Income tax on arbitration award

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 April 2011 Dear Members of caclub.I have a query regarding award of a suit of arbitration. I have received an arbitration award of55 Lakh, out of which13 lakh are a claim of year 1992 as a domestic govt. contractor. The rest amount is intrest @ 18 % per annum. The order states that it has also deducted1,14,952/- as tax. Please help me to minimise tax libility. i have read a case law of cit vs govinda chowdhry and sons of 1992 wherein it was held that intrest is not taxable but it was reversed.

Also, i incurred legal and other expenses. Can i claim them too? and can i take a relief like section 89 that i can spread interst income in each year? Your comments will be most helpful.

thanks for your reply sir, but Dear Sir, I would also like to know whether i can claim relief u/s 89 like i can defer my interest over the years as the interest i received is for 15 years. and is the principal amount exempt from tax?

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
Follow

06 April 2011 Interest is taxable because it is your income.
.
Since you have received Rs. 42 Lacs as interest; then more tax liability is there in addition to the TDS.
.
You can claim your legal expenses in the year of receipt; if you have not claimed so far in previous years.

Message likes : 2 times

Querist : Anonymous

Querist : Anonymous (Querist)

11 April 2011 Thank you very much for your expert comments. I would also like to know whether i can claim relief u/s 89 like i can defer my interest over the years as the interest i received is for 15 years. and is the principal amount exempt from tax?

Upgrade to CAclubindia Pro. Subscribe Now!

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
Follow

11 April 2011 No. Benefits of Section 89 is available to salaried persons only.