2000 (8) TMI 52 - HC - Income Tax

Provisional Attachment, Refund, Interest, Bank Deposits, Provisional Attachment, Recovery Of Tax

Summary

Issues Involved:
1. Calculation of interest on the amounts deposited in FCNR/SDR accounts.
2. Maintainability of the CM after the writ petition was disposed of.
3. Entitlement to interest from the date of attachment versus the date of deposit.
4. Rate of interest applicable: RBI circulars versus Section 244A of the Income-tax Act.

Detailed Analysis:

Issue 1: Calculation of Interest on the Amounts Deposited in FCNR/SDR Accounts

The petitioner, a non-resident Indian, opened FCNR/SDR accounts with the Indian Overseas Bank in 1985. The Income-tax Department issued attachment orders on these accounts, and the amounts were subsequently transferred to the Department. The petitioner sought a refund, which was granted by the court in 1993, directing the Department to refund the amounts with interest. The petitioner claimed additional interest, arguing that the interest should be calculated from the date of deposit, not from the date the Department received the money. The court held that the petitioner was not entitled to interest for the period before the money was delivered to the Department, as the petitioner did not instruct the bank to renew the deposits.

Issue 2: Maintainability of the CM After the Writ Petition was Disposed Of

The Department argued that the CM was not maintainable after the writ petition was disposed of and that the petitioner should have filed an appeal against the Commissioner's order. However, the court decided to address the CM on its merits due to the peculiar facts of the case, including the prolonged litigation and the petitioner's ongoing grievances.

Issue 3: Entitlement to Interest from the Date of Attachment Versus the Date of Deposit

The petitioner claimed interest from the date of deposit, arguing that he would have renewed the deposits if not for the attachment orders. The court rejected this claim, stating that the petitioner was free to renew the deposits before the attachment orders and that the attachment did not prevent the petitioner from earning interest. The court agreed with the Commissioner's reasoning that interest could not be claimed on a hypothetical basis.

Issue 4: Rate of Interest Applicable: RBI Circulars Versus Section 244A of the Income-tax Act

The petitioner argued for interest rates as per RBI circulars, while the Department calculated interest under Section 244A of the Income-tax Act. The court held that the interest should be calculated as per Section 244A, as the attachment and refund were governed by the Income-tax Act. The court clarified that the direction for "interest accrued thereon" in the 1993 judgment referred to interest as per the provisions of the Income-tax Act.

Conclusion:

The court dismissed the CM, ruling that the petitioner was not entitled to additional interest beyond what was calculated under Section 244A of the Income-tax Act. The court emphasized that the petitioner's claims for interest based on hypothetical scenarios and RBI circulars were not valid. The judgment reinforced that the Department's liability to pay interest on refunds is governed by the provisions of the Income-tax Act. There was no order as to costs.