Genesis Indian Investment Co. Ltd. V CIT(A); ITA No. 2878 of 2006; Date of Decision 14.08.2013; ITAT-Mumbai As per circumstances of the case, the assessee had received an additional consideration from the foreign company in respect of the delay in completion of process of buy back of shares. The Ld. AO was of the contention that the consideration received was interest income in the hands of assessee. Held No. The payment of interest was directed by the SEBI under regulations 22 and therefore it was held that this is not a penalty but the payment of interest on account of failure to make the payment by the acquirer as per the time schedule prescribed under SEBI regulations. It is clear that this payment of interest @ 15% was not on account of any accretion in the value of the asset in question. However, the case in hand the interest received by the assessee is for the period prior to the tendering of shares and acceptance of the same therefore, the interest relates to the delay in completing the process of buy back of shares under open offer. If the interest is paid for delay in making the payment then it cannot be treated as part of consideration. In the case in hand the delay for which the interest has been received by the assessee is in the process of buy back of shares in the open offer after announcement of the intention of acquiring of shares. It is not a case of delay in making the payment of the determined consideration after the transaction of purchase of sale is over. In the case in hand the interest is received in pursuance to the directions of the SEBI and due to delay in completion of the process of buy back of shares as prescribed under the SEBI regulations. The real acquisition of shares took place only in the month of November 2001 and prior to the said date it cannot be said that the interest was paid due to delay in the payment of consideration. Therefore, we held that the additional amount received by the assessee being 15% interest from 8.8.2000 to 22.11.2001 is part of sale consideration and accordingly will be treated as part of capital gain and not the income from interest.
Posted on: Mon, 23 Sep 2013 10:10:09 +0000
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