IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH PHYSICAL HEARING BEFORE HON’BLE SHRI LALIET KUMAR, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

1. ITA No.1310/CHANDI/2025 (िनधा(cid:330)रणवष(cid:330) / Assessment Year: 2020-21)

&

2. Stay Application No.47/Chandi/2025 (In ITA No.1310/CHANDI/2025)

(िनधा(cid:330)रणवष(cid:330) / Assessment Year: 2020-21)

(िनधा(cid:330)रणवष(cid:330) / Assessment Year: 2020-21)

(िनधा(cid:330)रणवष(cid:330) / Assessment Year: 2020-21)

(िनधा(cid:330)रणवष(cid:330) / Assessment Year: 2020-21)

(िनधा(cid:330)रणवष(cid:330) / Assessment Year: 2020-21)

(िनधा(cid:330)रणवष(cid:330) / Assessment Year: 2020-21)

(िनधा(cid:330)रणवष(cid:330) / Assessment Year: 2020-21)

(िनधा(cid:330)रणवष(cid:330) / Assessment Year: 2020-21)

अपीलाथ५कीओरसे/ Appellant by : Sh. Akshat Dalal (Advocate) – Ld. AR ঋ(cid:529)थ५कीओरसे/Respondent by : Sh. Vivek Vardhan (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 24-12-2025 घोषणाकीतारीख /Date of Pronouncement : 06-01-2026 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)

1. Aforesaid appeal by assessee for Assessment Year (AY) 2020- 21 arises out of an order of Ld. Commissioner of Income Tax (Appeals), NFAC, [CIT(A)] dated 14-08-2025in the matter of an assessment framed by Ld. AO u/s 147 read with Section 144B of the Act on 26-12-2024.Though the assessee has raised multiple grounds of appeal, the sole grievance of the assessee is the fact that certain interest income of Rs.15,13,626/- has been brought to tax by Ld. AO.

2. The Ld. AR advanced arguments supporting the case of the assessee and referred to variousjudicial decisionsfavoring the assessee on the issue of taxability of interest component on motor accident compensation claim. The Ld. AR pointed out that the interest income has not been received, at all, by the assessee during this year and the claim continue to be in the court custody as per the directions of the court. The Ld. Sr. DR also advanced argument in support of assessment order. Having heard rival submissions upon perusal of case records,our adjudication would be as under

3. The assessee declared income of Rs.1,76,800/-. Pursuant to receipt of information that the assessee received impugned interest income of Rs.15,13,626/- which was not offered in the return of income, the case was reopened and a notice u/s 148 was issued on 26-03-2024. It transpired that the interest income represents accrued interest on delayed motor accident insurance claim in compliance of judgement from the lower court. However, the assessee did not have access to the funds since the insurance company had appealed the lower court’s order before the Hon’ble High Court. As per court’s directions, the insurance company had deposited principal amount and accrued interest in Fixed Deposits. The same was confirmed by the Oriental Insurance Company Ltd. The Ld. AO opined that though the principal amount on motor insurance claim was construed as capital receipt but the interest on delayed payment was not a capital receipt. The same would be taxable as ‘income from other sources’ u/s 56(2) though the assessee was following receipt basis of accounting. Finally, considering potential loss of revenue, Ld. AO added the interest income on protective basis in the hands of the assessee and finalized the assessment.

4. During first appeal, the assessee cited the decision ofHon’ble Punjab & Haryana High Court in the case of Nirmal Devi @ Nirmal Verma (CWP No.20290 of 2020 dated 10-08-2023); the decision of Hon’ble Himachal Pardesh High Court in the case of Own motion vs. HP State Co-op. Bank Ltd.; the decision ofHon’ble Bombay High Court in the case of Rupesh Rashmikant Shah holding that MACT interest would be compensatory in nature and form part of an award and not income. In the decision of Hon’ble Supreme Court in the case of Hindustan Housing & Land Development Trust as well as in Shoorji Vallabhdas & Co. (CA No.419 of 1961 dated 27-03-1962), it was held that no income accrues where the award is under