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 in the assessee's hands and that it could not be held to be the income of the assessee under Section 5(1) of the Income Tax Act, 1961.
The appellant/department stated that the ITAT had erred in deleting the additions for the Assessment Years 2012–13 and 2013–14 made by the Assessing Officer. The department stated that ITAT has ignored the fact that the FDR is in the name of the Assessee and that interest has accrued and been credited in the name of the Assessee only. The share of the disputed parties in the interest will arise only after the payment of due taxes.
The appellant emphasises that the dispute between the parties was with regard to 100 crores, whereas the amount deposited was in excess of Rs.190 crores. The final settlement agreement between the parties was for 100 crores, whereas the amount deposited was in excess of Rs.190 crores. The assessee company paid Pramerica ASPF II Cyprus Holding Ltd. Rs. 70 crores from the FDR amount, and the agreement was accepted by the Delhi High Court Mediation and Conciliation Centre, resulting in a final order dated April 9, 2015, being issued by the Court.
The court found that the FDRs were made in the name of the respondent-assessee by virtue of a consensual order passed by the Arbitral Tribunal comprising three retired judges.
Case Title: PCIT Versus M/s Rajdarbar Heritage Venture Limited
Citation: ITA 376/2022
Date: 06.10.2022
Counsel For Petitioner: Sr. Standing Counsel Puneet Rai
Counsel For Respondent: None
Copy of the judgment has been enclosed below
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