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46. Before us the sequence of events of NTPC arbitration award was provided, which is as under:-

                     Event                                  Date
The assessee entered into a contract with             06.12.1989

NTPC for Gas Based Combined Cycle Power Project at Dadri, Uttar Pradesh Reference made to arbitration 20.08.2001 Issue decided by Tribunal (also referred as partial award) on the grounds of:

a) Claims made by SAG were time barred;

b) NTPC counter claims The partial award was appealed by NTPC in High Court The Delhi High Court upheld the order of the 24.05.2005 Tribunal which upheld the order of the Tribunal which was then appealed before the Supreme Court The Supreme Court passed a favorable order 28.02.2007 in favour of SAG and thus the Tribunal was free to decide the claim submitted by SAG as described in the statement of claims plus interest. These claims were set to arise under Clause 22.2 of the GCC, being extra Siemens Sktiengesellshaft cost claimed for failure of various activities delayed by NTPC's failure to obtain import license, letter of credit.

The Tribunal (International Court of 06.01.2009 Arbitration) - directed NTPC to pay

a) Claims C2 to C8

b) Claim 9 was fully rejected

c) NTPC was directed to pay 17,158,557 Euro plus an interest of 7,604,296 Euros calculated at 6% interest from the period from the period 20.08.2001 to 6 January 2009 d) NTPC to also pay simple interest on 17,158,557 Euros from the date of award till the date of payment NTPC to bear the costs of the Arbitration fixed by the International Court of Arbitration at 877,000 USD.

Pursuant to the Delhi High Court order 19.04.2013 amount of INR 2,037,274,902 was released to SAG in FY 2013-14

47. The International Court of Arbitration directed NTPC to pay SAG a sum of Euros 1,71,58,557 on account of its claims C2 to C8 and Euro 76,04,296 being compensation for delayed payment Siemens Sktiengesellshaft of such claims at the rate of 6% per annum till the date of payment of such claims. Relevant reference in respect of compensation of delayed receipt of the principal amount has been provided in the paper book from pages 661-668 and our attention was drawn to paras 137 to 155 of the arbitration award.

51. Before us, ld. Senior Counsel submitted that interest on arbitration award is not interest as understood in general parlance and it is not to be considered as an income. He submitted that there has to be debt claim prior to the passing of the arbitration award the compensation for delayed payment cannot be regarded in the nature of interest for the purposes of Article 11 of the Tax Treaty.

52. On the other hand, ld. DR relied upon the order of the ld. DRP.

53. After considering the relevant facts and submissions made by the parties, we find that it is not in dispute that international Court of Arbitration directed the NTPC to pay 17,158,557 Euro plus interest of 76,04,296 Euros at @ 6% interest from the period from the period 20.08.2001 to 6 January 2009 and NTPC was to also pay simple interest on 17,158,557 Euros from the date of award till the date of payment. Further, NTPC had to bear the costs of the Arbitration fixed by the International Court of Arbitration at 877,000 USD. Thus, the interest which is part of the arbitral award which was calculated @ 6% from the period 20/08/2001 to 06/01/2009 cannot be reckoned as interest in the form of a debt claim. The debt claim arises upon the issuance of the award by the International Court of Arbitration that is, from 06/01/2009 till date of payment. However, the Siemens Sktiengesellshaft interest totaling to EURO 7,604,296 which was part of arbitration award cannot be treated as different from award and cannot be held to be income. Any interest due post date of award and till the final payment will fall in the nature of interest chargeable to tax not only under the Act but also under the Treaty, but in so far as the component of interest included in the arbitrary award till 06/01/2009 is part of a compensation only. This view was discussed by the Hon'ble High Court of Andhra Pradesh in the case of CIT vs. Visakhapatnam Port Trust (1983) 15 Taxman 72(AP) wherein it is held as under:-