2007 (6) TMI 300 - AT - Income Tax

Summary

Issues Involved:
1. Grant of interest under section 244A on the amount of refund of tax deducted under section 195.
2. Equivalence of payment made under section 195(2) with payment made under section 156 of the Income-tax Act.
3. Application of case laws by CIT(A).
4. Alternative claim for interest under section 244A(1)(a) on the refund of TDS paid under section 195(2).

Detailed Analysis:

1. Grant of interest under section 244A on the amount of refund of tax deducted under section 195:
The assessee-company deducted tax at source under section 195 of the Income-tax Act on remittances to Denmark and Germany. The CIT(A) later ruled that no tax was required to be deducted on these remittances and directed the Assessing Officer to refund the tax. However, the Assessing Officer did not allow interest under section 244A on the refunded amount. The Tribunal held that under section 244A, the assessee is entitled to interest on any refund due, including amounts paid under section 195(2). The Tribunal referenced the decision in Grindwell Norton Ltd. and Sandvik Asia Ltd., which support the entitlement to interest on refunds of excess tax payments, including self-assessment taxes.

2. Equivalence of payment made under section 195(2) with payment made under section 156 of the Income-tax Act:
The CIT(A) had held that the payment of tax under section 195(2) is not equivalent to payment made under section 156. The Tribunal disagreed, stating that section 156 covers any tax, interest, penalty, or other sums payable due to any order passed under the Act, including orders under section 195(2). Therefore, payments made under section 195(2) should be treated similarly to those made under section 156 for the purpose of refund and interest under section 244A.

3. Application of case laws by CIT(A):
The CIT(A) relied on the decision in Sutlej Industries Ltd., where no interest under section 244A(1)(b) was allowed on excess self-assessment taxes. The Tribunal found this case law inapplicable, as the facts differed significantly. The Tribunal emphasized that the provisions of section 244A should be interpreted to include interest on refunds of any excess tax paid, not limited to specific cases like self-assessment taxes.

4. Alternative claim for interest under section 244A(1)(a) on the refund of TDS paid under section 195(2):
Given the Tribunal's decision on the primary grounds, the alternative claim for interest under section 244A(1)(a) was dismissed as redundant. The Tribunal directed the Assessing Officer to allow interest under section 244A(1)(b) on the refunded amounts due to the assessee following the CIT(A)'s orders.

Conclusion:
The Tribunal concluded that the assessee is entitled to interest under section 244A(1)(b) on the amounts refunded due to the CIT(A)'s orders. The provisions of section 244A apply to any refund due to the assessee, including those resulting from payments made under section 195(2). The Tribunal directed the Assessing Officer to grant the appropriate interest, thereby allowing the assessee's appeal on the primary grounds and dismissing the alternative ground as unnecessary. The appeal was partly allowed.