2009 (6) TMI 913 - HC - Income Tax

Whether the appeal before the First Appellate Authority was maintainable in law? Whether in the facts and circumstances of the case the Tribunal was justified in holding that as refund has been issued under Circular No. 285 independently of the Income-tax Act 1961 the appellant is not entitled for interest on the refunded sum? Held that - In the present case the appellant was not liable to deduct the tax under the Act. It did so on its own on an erroneous impression and the IDBI clarified the said position. In view of the aforesaid the appellant does not become a deemed assessee and further the refund is not under the Act. Once he is not an assessee as per section 244 of the Act does not gets attracted. Refund that has been directed has been made in pursuance of the circular. The provisions under the Act relate to an assessee. As there was no statutory liability on the part of the appellant to deduct tax we are of the considered opinion he is not an assessee. As it is an appeal we cannot deal with the concept of compensation for the delayed payment for simon-pure reason the appeal has to be decided within the parameters of statutory law. Appeal dismissed.

Summary

In the case of M/s. Universal Cables Limited vs. CIT, the High Court of Madhya Pradesh analyzed the issue of whether the appellant was entitled to interest on a refunded sum under section 244A of the Income-tax Act, 1961. The appellant had erroneously deducted tax out of interest payments made to IDBI, which was later refunded. The CIT(A) directed the ITO(TDS) to grant interest on the refunded sum, but the Tribunal overturned this decision. The Tribunal held that the appellant was not an assessee under the Act but a tax deductor, and as the refund was made based on a circular and not under the Act, interest was not payable. The High Court examined the definitions of 'assessee' under section 2(7) and the consequences of failure to deduct tax under section 201 of the Act. Refunds under section 237 and interest due to the assessee under section 244A were also considered. The Court emphasized the need for the appellant to be an assessee to claim interest under section 244A and dismissed the appeal, stating that the appellant was not an assessee and, therefore, not entitled to interest on the refunded sum. The appeal was subsequently dismissed with no costs awarded.