Damages for deprivation of use & occupation of profits is capital in nature not chargeable to tax

If the interest is paid for deprivation of use of money fallen due to them it is revenue receipt chargeable to lax. On the other hand, if the interest is paid on account of the injury to the capital i.e.. deprivation of use and occupation of the property then it is capital receipt not chargeable to lax. In the present case, it has already been held by us that mesne profit was f or deprivation of use and occupation of the property. The interest received by the assessee is also for the same period as it is awarded up to the date of decree. The money has become due on the date of decree. Accordingly, it is held that interest from the date of termination of lease till the date of decree would be capital receipt not chargeable to tax.

Full Text of the High Court Judgment / Order is as follows:-

This appeal of the assessee arises from the order of learned Commissioner (Appeals)-21, New Delhi vide order dated 16-9-2016 for the assessment year 2012- 13. The assessee has raised the following grounds of appeal :–

“1. That on the facts and circumstances of the case and in law, the Commissioner (Appeals)-21, New Delhi (briefly “the Commissioner (Appeals)”) has erred in upholding the assessment of income at Rs. 14,03,626 as against declared income of Rs. 3,28,260. The Appellant denies his liability to be assessed at the total income of Rs. 14,03,626.

2. That on the facts and circumstances of the case and in law, the Commissioner (Appeals) has erred in holding that the mesne profit is a revenue receipt and as such, addition of Rs. 10,75,365 on account of mesne profit was rightly made.

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