Payment of interest on interest on delayed refund u/s 244A. Delayed refund becomes part of principle amount and delayed interest includes interest for not refunding it.
ABCAUS Case Law Citation:
ABCAUS 3204 (2019) (12) HC
Important case law relied upon by the parties:
Sandvik Asia Ltd. Vs. Commission of Income Tax and others (2006) 280 ITS 643 (SC)
Commissioner of income Tax Vs. HEG Ltd. (2010) 324 ITR 331 (SC)
Commissioner of Income Tax, Gujrat vs. Gujrat Fluoro Chemicals (2014) 1 SCC 126.
The instant appeal was directed by the appellant Revenue against the order passed by the Income Tax Appellate Tribunal (ITAT).
The case of the appellant was that for three assessment years, certain refunds arising out of excess TDS were issued in favour of the assessee. However, interest under Section 244-A of the Act was not paid in respect of some of the refunds, while in the case of some other refunds, interest was paid for a shorter period than what was claimed by the assessee. The interest was refused on the ground that the delay in issuing refund was attributable to the assessee.
Against the order of the Assessing Officer refusing to grant interest under Section 244-A of the Act, the assessee filed an appeal before the CIT(A). The CIT (A) dismissed the appeal on the ground that the question as to whether any part of the delay was attributable to the assessee is a question to be decided by the Chief Commissioner or Commissioner of Income Tax under Section 244A(2) of the Act.
Then, the matter was referred to the Commissioner of Income Tax (CIT). The CIT vide its order dismissed the appeal while exercising its powers under Section 244 of the Act and the Assessing Officer was directed to pay interest to the assessee for nine months. Thereafter, the Assessing Officer issued refund.
Subsequently, the assessee filed an application under Section 154 of the Act requesting therein to allow interest on delayed interest on the refund. The Assessing Officer rejected the application of the assessee.
Being aggrieved by the aforesaid order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) who dismissed the appeal of the assessee, while relying upon the judgment of the Hon’ble Supreme Court.
The aforesaid order of CIT(A) was again challenged by the assessee before the ITAT which allowed the appeal and directed the revenue to pay compensation in the shape of simple interest on the amount due at the rate at which the assessee otherwise would have been entitled to, on the delayed payment of excess tax paid.
Being aggrieved by the aforesaid order, Revenue challenged the same by way of Miscellaneous Application before the ITAT but it was dismissed as being misconceived and not maintainable and also on the ground that there was no error apparent on the record.
The Hon’ble High Court framed the following substantial questions of law for consideration in:
(i) Whether the impugned order of the Ld. ITAT for payment of compensation on delayed refund and interest paid is illegal and without jurisdiction since the statutory provisions do not provide for the same.
(ii) Whether the Ld. ITAT erred in holding that the issue cannot be decided under Section 254 (2) of the Act and the only remedy is to file appeal before the Hon’ble High Court.
With regard to the contention of the Revenue to the effect that there is no provision under Section 244A of the Act in respect of payment of interest on delayed refund is concerned, the Hon’ble High Court noted that the Hon’ble Supreme Court had elaborated the meaning of the words “refund of any amount becomes due to the assessee” as appearing in Section 244A. The Hon’ble Supreme Court had held that the interest component will partake the character of the “amount due’ under Section 244A.
Thus, the Hon’ble High Court stated that in view of the ratio laid down by the Hon’ble Supreme Court, the interest on the delayed refund becomes part of the principle amount and the delayed interest includes the interest for not refunding the principle amount. Accordingly, it also includes the interest on the delayed refund.
Further in view of the CBDT Notification on specifying the monetary limit on appeal to High Courts said amount, dismissed the appeal being not covered under any exception.
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