The Delhi High Court has held that the income tax is not leviable on the interest income from FDRs till the date of the final arbitral awardwhere the ownership of such FDRs was finally established.
The assessee, M/s Rajdarbar Heritage Venture Ltd received an arbitral award wherein the Arbitral Tribunal comprising three retired judges passed an order that FDRs were made in the name of the respondent-assessee by virtue of a consensual order dated 7th October 2021.
The department approached the High Court contending that the ITAT has erred in deleting the additions of Rs.8,57,25,871/- & Rs.16,15,54,801/- for the Assessment Years 2012-13 & 2013-14 respectively made by the Assessing Officer, ignoring the fact that the FDR is in the name of the Assessee and interest has accrued and been credited in the name of the Assessee only and the share of the disputed parties in the interest will arise only after payment of due taxes.
After perusing the arbitral award, Justice Manmohan held that “Consequently, this Court in agreement 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 crystallized in the respondent’s hands and the same cannot be held to be income of the respondent-assessee under Section 5(1) of the Income Tax Act, 1961.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanPremium. Follow us on Telegram for quick updates.
