whether vat refund taxable in income tax act

This does not require in any case law to understand. Whenever a purchase is made where VAT has been charged. Vat is debited to a seperate account i.e. Input tax credit a/c. If this amount is refunded it will just adjust the account.It has nothing to do with Expenses or income a/c.

Accounting Standard 2 issued by ICAI also requires that any tax if refundable should not be debited to purchase a/c.

Please suggest under what circumstances it will be debited in expense a/c

If it was allowed as an expense earlier at the time of payment(For eg..material for which no input credit is claimed), it will be taxable on refund.(See Sec. 41)

Else.....Exempt.

>>Vipul Garg

Vipul is right. If the refund is earlier charged on expenses, it will be taxable; if not charged on expenses, it will not be taxable.

If previous year  2007-08 vat payable liabiltiy paid in current year (2008-09)without provision in earlier year (2007-08)allowed as expenses in 2008-09 under Income tax act

Regards

paresh