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The argument of the assessee is that since interest paid u/ss.234B, 234C &. 234D is not allowable as a deduction from taxable income, interest received should also not be taxed as income. This contention of the assessee is not at all acceptable. Interest on income tax refund is clearly taxable.

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Section 14A, 32, 37, 145A, 199, 234B of Income Tax Act, 1961— Depreciation— The assessee received interest of Rs. 16.92 crores on income tax refund for the AY 2011-12 and the same was not been offered for taxation in the return of income. The argument of the assessee is that since interest paid u/ss.234B, 234C &. 234D is not allowable as a deduction from taxable income, interest received should also not be taxed as income. This contention of the assessee is not at all acceptable. Interest on income tax refund is clearly taxable. Hence, the addition of Rs. 16.92 crores made by the AO is confirmed. This ground of assesee dismissed.—MAHANADI COALFIELDS LTD. vs. DEPUTY CIT.[2020] 26 ITCD Online 003 (ITAT-CUTTACK)