UNITED CONSTRUCTION CONTRACTORS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee and the Department, the Income-tax Appellate Tribunal, Cochin, has referred the following four questions of law for decision by this court. The first three questions are referred at the instance of the assessee and the fourth at the instance of the Department :

(2.) THE assessee was a contractor under the public works department. He was mainly engaged in the construction of sea wall near Kayamkulam. He stopped his work by April, 1974. At that time, a sum of Rs. 3,00,556 was due to the assessee from the Department and the payment of the same was withheld by the Department. Payment was also due for some work done, for which bills were pending. THE matter was referred to arbitration. An award was passed by the arbitrator on July 20, 1977. As per the award, the assessee became entitled to :

(3.) THE Tribunal took the view that the interest obtained by the assessee is a revenue receipt, on the basis of its decision in the case of Rockwell Engineering Company in Income-tax Appeal No. 715/(Coch.) of 1982. In Rockwell Engineering Company's case, the question whether the interest received by the assessee was a revenue receipt liable to be taxed was referred to this court for its decision. This court in Rockwell Engineering Co. Ltd. v. CIT [1989] 180 ITR 277, took the view that the interest portion of the amount awarded on the basis of the decision rendered by the arbitrator is a revenue receipt. As per the award in the instant case, amounts were payable to the assessee. Since the amounts were not paid at the proper time, interest was awarded for such delay. THE interest so paid is only an accretion to the amounts due to the assessee under the contract. It is therefore attributable and incidental to the business carried on by him. Under no circumstance can it be said that this interest is de hors the contract business carried on by the assessee. As observed by the Supreme Court in CIT v. Govinda Choudhury and Sons [1993] 203 ITR 881, the interest paid to the assessee partook of the same character as the receipts for the payment of which he was otherwise entitled under the contract and which payment was delayed as a result of certain disputes. So, we have no hesitation in holding that the interest amounting to Rs. 36,066.70 is a revenue receipt, liable to be taxed for the assessment year 1979-80. In this view, we answer question No, 1 in the affirmative, against the assessee and in favour of the Revenue.