Mandatory Deduction of Foreign Tax Credit Before Computing Statutory Interest: An Analysis of the ITAT Ruling in Raveendra Nalluri Vs ACIT

The computation of statutory interest under the Income Tax Act, 1961 often becomes a point of contention between the revenue authorities and the assessee, particularly when international taxation and double taxation relief are involved. A recent judicial pronouncement by the Income Tax Appellate Tribunal (ITAT), Hyderabad, in the matter of Raveendra Nalluri Vs ACIT, has provided critical clarity on this subject. The tribunal unequivocally ruled that any foreign tax relief available to an assessee must be deducted from the total assessed tax liability before calculating interest under Section 234A, Section 234B, and Section 234C.

This article provides a comprehensive summary of the tribunal's decision, the factual background of the dispute, and the statutory interpretation that led to the final verdict.

Factual Background of the Dispute

The controversy originated from the income tax assessment of the assessee for the Assessment Year (AY) 2018-19.