Commissioner of Income Tax vs R.N. Agarwala and Co.

Pursuant to the direction given by this court, reference has been made by the Income Tax Appellate Tribunal, Cultark Bench (in short, "the Tribunal"), u/s 256(2) of the Income Tax Act, 1961 (in short, "the Act").

The following question has been referred to this court for adjudication :

"Whether, on the facts and in the circumstances of the case, interest awarded by an arbitrator is income to be assessed to tax under the Act ?"

A similar question came up for adjudication by this court in the case of Govinda Choudhury and Sons Vs. Commissioner of Income Tax, . It was observed in the said case that the interest component of an arbitration award is not taxable, being in the nature of a capital receipt. We are in agreement with the view expressed by this court in Govinda Choudhury and Sons Vs. Commissioner of Income Tax, . Following the ratio laid down in the said case, our answer to the question referred to us is in the negative, in favour of the assessee and against the Revenue.

The reference is, accordingly, answered. No costs.