M/S. G.H.REDDY AND ASSOCIATES vs. THE INCOME TAX OFFICER,

PDF · subscribers
ITTA/464/2012HC TelanganaHBHC01032190201206 February 2026Author: P.SAM KOSHY,SUDDALA CHALAPATHI RAO11 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the sum of Rs. 3 crores deposited pursuant to an interim order by the High Court of Karnataka is not taxable as income in the year of receipt. The Court reasoned that the assessee's right over the amount had not attained finality and its crystallization into income was in a fluid state, dependent on the final determination by the High Court of Karnataka. It is well-settled that until a competent court conclusively decides the issue, the amount cannot be said to have crystallized as income, and the assessee derives no right over it. The Court relied on the Supreme Court's decision in Hindustan Housing and Land Development Trust Limited and other High Court judgments, which categorically held that unless the amount is finally crystallized, it cannot be treated as income in the year of receipt. The Court further stated that it is always open for the Assessing Officer to tax the amount in the assessment year when the dispute is finally resolved in favour of the assessee. The impugned order of the ITAT was set aside, and the assessment order was quashed.

What were the facts?

The assessee, M/s G.H. Reddy & Associates (Construction) Pvt. Ltd., was awarded a work contract by M/s Krishna Bhagra Jala Nigam Limited (KBJNL). Disputes arose, leading to an arbitration claim by the assessee, which was allowed. KBJNL appealed to the District Court and subsequently the High Court of Karnataka. The Karnataka High Court, by an interim order dated 21.12.2005, stayed the District Court's order and directed KBJNL to deposit Rs. 3 crores with the assessee pending appeal disposal. The Assessing Officer treated this Rs. 3 crores as revenue receipt and brought it to tax for assessment year 2006-07. The CIT(A) deleted this addition, holding the amount taxable only upon finality of the dispute. The Revenue appealed to the ITAT, which set aside the CIT(A)'s order and affirmed the Assessing Officer's view.

What were the issues?

1. Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the amount received by way of an interim order from the Honourable High Court of Karnataka is taxable in the year of receipt when the matter has not attained any finality and the dispute is still pending before the Honourable Supreme Court of India for final decision? (Question of law) Assessee's contentions: - The Rs. 3 crores was deposited as an interim measure arising from arbitral proceedings and cannot be treated as income in the year of receipt. - It would become taxable only when the dispute finally resolves in favour of the assessee, or if the dispute ends against them, they are liable to return the amount. - Relied on the Division Bench order in Commissioner of Income Tax-0ff & Ors. v. S. Indira Power Energies Limited and the Supreme Court's decision in Commissioner of Income Tax v. Hindustan Housing & Land Development Trust Limited. Revenue's contentions: - The Tribunal was justified in passing the impugned order. - As the amount was deposited in the assessee's account, it is income of the assessee and liable to be taxed in the year of receipt. - The orders passed by the ITAT are justified and valid.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Hyderabad Bench

ITTA.No.464 o1'2012 ALLOWING THE APPEAL WITHOUT COSTS lab I 6 '{ irfl 2026 t o * THE S * t a"

More judgments on Section 260-A

All 2,570 judgments and leading authorities on Section 260-A →

Recent GST High Court judgments

Search GST case law →