Interest on the income-tax refund received was eligible for deduction under Section 80IA: ITAT

Recently, an ITAT has held that interest on the income-tax refund received was eligible for deduction under Section 80IA

 The issue involved was that the CIT(A) upheld the Assessing Officer’s disallowance of the deduction under Section 80IA(4)(iii) of the Income-tax Act, 1961 (‘the Act’) on interest received on an income-tax refund for AY 2014-15. The deduction claim relating to interest on an income-tax refund for AY 2014-15 was not allowed because the interest received pertained to a refund for AY 2012-13, a year in which the appellant had not claimed any deduction under Section 80IA of the Act.

The Hon’ble ITAT held that the appellant was entitled to claim a deduction under Section 80IA of the Act on the interest income for AY 2014-15, even though no deduction under Section 80IA was claimed for AY 2012-13. It held that interest on a refund is statutory compensation and is fully taxable in the year of receipt; accordingly, the entire interest on the income-tax refund received was eligible for deduction under Section 80IA of the Act.

While deciding the issue, the Tribunal relied on the judgment of the Hon’ble Bombay High Court in Gateway Terminals India Pvt. Ltd. v. DCIT (479 ITR 726).

 

The copy of the order is as under:

1764135259-NuUdC7-1-TO