Universal Tractor Holding LLC Vs DCIT (ITAT Delhi)
ITAT Delhi held that damages are compensation received is a capital receipt, however, interest on damages is to be treated as revenue receipt hence the same is taxable.
Facts- The assessee M/s Universal Tractor Holding LLC (UTH) is a foreign company UTH entered into an agreement with another US Company, viz. M/s Escorts Agri Machinery Inc, (EAMI) for the sale of its membership interest of 49% in another US company. viz. M/s Beaver Creeks Holding LLC, for US$ 1.2 million, in 2006. EAMI was a wholly Owned subsidiary of M/s Escorts Ltd, a limited company having its head quarters in New Delhi. EAMI already held 51% interest in M/s. Beavers Creek Holding LLC. The payments were to be made in 4 installments. The purchasers paid the first two installments but subsequently defaulted on third & fourth installments, in as much as it only paid part of the third installment and paid nothing thereafter. Thus, a commercial dispute arose between UTH and EAMI. The dispute was referred to an Arbitrator, who gave a unanimous verdict in 2010, in favour of UTH, awarding it damages to the tune of US$ 4,75,000/- plus other expenses viz. pre-judgement & post judgement interest 11.25%, Counsel fee, filing fee, Arbitrators’ fee etc.
