Taxability of interest on Income Tax Refund

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IN THE HIGH COURT OF DELHI AT NEW DELHI

DECIDED ON: 27.07.2012 ITA 1208/2011

Commissioner of Income Tax-I V

versus

M/s Delhi State Industrial & Infrastructure Development Corporation Ltd.

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.