hyd/2003, for Assessment Year'1995-96' dated 14-03-2006, preferred against the Order of the Commissioner of lncome Tax Appeals-ll, Hyderabad, ITA No.51O CIT (A)-ll 02-03 dated 06-11-2002, preferred against the Order of the Assistant Commissioner of lncome Tax, PAN/GIR No.A-1 dated 15-02-2002) Between: Andhra Bank Financial Services Ltd, Hyderabad I Floor, 4-5-1 to 23' Andhra Bank Buildings, Sultan Bazar, Koti, Hyderabad - 195 ...APPELLANT AND The Commissioner of lncome Tax-|, Aayakar Bhavan, Basheerbagh, Hyderabad- 5OOOO1 ...RESPONDENT Counsel for the Appellant: SRl. C. P. RAMASWAMI Counsel ior the Respondent: SRI B.NARASIMHA SARMA, SENIOR STANDING COUNSEL FOR INCOME TAX The Court delivered the following Common Judgment: ',fti ), r. THE HON'BLE THE CHIEF JUSTICE UJJAI BHUYAN AND THE HON'BLE SRI JUSTICE C.V.BHASKAR REDDY I.T.T.A. Nos.424 425 and 445 of 2OO5 32O of 2006 and 114 of 2012 COMMON JUDGMENT: ltr. tt , tlar)'t)te the CheJ.Justic( IUat tttulltatl) This common order t,ill dispose of I.T.T.A. Nos.424, 425 and 445 ::f 2OO5, 32O of 2006 and 114 of 2012. 2. We havr: heard Mr. C.P.Ramaswami, learned counsel for the appellarrt (also referred to as 'the assessee') arrd Mr. B.Narasimha Sarmar. learned Standing Counsel, Income Tax Department representing the respondents (also referred to as 'the Revenue') 3. Issue raised in all thc appeals is one and the same and therefore, all the appeals were heard together and are being disposed of by this common judgment ald order Hou,ever, Mr. C.P.Ramaswami had argued I.T.T.A.No.425 of 2O05 as the lead appeal. T}-rerefore, reference to facts and orders would be in relation to LT.T.A.No.425 of 2OO5 ( 4. Before we deal with the said appeal, we may mention that LT.T.A.No.424 of 2005 arises out of the order dated 06.06.2OOS passed by the Income Tax Appellate Tribunal, Hyderabad Bench-A, Hyderabad (briefly, the Tribuna-l' hereinafter) in I.T.A.No.126 lHydl2OO0 for the assessment year 1996-97. Likewise, I.T.T.A.No.425 of 2005 arises out of order dated 06.06.2005 passed by the Tribunal in I.T.A.No.lL5/Hyd/1999 for the assessment year 1994-95; I.T.T.A. No.445 of 2O05 arise s out of the order of the Tribunal dated 06.06.2005 in I.T.A.No.116/Hyd/1999 for the assessment year 1995-96; I.T.T.A.No.320 of 2OO6 arises out of the order dated 14.03.2006 passed by the Tribunal in I.T.A.No.562/Hydl2OOl for the assessment year 1993-94; and hnally I.T.T.A.No.ll4 of 2Ol2 arises out of the order of the Tribunal dated 14.03.2006 passed by the Tribunal in I.T.A.No.318 /Hyd l2OO3 for the assessment year 1995-96. 5. These appeals have been filed by the assessee AS appellant under Section 260A of the Income Tax Act, 1961 (briefly, 'the Act' hereinafter) against the aforesaid orders of I il I / the Tribur-ral and I'ravt' bcen admitted on the follou'ing substantial qr-re stions ol ia ( l ) Whcthcr orl the facts and in t]rc circunrsrances of tltc' c rrsc, Tribunal was jusrified in holdrng that thc appcll:Lrrt rvas the ou'ner of the l;onrls in qrrestion despite thc notification dated 02.O7 1992 issued by the Custodiarr in terms of Section 3 of thc Special Courl (Trial of Offences Relating to Transaciions in Securitics) Act, 1992? And 2) Whcther on the facts and iI.t the circumst ances of thc case, Tribuna.l was justified in holding that the assessing officer as well as the Comrnissioner of Incomc Tar (Appeals) was competent to decide the ownership of the bonds in assessment proceedings in spite of tl-re provisions of sub section (4) of Se,rtion 3 of the Spccral Court (Trial of Offenccs Relating to Transactions in Securities) Lct, 1992? 6. Appellart before us is an assessee under the Act having the status of a company. Assessment year under consideration is 1994'95. Assessee is engaged in the business of providing financial services 7. For the trforesaid assessment year, the assessee filed return of incorne on 29.11 .1994 declaring Ni1 income after t setting-off the losses of earller years. This was foiioued by ( l filing of a revised return b1,' the asscssee on 22.08.1995 again declaring Nil incomc after setting-off the losses Thereafter revised return /as processed under Section 143 of the Act. Assessing officer noted that one entity called 'Fair Growth Financial Services Limited' (referred to hereina-fter as 'Fair Growth') had delivered five bonds to the assessee in discharge of twelve contracts much before the notifled date. However, assessee had not accounted for the accrued interest on the said bonds on the ground that till such time the petitions hled by the assessee before the Special Court constituted under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 (briefly, the Special Court Act' hereinafter) were decided declaring the ownership of the bonds, assessee could not deal witl- the bonds including getting its name registered as the owner. According to the assessing ofhcer, assessee had purchased these bonds before the notified date though those were under the custody of the Special Court along with various other bonds. Therefore, assessing officer took the view that the interest accrued on those bonds had to be ) accounted for by the assessee. By the assessment order ) t# lffi*r' ,' / dated 31.O3.1997 passcrl Lrnder Section 143(3) of the Acr, thc assessinli officer treatecl the interest amount u,hicl'r r.l.as u,orked out b1, the asscssce itself at Rs.47.03 crores as income beinrl intercst due lrom Fair Grou,th and on that basis, proceerled to completc the assessment. B. Aggrievcd thereb1,, assessee preferred appeal before the Commissioner of Income Tax (Appeals) (Central), Hyderabad (briefly referred to hereinaJter as 'CIT-A'). By the appellate orcler dated 30.11.1998, CIT-A upheld the addition holdir-rg that the bonds had been purchased by the assessee prior to the notification date. It was held to be a valid purchase and thus the assessee was treated as the absolute owner of those ltonds as delivery of the bonds to the assessee was not hit by the Special Court Act Therefore, the addition of the interest accrued on the bonds by the assessing officer as income of the assessee was upheid by thi: CIT-A 9. Assessee filed further appeal before the Tribuna_l r ( u,hich w-as rcgistered AS I'l'.A.No.115lHyd/ 1999 for the 6 assessment year 1994-95. The said appeal r.r'as heard bv the Tribunal along with I.T.A.No.116 lllydl1999 for the assessment year 1995-96 filed by the assessee itself Tribunal vide the order dated 06.06.2005 hoq'ever upheld the decision of the assessing ofhcer as aJfirmed by the CIT-A on this point. 1O. Mr. C.P.Ramaswami, learned counsel for the appellant, argued that the question for consideration in this batch of appeals is whether interest income accrued to the appellant on the bonds held by it without transfer of title and more particularly when such bonds were attached by operation of law and the title of the bonds was in dispute before the Special Court under the Special Court Act? Corollary to the above question would be the question as to whether Income Tax authorities have power to determine ownership of the bonds between the period from July, 1992 to May, 1997 when the title to the bonds was sub judice before the Special Court? J''t' 10. I . Mr. Rilmasri'ami poilrtcd out that appellant lt'as incorporated in Februarr'. 1 ()q I as a lOOoh subsidiary of Andhra Bar-rk, a pr-rbli<: scctor undertaking, presently merged s'ith Lrnion Bank. rts a Non-Banking Financial Corporation (NBFC) u'ith strare capital of Rs 5 crores' Betlr,een April, 199 1 ald Jurre, 1992, appellant had all its hnancial transactions onl5- r'u'ith Fair Growth for value of more than Rs.2OO crores m alinly out of borrowed funds' Most of these transactions u'ere in securities through ready ancl forward tr:rnsactions Adverting to the Special Court Act, he submits that Fair Growth was a notilied person in terms of Section 3 thereof bv virtue of notification dated O2.O7.1992 isstted by the Custodian' In terms of Section 3(3) of the Spe<:ial Court Act, all properties of the notified person stood atlached simultaleously with the issue of the notif-rcation. According to hrm, appellant was required to deposit all the income arising from the bonds to the Custodian in t erms of the Special Court Act pending decision of the Special Court. All the concerned public sector underta-l:ings u'hich h ad issued the securities had directed the appellant to prorluce 'No Objection Certificate' I I I 8 (NOC) irom the Custodian for interest and ou'nership ovcr such bonds. Consequentiy, in the audited final accounts for the financial year 1993-94, relevant to the assessment year L994-95, appellant had disclosed in the 'Notes on Account' that no income had accrued to the appellant on bonds valued at Rs.40.83 crores since the title to the bonds/ securities was in dispute before the Special Court by virtue of the petitions filed by the appellalt before the Special Court. Mr. Ramaswami submits that in all such cases, the Special Court had held that all the ready and forward transactions entered into during the period from O 1.04. 1991 to 06.06. 1992 were illegal. However, this decision of the Special Court was partly reversed by the Supreme Court in the case of Bauk of.India v. The Custodian on 19.O3.1997 by holding that the ready and forward contracts were severable into two parts - i.e., the ready leg and the forward leg. While the ready leg was legal, the forward leg was illegal. 10.2. In the case of the appellant, Special Court by its order passed in 1997 declared it to be the owner of the n. () bonds valued at Rs.4O.83 crores. Consequentlr,, the appellant rlr'clared rr it s return of income for the assessment vear 1997-98 all the accrued interest as its income- Thus, the arppelJ:rnt substantiated its stand that no income haLd accrtred to it on those bonds till the title to the bonds u,as clealed trv the Special Court in the year 1997. 10.3. Learned counsel submits that the Revenue authorities including th c' appellate authorities did not appreciate the abovc fer<:ts: rather they proceeded to determine the ou,nership of the bonds which is not permissible. 10.4. Learned counscl submits that Tribunal erred in re ring upon 1wo decisions of the Calcutta High Court in Mahamaya Dassi v. Commissioner of Income Taxt and in the case of Champa Properties (Privatel Limited v. Commissioner of Income Taxz in as much as facts were completely distinguish:rblt: in the tu,o referred cases. In the two ll9801 126 ITR 7,18 (t al) ll987l 166 II'R 167 (('al) l0 decisions of the Calcutta High Court, title to the concerned properties was not in dispute, whereas by operation of law under the Special Court Act appellant was divested of its title to the bonds held by it till 1997 when it was declared to be the owner by the Special Court. He, therefore, submits that decision of the Supreme Court in CIT v. Hindustan Housiag and Laad Development Trust Limited3 followed by the Ca,lcutta High Court in cIT v. Eastern Investments Linited4 is squarely applicable to the facts of this case. He submits that Tribunal had completely misconstrued the provisions of the Special Court Act and thus arrived at an erroneous conclusion. Thus, he submits that the two questions may be answered in favour of the appellant and against the Revenue. 11. On the other hand, Mr. B.Narasimha Sarma, learned Standing Counsel, Income Tax Department appearing for the respondents has supported the orders passed by the revenue authorities including the Tribunal. He submits that the Tribunal has correctly appreciated the provisions 'Irq86l t6t ITR 524 (sc) n 1rso51 213 rrR i34 (cat1 --t ffitr 1: ,r! '! ) ) of the Specia: Court Acl :rnrl has in fact parth. allor.r,ed thc appeal of thr. appcllanr lrr any view, of the matter, he submits that findin{r ol the assessing officer has been aliirmed b-y thr: CIT A as u'c,11 as by thc Tribunal albeit w,ith some modific:rtion, ancl t ltercfore, in an appeal under Section 260,4 of the Act, lurther interference by the High Court is not n(tcessary. IIc ftnally submits that no question of law arises in this batch of appeals muchless any substantial qui:stion of lau . 12. Submissions made bl learned counsel for the parties have received the due consideration of the Court. 13. Before ad verting to th e findings of the Tribunal, it would be apposite to first deal with the provisions of the Special Court Act. The Spet:ia1 Court Act was enacted in the year 1992 ind camc into force on 06.06.1992. It was enacted to provide for the establishment of a Special Court for the trial of olTences relating to transactions in securities and for matters connectecl ttrerervith or incidental thereto. 'Custodian' has been definerl under Section 2(b) to mean L 2 t t .'i{ the Custodial appointed under sub-section (1) of Section 3. 'Special Court' has been defined in Section 2(d) to mean the Special Court established under sub-section (1) of Section 5. 14. Section 3 of the Special Court Act is the essence of the Act and reads as follows: 3. Appointment and functions of Custodian:- (1) The Central Governmcnt may appoint one or more Custodians as it may deem fit for the purposes of this Act. (21 The Custodian may, on being satisfred on information received that any person has been involved in aly offence relating to transactions in securities after the 1\"! day of April, 1991 and on and before the 6fr June, 1992, nottfy the name of such person in the Oflicia-l Ga\"rtLe. (3) Notwithsta-nding anything contained in the Code and aly other law for the time beingin force, on and from the date of notil-rcaLion under sub-section (2), any property, movable or immovable, or both, belonging to any person notified under that sub-section shall stand attached simultaneously with the issue of the notifrcation. 14) The property attached under sub- section (3) shall be dealt with by the Custodian in such manner as the Special Court may direct. (5) The Custodian may take assistance of any person while exercising his powers or for dischargrng his duties under ttris section ald section 4. .r.-l 14.1. As per sub scction (1), Centrat Govemment may appoint one c,r morc Cuslodians as it may deem fit for the purposes of r,he Speci:rl Court Act. Sub-section (2) says that the Custodian ma ., ()n being satisfied on information received that any person has been involved in any offence relating to transactions in securities after O1.04.1991 and on or before 0(;.06.1992, notifv the narne of such person in the Officia1 Gazette. Srrb-section (3) provides that notwithstanding anything contained in the Code of Criminal Procedure, 1973 and any other law for the time being in force, on and from the date of notification under sub-section (2l,, any property, movable or immovable, or both, beionging to aly person notified under that sub_ section shall stand attacherl simultaneously with the issue of the notification. Thus, lr.hat sub-section (3) says is that on and from the date of notification notifying the name of such person in the Official Gazette involved in any offence relating to tralsactions in securjties after 01.O4.1991 and on or before 06.06.1992, zrrrr. property, be it movable or ;-/ l'1 immovable, belonging to such person shall stand attached simultaneously u'ith the issue of the notification. 14.2. Post such attachment, sub-section (4) empowers the Custodian to deal with such attached property in such manner as the Special Court may direct 15. As per Section 4(11, if the Custodian is satished after an inquiry that any contract or agreement entered into at any time after O1.04.1991 and on or before 06.06.7992 in relation to arry property of the person notihed under sub- section (2) of Section 3 has been entered into fraudulently or to defeat the provisions of the Special Court Act, he may cancel such contract or agreement ald on such cancellation, such property would sta-nd attached. However, as per the proviso no contract or agreement shall be cancelled except after giving to the parties to the contract or agreement a reasonable opportunity of being heard. Sub-section (2) provides that any person aggrieved by the notification issued under sub-section (2) of Section 3 or any cancellation made under sub-section (1) of Section i ,1 or al_v- othur orcler m:rrle' bv the Custodian in exercise of the pori,ers cr )nferrecl on hirn under Sections 3 or 4 mav file a petition objecting to tl-re same u/ithin such period as may be specificd ',r'hereafter t1'rr, Spe cial Court mav make such order as it mzry deem fit :rftcr hearing the parties 16. Section 5 provides lbr establishment of Special Court. Section 94 of the Specral Clourt Act deals with jurisdiction, powers, authority ald pror:edure of Special Court in civil matters. Whal is relevant for our present discourse is sub- section (1) of Section 9A. It says that on and from the commencement of the Special Court (Trial of Offences Relating to Tralsaction s ir-r Securities) Amendment Act, 1994, the Sper:ial Court shal1 exercise all such jurisdiction, powers and eLuthority as were exercisable, immediately before such commencement by any civil court in relation to any matter or claim relating to any property standing attached under sub-section (3) of Section 3 and/or arising out of transactions in securities entered into after 01.04.199 1 ard on or be:forc 06.06.1992 for which a person notifiecl under sub section (2) of Section 3 is i I l6 involved as a party, broker, ir-rtermediar5z or in any other manner. 77. Section 13 confers overriding effect on the Special Court Act. It says that provisions of the Special Court Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act or in any decree or order of any court, tribunal or other authority. 18. We may now advert to the order of Tribunal. Tribunal summed up the facts in the following manner: 4. The facts of the case are that the appellant company is incorporated in 1991 as 100% subsidiary of Andhra Bank Lirnited, a Nationalized Bank. It is engaged in the business of linancial services, leasing, hire purchase activities etc. As regards the addition of interest on Securities of Rs.41.83 crores the facts are that the following Bonds had been delivered by M/s Fair Growth Financial Services Ltd. [M/s FGFSL in short] to the assessee company in discharge of 12 contracts much before the notifred date: lii ![ rt f' Sr No l 2 3 4 5 Bonds t7\",i, 9'1 9\",1, Rs Rs RS Rs Rs ir. Face Value I i.,r.1,75,000' 14.00,o0,00o ir ()r ).O0,0OO 2 (X).00,000 8.!)0,O0,000 + ].r.r,75,ooo Cost Rs. 14.71,').7,3O7 Rs. !1,5 I ,a 7.945 Rs 5,8O.91.78l Rs. 1 ,81 ,50,95!) Rs. 8,90,00,0O0 n\". +0,Si,I a,ooo 5. 'lhc assessee h:rcl mentioncd in thc notes on accounts that the interest irccrued on the aforesaid bonds has not ber:n accountcd for since the matter was pending before the Special Court and until the Special Court declared the assessec as owner of those bonds, the assesseo could not get lho bonds registered in its name. The AO, horvever, formed an opinion that the assessce had purchased those bonds and those have been delivered to the assessee before the noLified date mentioned in the Special Court Act. The asscssee contended before the AO that the ser:urities were in the name of M/s FGFSL ald there was no endorsement on those bonds transferring the sarne to the assessee and that the CAs appointed by the Special Court was to verify ald certify the claim of the assessee has reported that m the books of M/s FGFSL only Rs.21.58 crores has been treated as sale on ready- forward basis and the \"ready forward transactions\" balance was treated as closil-rg stock of securiLies in their books ald bcing illegal, thr: Securities of Rs.41.83 crores did not belong to the assessee. The AO opined that this observation of thc CA hitnd s. held as coilalt'ral security furnished by thc notificd l)cr so ls. ) ) ) ) ) 10. Thc asscssee r'as onc o[ thc eflcctccl partit:s o[' I992 Scam and had advanced mone-v to M/s FGFSL. onc of the notified parties ard it was for:nd thert somc o[ tl-t t: securities delivered by M/s FGFSL werc forgcd/ fabricated. On 3 8-1992 the assessee filed a Misc. Petition No.6 bcfore the Special Court mentioning therein that as against thc total payment of Rs.236.78 crores, M/s FGFSI- had clelivered securitics worth Rs.266.03 crores to the asscssec and out of this, securities worth Rs.205.12 crores were forged and were tampered with or not genuine; that on further negotiations, M/s FGFSL had handed over certain securities worth Rs. 101.57 crores and offered collatera-l security for certain shares worth Rs. 1l1.87 crores; that as given in annexure-C to the petition the assessee has securities witll face value of Rs. 42 crores, which have been purchased by the assessee before the notihcaLion period. In this petition, the assessee has prayed the Court to declare it as absolute owner of the equity shares ald PSU Bonds and beneficial owner of the equity shares and bonds receivable for realizing the outstanding demand. Out of the total paJ.ment of Rs.236.78 crores the assessee has reduced Rs.4O.83 crores being the cost of aforesaid disputed 5 Bonds and had shown Rs.195.94 crores as the amount outstanding against M/s FGFSL as on 3 1-3- 1993 in its balance sheet. As an alternative the assessee prayed that in case the Court came to the conclusion that the appellalt was not entitled to the declaration of ownership of the aforesaid securities and tronds, M/s FGFSL might be directed to pay the entire sum of Rs.236.78 crores along with interest thereon at the contract rates and further interest thereon at the rate of 24o/o per annum from 3orh June, 1992 till payment and/or realisation. The Custodian ) J ll f-ilc-d an ii lldar rr lr, lort ht. Special Court contending that sincc rltr: ilsscssc(. ltlrrl cntr.rr:d ir.rto ccrtarirr transactions on rcird lbr$rucl l>.rsr-. u.trl.r M/s. FCFSI- and cert:rin Sharcs arrd Sci:Lrritii,s lLild becn h;rnded over to the appcll:rnt its sccLrritr rrr corlncction with some rcady foruirrrl l] iutsir( ltolrs :rnrl ;rs ll-re ready lorward transaction was illcg;rl l;r' rr.rsoninr ,,i titc pror,isions of the Sec.l3 of the Sccurr ies ( ontrzrr.l rl. no rights rvhatcver had llccn creatccl in farrrLrr ol- thc rtpl;cllalt in respect of the said Securities ,urd rlrt silrn( ()Llld continue to beiong to the notificd pt',-son. [t wtrs :,Lrbmitled that even if the Court held that (lre bcncfir.ral ii-ti.resl in respect ofcertain shares belonging ro FC.I.SL .rnrt i)attded-over prior to 2\"a July, 1992 :rnd l)asscd 1lr(: Crrsrodiarl right under Sec. 4 of the Specinl Cou rt Ar-.t should lrc orotected. 18.2. Further 'lribunaLl nored that insofar the assessee is concerned, the transactions were entered into prior to introduction of the Spccral Court Act. Assessee had purchased the bonds prior to the notifred date and had taken delivery thereof. It, thus, became property of the assessee ald could not bc construed to be property of the notified person. Tribunal hclcl as follows: I3. [n llre present cast.. lltc transactions were entered into lty the irsst,ssc<' 1;rior 1o ir-rtroduction of the Spccial Act. Adrni c(11-r. ll.rc asscsscc had purchased the bonds prior to thc notilird scquentlr'. The asscssec vvas the o r.rrcr altd continucd to be so in the t rio years under consideration rtnd cOnserluentlr-, thc assessnlcnt of interest thereon was <:hargcablc in hrs heurd in these two years rtself. 18. [n the aborre facts and circumstances, in our opinion, intcrest income accrucd to the assessee in the two years, under considerations, and was rightly assessed. The contention of the assessee is that it has offered in A.Y. 1997 -9a has no bearing in determining its accrual income in the ycars to which it pertain. We, however, leave it open to the assessee to claim necessary relief in the proceedings for A.Y. 1997 -98, wherein entire income has been offered to ta-x, if so adviscd. The assessee would be at liberty to claim nccessarl/ claim and the authorities would consider the claim of the assessee in accordance with the law. 18.4. Thus, Tribunal held that mere existence of dispute as to the title or freezing of one's right by invalid action of an authority cannot by itself be decisive. In an assessment proceeding, the Revenue has pima facie power to decide whether the assessee is the owner of the property without waiting for outcome of the Iitigation proceedings. ( t 18.5. On the issue zrs to lrr-ralrilitv of the intcrest earned on bonds transfe,rred to NAL('O:rnd similzrr addrtions on inter corporate deposit, Tnbunrrl hcld as follor.r,s 24. Wr havc lrr:rrrrl llr,.i)irr'{ics iuld consiclcred thc rival submissiorrs- Thc AO rr;rs lejccled thc claim of thc asscssee b.rcause tlrc :rr3r r,r.mcnt on thc basis of which it has carmarked thc bortrls ar-rd the intercst thereon in favour of llALCO, rvas ol rr slrt)scqueltt datr: i.e. 17-5-94 which rvas much alter tlrc clrrsrng datc of the accounting year. It was irrcspcr:tirre rJl th(. fact thal on cxamining the details of intercst crt:ditecl rn tlrc ledger a/c under the head \"lnterest orr Securi(ies lln cslments)\", hc found that the interest on such bon(ls had been credited and a corresponding debited c)l rh(' intercst payable has been given to N/ LCO. F'r'r>m tltc copy o[ thc agreement with NALCO claimed to havc bccrr finzrl jzed on 29- 1O-93, it is evident that partres have :rsrccd to the tcrms but could not execute the agreemcnt drrr' 1o injunction by the Supreme Court. Frorr, the matcrial on r t'cord we notice that NALCO started pla('ing thc temp()rarv surplus funds with the assessee from Novernber, 1991 on short-term basis i.e. for a period o1 !)Q fl2ys on th(. ratc of interest of 21o/o to 22o/o. The total outstanding arrotLllt in inter corporate deposit of NALCO u,as Rs.45 crores. 'j'hc *- (j; "