2025 (12) TMI 342 - AT - Income Tax

Interest on section 244A income tax refund to foreign company taxable in India at 40% maximum rate

The ITAT held that interest received under section 244A on income tax refund by a foreign company is taxable in India at the maximum marginal rate of 40%. ... Interest income on income tax refund earned u/s 244A arising to a foreign company - chargeable to tax on maximum marginal rate of 40% or not? - HELD THAT:- The above issue involved in the present Appeal is no more res-integra. As in the case of Schlumberger Asia Services Ltd [2023 (9) TMI 1723 - ITAT DEHRADUN] hold that interest refund u/s 244A of the Act arising to foreign company would be taxed at maximum marginal rate. The Income Tax Appellate Tribunal, Dehradun decided cross appeals for AYs 2015-16, 2016-17 (by Revenue) and AY 2017-18 (by assessee), on the solitary issue whether interest on income tax refund under section 244A of the Income-tax Act, 1961, received by a foreign company, is taxable at the 'maximum marginal rate' of 40%. The Tribunal held the issue to be no longer res integra, following its earlier decision in Schlumberger Asia Services Ltd. v. DCIT, ITA No. 5223/Del/2018 (order dated 15.09.2023), which in turn relied on the jurisdictional High Court decision in B J Services Co. Middle East, 380 ITR 138 (Uttarakhand). The High Court had held that 'interest on refund u/s 244A of the Act arising to a foreign company would be taxed at Maximum Marginal Rate.' Respectfully following these precedents, the Tribunal held that interest under section 244A to a foreign company is taxable at 40%, allowed the Revenue's appeals, and dismissed the assessee's appeal.