Nalini Tukaram Nikam Vs ITO (ITAT Pune)
Interest on Escrow FDs Taxable Despite Agreement Cancellation, Real Income Theory Rejected—Interest Credited in Assessee’s Name Taxable in Full; No Deduction u/s 57(iii) Without Actual Expenditure to Earn Income; Escrow Agreement Cancellation Does Not Shift Tax Liability; ITAT Upholds Tax on Interest Credited Due to Bank Error—Real Ownership Decisive; No Jurisdictional Error Found—Assessment Order Upheld; TDS Credit Directed Despite Disallowance of Deduction; “Technical Glitch” Argument Fails—Bank Confirmation Insufficient to Escape Tax; Interest Income Remains Taxable Even When Refund to Developer Expected; ITAT Pune Reaffirms Principle: Taxability Depends on Receipt, Not Intention; Real income theory” could not apply to mere anticipatory liability to refund- Interest on Escrow FDR Belongs to Developer, Not Assessee – ITAT Pune Dismisses Claim for Deduction u/s 57
Assessee entered into a development agreement with M/s Dhardhar Developers Pvt. Ltd. (now Sangamcity Township Pvt. Ltd.), under which certain consideration amounts were kept in an Escrow Account. As the developer failed to secure conversion of agricultural land to residential zone, Assessee cancelled the agreement & claimed that the interest of ₹48.08 lakh credited by Union Bank on fixed deposits in the Escrow Account did not belong to her, being refundable to the developer. AO taxed the entire interest & denied deduction u/s 57(iii), which was upheld by CIT(A).
