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Case Law Details

Case Name : Commissioner of Income Tax-I V Vs M/s Delhi State Industrial & Infrastructure Development Corporation Ltd. (Delhi High Court)
Appeal Number : ITA 1208/2011
Date of Judgement/Order : 27/07/2012
Related Assessment Year :
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Unless there is an exact indication in the Income Tax Act itself, that interest payable on income tax refund amounts fulfill the basic character as income (defined under Section 2(24) of the Income Tax Act) cannot be ignored. It is no doubt true that this amount cannot be treated as  interest income since the assessee did not earn it through conscious choice or voluntarily, nor was it engaged in the activity of investing its amount and earning interest. However, the basic characteristic of income being what it is, the amount received towards statutory interest has to be subject to tax under the head income from other sources.

IN THE HIGH COURT OF DELHI AT NEW DELHI

DECIDED ON: 27.07.2012

ITA 1208/2011

Commissioner of Income Tax-I V

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6 Comments

  1. SUBASH says:

    Sir please explain..
    Where we have to claim the interest received on income tax refund..
    Under which section..?
    Like interest in saving account is 80tta..
    Sur pls guide..

  2. S. Mohan says:

    Since the interest paid on income tax is not allowable as expenses as such no tax be levied on interest received on income tax refunf

  3. Nikhil says:

    Yes, absolutely it is chargeable to tax because there is excess payment of tax amount on tax to be paid. If there is no excess payment it may be at bank or in any other investment, there is interest on investment, so it is considered as investment.

    Hyderabad
    08/07/2015.

  4. CA DEV KUMAR KOTHARI says:

    Government charge interest from tax payers at very higher rate than the rate of interest allowed by government to tax payers on refund. The spread is almost double if we take into account all type of interest charged and allowed.
    The rate of interest allowed from time to time also match with rate of interest payable on tax free approved securities or investments.
    There is no provision of TDS on refund allowed by government on income-tax refund.
    These factors can be considered as suggestive of legislative intention that interest paid on income-tax refund is not taxable as income or that it is considered as tax free income.
    The amount of refund against TDS or excess tax paid is a capital receipt, therefore, statutory accretion to the same can also be considered as capital receipt particularly because it is not business or occupation of tax payer to pay excessive tax and claim refund and earn interest.

    This is a topic to have brain storming and add more arguments and try a case.

    Best course is that interest on such refunds which are allowed by GOI, at much lower rate should be exempted by specific exemption provision.

  5. CA. Subhash Chandra Podder ,FCA. says:

    It appears to me that Interest received on refund of TDS includes interest , Hench, Interest received on TDS refund is subject to tax. Commissioner of Income Tax I V vs M/s Delhi State Industrial & Infrastructure Development Corporation Ltd. . Good judgement.
    CA. Subhash Chandra Podder , FCA
    Kolkata
    08/08/2012

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