THE ADIT (IT)-3(1), MUMBAI V. M/S. GENEIS INDIAN INVT. COMPANY LTD,

ITA 1565/MUM/2008

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70837 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 31-07-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 04-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F V IRANI
• Section: 143(3); 2

Judgement Text

, IN THE IN IN THE IN IN THE IN IN THE INCOME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL COME TAX APPELLATE TRIBUNAL L BENCH, L BENCH, L BENCH, L BENCH, MUMBAI MUMBAI MUMBAI MUMBAI . , !' !' !' !' , . BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI B. R B. R B. R B. RAMAKOTAIAH AMAKOTAIAH AMAKOTAIAH AMAKOTAIAH, AM , AM , AM , AM & && & SHRI SHRI SHRI SHRI VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, ,, , JM JMJM JM ./ I.T.A. N I.T.A. N I.T.A. N I.T.A. NO.2878/MUM/2006 O.2878/MUM/2006 O.2878/MUM/2006 O.2878/MUM/2006 ( #$ #$ #$ #$ % % % % / ASSESSMENT YEAR : 2002-03) GENESIS INDIAN INVESTMENT COMPANY LTD. C/O-S R BATLIBOI & CO, 18 TH FLOOR, EXPRESS TOWERS, NARIMAN POINT MUMBAI-400021 $ $ $ $ / VS. COMMISSIONER OF INCOME TAX (APPEALS)-XXXIII, MITTAL COURT, NARIMAN POINT MUMBAI-400021 ./ I.T.A. NO.1565/MUM/2008 I.T.A. NO.1565/MUM/2008 I.T.A. NO.1565/MUM/2008 I.T.A. NO.1565/MUM/2008 ( #$ #$ #$ #$ % % % % / ASSESSMENT YEAR : 2002-03) ADIT (IT) 3(1), SCINDIA HOUSE, R. NO. 132, 1 ST FLOOR, N. M. ROAD, MUMBAI-400038 $ $ $ $ / VS. GENESIS INDIAN INVESTMENT COMPANY LTD. C/O-S R BATLIBOI & CO, 18 TH FLOOR, EXPRESS TOWERS, NARIMAN POINT MUMBAI-400021 & ./ '' ./ PAN/GIR NO. : AAACG6911D ( &( / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( )*&( / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) &( &( &( &( + + + + / APPELLANT BY : MR. F. V. IRANI )*&( )*&( )*&( )*&( , ,, , + + + + /RESPONDENT BY : MR. NEERAJA PRADHAN $ $ $ $ , ,, , - - - - / DATE OF HEARING : 31 ST JULY 2013 .% .% .% .% , ,, ,- - - - /DATE OF PRONOUNCEMENT: 14 TH AUGUST 2013 / / O R D E R PER : !' , . . / VIJAY PAL RAO, JM THE APPEAL ITA NO. 2878/M/2006 BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 3.2.2006 OF COMMISSIONER OF INCOME TAX(APPEALS) ARISING FROM THE ASSESSMENT ORDER PASS ED U/S 143(3) WHERE AS THE APPEAL ITA NO. 1565/M/2008 IS BY THE R EVENUE AGAINST THE ORDER DATED 14.12.2007 OF CIT(A) ARISING FORM T HE PENALTY ORDER ITA NO. 2878/M/2006 & 1565/M/2008 GENESIS INDIAN INVESTMENT CO. LTD. 2 PASSED U/S 271(1)(C) OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2002-03. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: AGGRIEVED BY THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXXIII, MUMBAI [HEREINAFTER RE FERRED TO AS THE LEARNED CIT(A)], UNDER SECTION 250 OF THE INCOME-TAX ACT, 1961 (ACT) AND BASED ON THE FACTS AND CIRCUM STANCES OF THE CASE, GENESIS INDIAN INVESTMENT COMPANY LIMITED [HEREINAFTER REFERRED TO AS THE APPELLANT] RESPEC TFULLY SUBMITS THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDE R OF THE ASSISTANT DIRECTOR OF INCOME-TAX (INTERNATIONAL TAX ATION), RANGE 3(1), MUMBAI, THEREBY DISPOSING THE APPEAL OF THE APPELLANT ON THE FOLLOWING GROUNDS. 1. IN TAXING THE COMPENSATION RECEIVED BY THE APPEL LANT FROM CASTROL UK, FOR DELAY IN PAYMENT OF PROCEEDS O F SHARES TENDERED UNDER THE OPEN OFFER (MADE AS PER T HE TERMS OF THE TAKEOVER REGULATIONS) AS INTEREST INCO ME, AS AGAINST CAPITAL GAINS. 2. WITHOUT PREJUDICE TO THE CONTENTION IN GROUND NO . 1 ABOVE, IN NOT TREATING THE AFORESAID COMPENSATION RECEIVED FROM CASTROL UK AS INCOME RECEIVED IN RES PECT OF SECURITIES UNDER THE PROVISIONS OF SECTION 1 15AD(1)(A) OF THE ACT TAXABLE AT THE RATE OF 20 PER CENT. 3. WITHOUT PREJUDICE TO THE CONTENTIONS IN GROUND N O. 1 AND GROUND NO. 2 ABOVE, IN TAXING THE AFORESAID COMPENSATION RECEIVED FROM CASTROL UK AS INTEREST INCOME DURING ASSESSMENT YEAR 2002-03, INSTEAD OF TAXING THE SAME IN ASSESSMENT YEAR 2003-04 (ON RECE IPT BASIS). THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE OR AMEND THE GROUND OF APPEAL, AT ANY TIME BEFORE O R AT, THE TIME OF HEARING OF THE APPEAL, SO AS TO ENABLE THE HONOURABLE INCOME-TAX APPELLATE TRIBUNAL TO DECIDE THIS APPEAL ACCORDING TO LAW. 3. GROUND NO. 1 REGARDING TAXING THE ADDITIONAL AMO UNT OF ` 7,07,76,547/- RECEIVED BY THE ASSESSEE AS PER THE O RDER OF SEBI BEING ITA NO. 2878/M/2006 & 1565/M/2008 GENESIS INDIAN INVESTMENT CO. LTD. 3 15% INTEREST FOR DELAY IN PAYMENT OF PROCEEDS OF SH ARES TENDERED UNDER THE OPEN OFFER OF CASTROL UK. THE ASSESSEE IS A COMPANY INCORPORATED IN MAURITIUS AND HAS OBTAINED REGISTRA TION WITH THE SECURITIES & EXCHANGE BOARD OF INDIA (SEBI) AS A SU B-ACCOUNT OF GENESIS ASSET MANAGERS LTD., REGISTERED FOREIGN INS TITUTIONAL INVESTOR (FII). THE ASSESSEE WAS HOLDING THE SHARES OF CASTR OL INDIA LTD. WHICH IS A SUBSIDIARY OF CASTROL LTD. UK. DUE TO GLOBAL ACQU ISITION OF BURMAH CASTROL PLC BY THE BRITISH PETROLEUM THROUGH THE PR ESS ANNOUNCEMENT OF ITS INTENTION TO ACQUIRE THE ENTIRE SHARE CAPITA L OF BURMAH CASTROL PLC ON 14.3.2000, THE CONSEQUENTIAL OPEN OFFER WAS ANNO UNCED FOR ACQUISITION OF 20% OF THE ISSUE CAPITAL OF CASTROL INDIA LTD. ON 10.7.2000 B.P. PLC APPROACHED THE SEBI SEEKING EXEM PTION FROM THE REQUIREMENT OF MAKING A PUBLIC OFFER FOR ACQUISITIO N OF UPTO 20% OF THE SHARES OF CASTROL INDIA LTD. THE SAID EXEMPTION APP LICATION WAS DISPOSED OF BY THE SEBI VIDE ORDER DATED 7.8.2000 B Y GRANTING EXEMPTION SUBJECT TO CERTAIN CONDITIONS WHICH WAS N OT ACCEPTABLE TO THE HOLDING COMPANY. ACCORDINGLY, THE REQUEST FOR E XEMPTION WAS WITHDRAWN ON 6.12.2000 AND THE HOLDING COMPANY PROC EEDED TO TAKE STEPS TO MAKE PUBLIC OFFER TO THE SHAREHOLDERS OF C ASTROL INDIA LTD. ON 11.12.2000 CASTROL UK MADE OPEN OFFER FOR ACQUISITI ON OF 20% OF THE ISSUED CAPITAL OF CASTROL INDIA LTD. WITH SEBI INDI CATING THE OFFER PRICE OF ` 311.91 PER EQUITY SHARE BASED ON THE MARKET PR ICE AS ON 7.7.2000. THEREAFTER ON 16.2.2001 THE SEBI INTER ALIA DIRECTED THE CASTROL UK TO REVISE THE MINIMUM OFFER PRICE TAKING 14.3.2000 AS THE ITA NO. 2878/M/2006 & 1565/M/2008 GENESIS INDIAN INVESTMENT CO. LTD. 4 RELEVANT DATE AND THE PRICE AS ON THAT DATE IS ` 35 0.02. THE HOLDING COMPANY CHALLENGED THE ORDER OF SEBI BY FILING AN A PPEAL BEFORE THE SECURITIES APPELLATE TRIBUNAL (SAT). THE SECURITIES APPELLATE TRIBUNAL UPHELD SEBIS DIRECTIONS VIDE ORDER DATED 27.4.2001 AGAINST WHICH THE HOLDING COMPANY FILED AN APPEAL BEFORE THE HONBLE JURISDICTION HIGH COURT. IN THE MEAN TIME, ON 23.7.2001 THE SEBI DIRE CTED THE MERCHANT BANKER TO PROCEED WITH THE OFFER FORMALITIES AND PA Y INTEREST @ 15% PER ANNUM ON OFFER PRICE PERIOD FROM 14.3.2000 TILL THE ACTUAL DATE OF PAYMENT OF CONSIDERATION. THE HONBLE HIGH COURT UP HELD THE SEBI DIRECTIONS TO REVISE THE OFFER PRICE BASED ON THE P RICE ON 14.3.2000 @ ` 350.02 PER EQUITY SHARE VIDE ITS DECISION DATED 8.8 .2001. THE HOLDING COMPANY ALSO CHALLENGED THE DIRECTION OF THE SEBI T O PAY INTEREST @ 15% BEFORE THE SECURITIES APPELLATE TRIBUNAL BUT CO ULD NOT SUCCEED. THE TRIBUNAL HELD THAT CASTROL UK IS LIABLE TO PAY INTEREST TO THE SUCCESSFUL OFFER AT 15% PER ANNUM ON OPEN OFFER PRI CE HOWEVER FROM 8.8.2000 TILL THE ACTUAL DATE OF PAYMENT OF CONSIDE RATION INSTEAD OF 14.3.2000 DIRECTED BY THE SEBI. THE HOLDING COMPANY AGAIN FILED AN APPEAL BEFORE THE HONBLE HIGH COURT AGAINST THE SE CURITIES APPELLATE TRIBUNAL ORDER UPHOLDING PAYMENT OF INTEREST @ 15%. THE HONBLE HIGH COURT UPHELD THE ORDERS OF THE SAT REGARDING PAYMEN T OF INTEREST. SUBSEQUENTLY, CASTROL UK POSTED OFFER LETTER TO SHA REHOLDERS OF CASTROL INDIA LTD. ON 21.9.2001. THE ASSESSEE TENDERED 2053 552 EQUITY SHARES ON 17.10.2001 UNDER THE OPEN OFFER HOWEVER 1042518 EQUITY SHARES OF THE ASSESSEE WERE ACCEPTED BY THE CASTROL UK ON 23. 11.2001. THUS, ITA NO. 2878/M/2006 & 1565/M/2008 GENESIS INDIAN INVESTMENT CO. LTD. 5 THE ASSESSEE RECEIVED ADDITIONAL AMOUNT OF ` 7,07,7 6,547/- AND NET AMOUNT AFTER DEDUCTION OF TDS AT ` 4,10,50,397/- ON ACCOUNT OF INTEREST @ 15% PER ANNUM. THE ASSESSING OFFICER WHI LE COMPLETING ASSESSMENT TREATED THE SAID AMOUNT OF ` 7,07,76,547 /- AS INTEREST INCOME AND TAXED THE SAME @ 48%. THE ASSESSEE CHALL ENGED THE ORDER OF THE ASSESSING OFFICER BEFORE THE CIT(A) INTER ALIA CONTENDED THAT THE ADDITIONAL CONSIDERATION RECEIVED FROM CAS TROL UK IS EXEMPTED UNDER THE PROVISIONS OF ARTICLE 13(4) OF INDO MAURI TIUS TREATY BECAUSE THE SAID AMOUNT WAS NOTHING BUT CAPITAL GAIN ARISIN G TO THE ASSESSEE FROM TRANSFER OF SHARES. ALTERNATIVELY THE ASSESSEE CONTENDED THAT THE RECEIPT OF THE AMOUNT IN QUESTION IS NOT THE INTERE ST UNDER ARTICLE 11 OF THE INDO MAURITIUS TREATY BECAUSE IT IS NOT AN INCO ME FROM DEBT CLAIM AND THERE IS NO DEBTOR-CREDITOR RELATIONSHIP BETWEE N THE ASSESSEE AND CASTROL UK. THE CIT(A) DID NOT ACCEPT THE CONTENTIO N OF THE ASSESSEE AND UPHELD THE ACTION OF THE AO. 4. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE HAS S UBMITTED THAT THE TERM INTEREST AS GIVEN UNDER ARTICLE 11(5) MEAN S THE INCOME FROM DEBT CLAIM AND PENALTY CHARGES FOR LATE PAYMENT SHA LL NOT BE REGARDED AS INTEREST FOR THE PURPOSE OF ARTICLE 11. THE PAYM ENT RECEIVED BY THE ASSESSEE IS NOT FOR DEBT CLAIM FROM CASTROL UK. THE PAYMENTS ARE RECEIVED BEING ADDITIONAL CONSIDERATION OF SHARES T ENDERED BY THE ASSESSEE. THE LD. COUNSEL HAS FURTHER CONTENDED THA T AT THE MOST THE SEBI ORDER CAN BE REGARDED AS PENALTY CHARGES FOR L ATE PAYMENT AND NOT AS INTEREST. HE HAS FURTHER CONTENDED THAT THE ASSESSEE HAS ITA NO. 2878/M/2006 & 1565/M/2008 GENESIS INDIAN INVESTMENT CO. LTD. 6 RECEIVED THE PAYMENT OF ADDITIONAL CONSIDERATION FR OM THE PERIOD 8.8.2000 TO 22.11.2001 WHEREAS THE ASSESSEE TENDERE D THE SHARES ON 17.10.2001 THEREFORE, THE ADDITIONAL AMOUNT HAS BEE N RECEIVED IN RESPECT OF THE PERIOD PRIOR TO THE TENDER OF THE SH ARES BY THE ASSESSEE. HENCE THIS AMOUNT CANNOT BE REGARDED AS INTEREST ON DELAYED PAYMENT AFTER THE TRANSFER OF SHARES BECAUSE PRIOR TO 23.11.2011 WHEN THE SHARES TENDERED BY THE ASSESSEE WERE ACCEP TED IN THE OPEN OFFER BY THE CASTROL UK THERE CANNOT BE DEBT CLAIM. THE LD. AR HAS POINTED OUT THAT IT WAS NOT CERTAIN WHETHER THE SHA RES TENDERED BY THE ASSESSEE WOULD BE ACCEPTED BY THE CASTROL UK BECAUS E FINALLY ONLY 50% OF THE SHARES TENDERED BY THE ASSESSEE WERE ACC EPTED IN THE OPEN OFFER. HE HAS REFERRED PARA 6.2 OF THE IMPUGNE D ORDER OF CIT(A) AND SUBMITTED THAT THE CIT(A) HAS GIVEN A FINDING T HAT THE AMOUNT WAS IN THE NATURE OF CONSIDERATION RECEIVED FOR USE OF MONEY AFTER THE SHARES WERE ACCEPTED BY THE CASTROL UK AND A DEBT W AS CREATED IN FAVOUR OF THE ASSESSEE. THIS FINDINGS OF THE CIT(A) IS CONTRARY TO THE FACT BECAUSE THE SHARES WERE ACCEPTED BY THE CASTRO L UK ONLY ON 23.11.2001 WHEREAS THE ADDITIONAL AMOUNT HAS BEEN P AID @ 15% PER ANNUM FORM 8.8.2000 TO 22.11.2001 WHICH IS PRIOR TO THE ACCEPTANCE OF THE SHARES. THUS, THE LD. AR HAS SUBMITTED THAT THERE IS NO QUESTION OF CREATING ANY DEBT IN FAVOUR OF THE ASSESSEE PRIO R TO THE ACCEPTANCE OF THE SHARES TENDERED BY THE ASSESSEE. IN SUPPORT OF HIS CONTENTION THE LD. AR HAS RELIED UPON THE FOLLOWING DECISION: ITA NO. 2878/M/2006 & 1565/M/2008 GENESIS INDIAN INVESTMENT CO. LTD. 7 CIT VS GOVINDA CHOUDHURY AND SONS 203 ITR 881(SC), DDA VS ITO 53 ITD 19 CIT VS VIDYUT CORPORATION, MUMBAI DATED 21.4.2010 RULING OF AAR DATED 22.3.2010 IN ROYAL BANK OF CAN ADA DECISION DATED 30.7.2010 OF HONBLE MADRAS HIGH COU RT IN CASE OF CAUVERY SPINNING AND WEAVING MILLS VS DCIT AND O THERS IN WRIT PETITION NO. 7978/2001. THE LD. AR HAS FURTHER CONTENDED THAT EVEN OTHERWIS E THE INTEREST DOES NOT ARISE IN INDIA. IN SUPPORT OF HIS CONTENTI ON HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN CASE OF SET SATELL ITE (SINGAPORE PTE LTD.) DATED 25.6.2010. 5. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT IN THE DECISIO N OF SECURITIES APPELLATE TRIBUNAL AS WELL AS HONBLE HIGH COURT IT HAS BEEN CLEARLY SET OUT THAT THE NATURE OF PAYMENT IS INTEREST AND NOT THE PENALTY. THE RATE OF INTEREST HAS BEEN DETERMINED BY COMPARING I T WITH THE RATE OF INTEREST PAYABLE ON REFUND OF APPLICATION MONEY U/S 73 OF THE COMPANIES ACT AND THIS ASPECT HAS BEEN CONSIDERED B Y THE SEBI AS WELL AS SAT WHICH HAS BEEN UPHELD BY THE HONBLE HI GH COURT. THE PAYMENT OF INTEREST @ 15% PER ANNUM HAS BEEN PAID B ECAUSE OF DEPRIVATION OF THE USE OF MONEY. ITA NO. 2878/M/2006 & 1565/M/2008 GENESIS INDIAN INVESTMENT CO. LTD. 8 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ORDER OF SEBI FOR PAYMENT O F INTEREST AND PARTICULARLY THE RATE OF INTEREST WAS CHALLENGED BY THE HOLDING COMPANY BEFORE THE SAT AS WELL AS HONBLE HIGH COUR T. IT IS CLEAR THAT THE PAYMENT OF INTEREST WAS DIRECTED BY THE SEBI UN DER REGULATIONS 22 AND THEREFORE IT WAS HELD THAT THIS IS NOT A PENALT Y BUT THE PAYMENT OF INTEREST ON ACCOUNT OF FAILURE TO MAKE THE PAYMENT BY THE ACQUIRER AS PER THE TIME SCHEDULE PRESCRIBED UNDER SEBI REGULAT IONS. IT IS CLEAR THAT THIS PAYMENT OF INTEREST @ 15% WAS NOT ON ACCO UNT OF ANY ACCRETION IN THE VALUE OF THE ASSET IN QUESTION BEC AUSE THE MARKET PRICE OF THE SHARE IS DETERMINE AS PER THE RATES PR EVAILING ON STOCK EXCHANGE. THE CONSIDERATION FOR ACQUIRING THE SHARE S UNDER OPEN OFFER WAS DETERMINED AT ` 350.02 WHICH WAS THE MARKET PRI CE AS ON 14.3.2000 WHEN THE HOLDING COMPANY MADE A PUBLIC AN NOUNCEMENT OF ACQUISITION. HOWEVER, THE CASE IN HAND THE INTEREST RECEIVED BY THE ASSESSEE IS FOR THE PERIOD PRIOR TO THE TENDERING O F SHARES AND ACCEPTANCE OF THE SAME THEREFORE, THE INTEREST RELA TES TO THE DELAY IN COMPLETING THE PROCESS OF BUY BACK OF SHARES UNDER OPEN OFFER. THERE IS A DIFFERENCE BETWEEN THE INTEREST WHICH CAN BE T REATED AT PAR OF CONSIDERATION AND THE INTEREST WHICH IS DIFFERENT F ORM COMPENSATIONS OR CONSIDERATION. IF THE INTEREST IS PAID FOR DELAY IN MAKING THE PAYMENT THEN IT CANNOT BE TREATED AS PART OF CONSID ERATION. IN THE CASE IN HAND THE DELAY FOR WHICH THE INTEREST HAS BEEN R ECEIVED BY THE ASSESSEE IS IN THE PROCESS OF BUY BACK OF SHARES IN THE OPEN OFFER AFTER ITA NO. 2878/M/2006 & 1565/M/2008 GENESIS INDIAN INVESTMENT CO. LTD. 9 ANNOUNCEMENT OF THE INTENTION OF ACQUIRING OF SHARE S. IT IS NOT A CASE OF DELAY IN MAKING THE PAYMENT OF THE DETERMINED CO NSIDERATION AFTER THE TRANSACTION OF PURCHASE OF SALE IS OVER. THEREF ORE, IN OUR CONSIDERED VIEW THIS AMOUNT OF INTEREST WHICH RELAT ES TO THE PERIOD PRIOR TO TENDERING AND ACCEPTANCE OF THE SHARES FAL LS WITHIN THE AMBIT OF CONSIDERATION RECEIVED BY THE ASSESSEE AGAINST T HE SHARES TENDERED IN THE OPEN OFFER. IN THE CASE OF CIT VS GOVINDA CH OUDHURY AND SONS (SUPRA) THE HONBLE SUPREME COURT HAS DECIDED THE N ATURE OF INCOME RECEIVED AS INTEREST AS UNDER: THIS BRINGS US TO A CONSIDERATION OF THE SECOND QU ESTION. THE SUM OF RS. 2,77,692 WAS RECEIVED BY THE ASSESSEE AS INTEREST ON THE AMOUNTS WHICH WERE DETERMINED TO BE PAYABLE BY THE ASSESSEE IN RESPECT OF CERTAIN CONTRACTS EXECUTED B Y THE ASSESSEE AND IN REGARD TO THE PAYMENTS UNDER WHICH THERE WAS A DISPUTE BETWEEN THE TWO PARTIES. THE ASSESSEE IS A CONTRACTOR. HIS BUSINESS IS TO ENTER INTO CONTRACTS . IN THE COURSE OF THE EXECUTION OF THESE CONTRACTS, HE HAS ALSO TO FACE DISPUTES WITH THE STATE GOVERNMENT AND HE HAS ALSO TO RECKON WITH DELAYS IN PAYMENT OF AMOUNTS THAT ARE D UE TO HIM. IF THE AMOUNTS ARE NOT PAID AT THE PROPER TIME AND INTEREST IS AWARDED OR PAID FOR SUCH DELAY, SUCH IN TEREST IS ONLY AN ACCRETION TO THI ASSESSEES RECEIPTS FROM T HE CONTRACTS. IT IS OBVIOUSLY ATTRIBUTABLE AND INCIDEN TAL TO THE BUSINESS CARRIED ON BY HIM. IT WOULD NOT BE CORRECT , AS THE TRIBUNAL HAS HELD, TO SAY THAT THIS INTEREST IS TOT ALLY DE HORS THE CONTRACT BUSINESS CARRIED ON BY THE ASSESSEE. I T IS WELL SETTLED THAT INTEREST CAN BE ASSESSED UNDER THE HEA D INCOME FROM OTHER SOURCES ONLY IF IT CANNOT BE BROUGHT WI THIN ONE OR THE OTHER OF THE SPECIFIC HEADS OF CHARGE. WE FIND IT DIFFICULT TO COMPREHEND HOW THE INTEREST RECEIPTS BY THE ASSESSE E CAN BE TREATED AS RECEIPTS WHICH FLOW TO HIM DE HORS TH E BUSINESS WHICH IS CARRIED ON BY HIM. IN OUR VIEW, THE INTERE ST PAYABLE TO HIM CERTAINLY PARTAKES OF THE SAME CHARACTER AS THE RECEIPTS FOR THE PAYMENT OF WHICH HE WAS OTHERWISE ENTITLED UNDER THE CONTRACT AND WHICH PAYMENT HAS BEEN DELAY ED AS A RESULT OF CERTAIN DISPUTES BETWEEN THE PARTIES. IT CANNOT BE SEPARATED FROM THE OTHER AMOUNTS GRANTED TO THE ASS ESSEE UNDER THE AWARDS AND TREATED AS INCOME FROM OTHER ITA NO. 2878/M/2006 & 1565/M/2008 GENESIS INDIAN INVESTMENT CO. LTD. 10 SOURCES. THE SECOND QUESTION IS, THEREFORE, ANSWER ED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 7. IN THE CASE IN HAND THE INTEREST IS RECEIVED IN PURSUANCE TO THE DIRECTIONS OF THE SEBI AND DUE TO DELAY IN COMPLETI ON OF THE PROCESS OF BUY BACK OF SHARES AS PRESCRIBED UNDER THE SEBI REG ULATIONS. THE REAL ACQUISITION OF SHARES TOOK PLACE ONLY IN THE MONTH OF NOVEMBER 2001 AND PRIOR TO THE SAID DATE IT CANNOT BE SAID THAT T HE INTEREST WAS PAID DUE TO DELAY IN THE PAYMENT OF CONSIDERATION. THERE FORE, WE HELD THAT THE ADDITIONAL AMOUNT RECEIVED BY THE ASSESSEE BEIN G 15% INTEREST FROM 8.8.2000 TO 22.11.2001 IS PART OF SALE CONSIDE RATION AND ACCORDINGLY WILL BE TREATED AS PART OF CAPITAL GAIN AND NOT THE INCOME FROM INTEREST. THE OTHER DECISIONS RELIED UPON BY T HE ASSESSEE ARE NOT APPLICABLE ON THE FACTS OF THE CASE BECAUSE IN THOS E CASES THE ISSUE WAS EITHER THE INTEREST RECEIVED ON DELAYED TRADE R ECEIPTS AND THEREFORE THERE WAS NO DISPUTE OF REVENUE OR CAPITA L RECEIPT OR THE PAYMENT WAS AS COMPENSATION FOR DELAY IN CONSTRUCTI ON. 8. SINCE THE GROUND NO. 1 IS DECIDED IN FAVOUR OF T HE ASSESSEE THEREFORE THE OTHER GROUNDS RAISED BY THE ASSESSEE IN THIS APPEAL BECOMES INFRUCTUOUS AND ACADEMIC IN NATURE AND ACCO RDINGLY WE DO NOT PROPOSE TO DECIDE THE SAME. ITA NO. 1565/M/2008 ITA NO. 1565/M/2008 ITA NO. 1565/M/2008 ITA NO. 1565/M/2008 9. THE REVENUE HAS RAISED ONLY GROUND IN THIS APPE AL AS UNDER: ITA NO. 2878/M/2006 & 1565/M/2008 GENESIS INDIAN INVESTMENT CO. LTD. 11 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY O F ` 3,39,72,743/- LEVIED U/S 271(1)(C) BY HOLDING THAT THE ASSESSEE HAS EITHER CONCEALED NOR FURNISHED INACCUR ATE PARTICULARS OF INCOME. 10. IN THE QUANTUM APPEAL OF THE ASSESSEE WE HAVE D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE THEREFORE, WE DO NO T FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) IN DELETING THE PENALTY. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF AUGUST 2013 / , .% 0 1$2 14 TH 3 - , 3 SD/- SD/- ( . ) (B. RAMAKOTAIAH) ACCOUNTANT MEMBER ( !' ) # (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 14 TH AUGUST 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI