3 hrs ago
ITAT Delhi Grants Relief in Minor’s ₹1.17 Crore Income Penalty
A child earned ₹1.17 crore as interest income.
Under tax rules, this income was added to the income of the parent with higher taxable income.
The father included the amount in his tax return.
However, the tax officer said the income should be taxed at a different rate and denied a treaty benefit.
The officer also denied ₹2.62 lakh in tax credit.
A ₹12.83 lakh penalty was then imposed on the father.
The tribunal said the income was already disclosed, so it was not hidden.
ITAT Delhi therefore cancelled the penalty.
A minor’s ₹1.17 crore interest income was clubbed with his father’s taxable income.
The father had declared the interest income, but the tax officer rejected the India-UAE treaty rate.
The Income Tax Department imposed a ₹12.83 lakh penalty for alleged under-reporting under Section 270A.
The father also disputed denial of ₹2.62 lakh in TDS credit linked to rental income.
On July 28, 2026, ITAT Delhi ordered deletion of the penalty, finding no under-reporting or misreporting.
- Who
- A taxpayer from New Rajendra Nagar, his minor child, the Income Tax Department, and ITAT Delhi.
- What
- ITAT Delhi deleted a ₹12.83 lakh penalty imposed over the treatment of the child’s ₹1.17 crore interest income.
- Where
- The matter was heard by ITAT Delhi and involved an assessment by the Jhandewalan income tax office.
- When
- The assessment and penalty orders were dated March 22, 2025; ITAT Delhi decided the appeal on July 28, 2026.
- Why
- The tribunal found that the disputed income had already been disclosed and that the disagreement concerned tax treatment, including the applicable India-UAE treaty rate.
Taxpayer’s Position
Income Tax Department’s Position
Whether income was under-reported
Taxpayer’s Position
The father argued that the ₹1.17 crore interest income was fully disclosed in his return and was also included in the assessed income, making the dispute one about the tax rate rather than concealment.
Income Tax Department’s Position
The tax officer imposed a penalty under Section 270A, treating the tax treatment of the income as under-reporting.
India-UAE treaty benefit
Taxpayer’s Position
The taxpayer claimed that the interest income should receive the reduced tax rate available under the India-UAE double taxation agreement.
Income Tax Department’s Position
The assessing officer denied the reduced treaty rate and applied a different tax treatment to the interest income.
TDS credit
Taxpayer’s Position
The taxpayer sought credit for ₹2.62 lakh in TDS and provided an explanation for the related rental income.
Income Tax Department’s Position
The tax officer denied the credit because the corresponding rental income had not been offered for taxation.
Key facts
- Minor’s interest income
- ₹1.17 crore
- Taxpayer’s declared income
- ₹8.43 crore
- Penalty imposed
- ₹12.83 lakh under Section 270A
- Disputed TDS credit
- ₹2.62 lakh
- Assessment and penalty date
- March 22, 2025
- Tribunal decision
- July 28, 2026
- Relevant minor-income rule
- A minor’s income is generally clubbed with the parent having higher taxable income
Sources
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