ITAT deletes Tax imposed on Interest received from Income Tax Department [Read Order]

The Income Tax Appellate Tribunal (ITAT) of the Mumbai Bench has deleted the tax imposed on interest received from the Income Tax Department.

Grasim Industries Ltd, a company involved in the manufacturing and sales of Viscose Staple Fibre, Chemicals, Cement, Sponge Iron, and Textile, filed its income tax return. Subsequently, the case was chosen for scrutiny by the tax authorities.

Following the scrutiny process, the Assessing Officer issued an assessment order, determining the total income of the assessee and imposing taxes on the interest received from the Income Tax Department.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who dismissed the appeal.

The assessee contended before the CIT(A) that the interest received on the refund should not be subjected to taxation since the matter is still pending and has not reached a final resolution. The Department has challenged the decision of the CIT(A) by filing an appeal before the Tribunal. Therefore, the assessee argued that the taxation of interest on the refund should be deferred until the appeal is resolved.

The order of CIT(A) there is nothing in the Act to wait for such taxation till the matter reaches the stage of finality. Then, the assessee filed a second appeal before the tribunal.

The representative of the assessee, J.D. Mistry, cited the case of Avada Trading Co. (P.) Ltd. vs. ACIT before the tribunal. He argued that any interest previously granted by the department but subsequently withdrawn due to appellate orders should not be subjected to taxation. The representative requested that the benefit of the withdrawn interest be given to the assessee and that the withdrawn interest should not be taxed.

Department representative Kishore Dhule supported the decision of lower authorities.

After examining the facts and arguments presented by the both parties, the tribunal observed that the same issue was covered in favour of the assessee for the assessment year 2001-02.

Therefore, the bench consisting of Amarjit Singh (Accountant Member) and Sandeep Singh Karhail (Judicial Member) allowed the appeal filed by the assessee and deleted the tax imposed on interest received from the Income Tax Department

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