Quick Summary
The Delhi High Court has held that income tax cannot be levied on the interest income from fixed deposits till the ownership is determined by the arbitral tribunal. The division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora has agreed with the finding of the two Appellate Authorities below that till the final award was passed by the Arbitral Tribunal determining the ownership of the fixed deposits and interest, it could not be said that the interest income had crystallised
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FAQ :
No, the Delhi High Court has ruled that income tax cannot be levied on interest income from Fixed Deposits until the ownership is determined by an arbitral tribunal.
The court agreed that until a final award is passed by the Arbitral Tribunal determining ownership, the interest income cannot be considered crystallised in the assessee's hands and thus not taxable under Section 5(1) of the Income Tax Act, 1961.
The department argued that the ITAT erred in deleting additions for Assessment Years 2012-13 and 2013-14, stating the FDR was in the assessee's name and interest was credited to them.
The dispute between parties was regarding Rs. 100 crores, while the total deposited amount exceeded Rs. 190 crores. The assessee company paid Rs. 70 crores from the FDR amount to Pramerica ASPF II Cyprus Holding Ltd.
The decision was made by a division bench comprising Justice Manmohan and Justice Manmeet Pritam Singh Arora.
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