ITA No. 161 of 2016. Case: National Agricultural Cooperative Marketing Federation of India Ltd. Vs Commissioner of Income Tax, Delhi-XI & Anr.. High Court of Delhi (India)

Case NumberITA No. 161 of 2016
CounselFor Appellant: Mr. M.S. Syali, Senior Advocate with Mr. Satyen Sethi and Mr. Arta Trana Panda, Advocates and For Respondents: Mr. Dileep Shivpuri, Senior Standing Counsel with Mr. Sanjay Kumar and Mr. Vikash Maheshwari, Advocates
JudgesS. Muralidhar and Chander Shekhar, JJ.
IssueIncome Tax Act, 1961 - Section 260A; Foreign Awards (Recognition and Enforcement) Act, 1961 - Section 5
Judgement DateApril 19, 2017
CourtHigh Court of Delhi (India)

Order:

  1. This appeal by the National Agricultural Cooperative Marketing Federation of India Limited ('NAFED') under Section 260A of the Income Tax Act, 1961 ('Act') is directed against an order dated 16th October, 2015 passed by the Income Tax Appellate Tribunal ('ITAT') in ITA Nos. 1999 & 2000/Del/2008 for the Assessment Year ('AY') 2001-02 and 2002-03.

  2. On 23rd February, 2016, while admitting this appeal the Court framed the following question of law for consideration:

    "Whether on the facts and circumstances of the case and in law, the Special Bench was right in law in holding that the Appellant did not incur the liability to pay interest to Alimenta, directed to be paid by the decree dated 28.1.2000?"

  3. The facts leading to the filing of the present appeal are that the Appellant entered into an Agreement with Alimenta SA Switzerland ('Alimenta') on 12th January, 1980 and 3rd April, 1980 for export of 5,000 and 4,000 MT HPS groundnut during the years 1979-80 and 1980-81.

  4. The disputes that arose from said agreements were referred to arbitration.

  5. An Award dated 14th September, 1990 was passed in favour of Alimenta and against NAFED whereby NAFED was required to pay Alimenta a sum of US$ 45.26 lakhs as principal together with US$ 48.81 lakhs as interest from 13th February, 1981 till the date of the Award.

  6. Alimenta initiated proceedings for recognition and enforcement under Section 5 of the Foreign Awards (Recognition and Enforcement) Act, 1961 in this Court. By an order dated 28th January, 2000, this Court made the Award rule of the Court and held that the Alimenta would be entitled to interest @ 18% per annum from the date of the Award till the date of payment.

  7. In computing its income for the AYs 2000-01 and 2001-02, for which returns were filed in October 2002 and 2003 respectively, NAFED, in terms of the decree dated 28th January 2000, claimed deduction of interest payable to Alimenta on the outstanding amount of the Award. Meanwhile, on an appeal filed by NAFED against the order dated 28th January 2000 making the Award rule of the Court, a Division Bench (DB) of this Court by an order dated 28th February, 2001 granted stay of the execution of the said decree.

  8. Alimenta then went in appeal to the Supreme Court of India by way of a Special Leave Petition ('SLP') in which by an order dated 5th April, 2002, the Supreme Court directed NAFED to either furnish a bank guarantee ('BG') or a proper security for the principal amount of...

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