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)
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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.

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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?

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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11 April 2011 No. Benefits of Section 89 is available to salaried persons only.

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