2014 (8) TMI 971 - HC - Income Tax

Interest under section 244A(1)(b) - ITAT treating the tax paid on self-assessment as prepaid tax for the purpose of interest - Held that - In so far as the nature of payment of tax is concerned the tax deducted at source advance tax and also tax paid by way of self-assessment after its adjustment in the tax liability of the assessee on regular assessment loses its original character and becomes tax paid in pursuance of the liability. Once that is so it cannot be held that the assessee is only entitled to interest under section 244A(1)(b) on tax deducted at source or advance tax and not on self-assessment tax paid under section 140A of the Act which was found to be paid in excess. The assessee shall be entitled to interest under section 244A(1)(b) of the Act on the refund of self-assessment tax as well. From the above it therefore follows that tax paid under section 140A is also taken as paid in pursuance of an assessment after the completion of assessment. Thus Tribunal was right in directing to allow interest under section 244A(1)(b) by treating the tax paid on self-assessment as prepaid tax for the purpose - Decided in favour of assessee.

Issues Involved:
1. Entitlement to interest under section 244A(1)(b) on self-assessment tax.
2. Interpretation of the Explanation below clause (b) of sub-section (1) of section 244A.
3. Date of payment of self-assessment tax for the purpose of section 244A.
4. Correctness of the Tribunal's inference from the Explanation below clause (b) of sub-section (1) of section 244A.

Issue-wise Detailed Analysis:

1. Entitlement to interest under section 244A(1)(b) on self-assessment tax:
The primary question for adjudication was whether the assessee is entitled to interest under section 244A(1)(b) of the Income-tax Act, 1961 on the amount of refund deposited by way of self-assessment tax under section 140A. The Tribunal had directed to allow interest on the refund due from the date of self-assessment tax adjustment against assessed income to the date of actual refund. The court upheld this view, emphasizing that self-assessment tax, once adjusted against the assessed tax, loses its original character and becomes tax paid in pursuance of the liability. The court cited various judgments including National Horticulture Board's case, which stated that the rationale behind section 244A is to compensate the assessee for the deprivation of property due to unlawful tax collection. The court concluded that the assessee is entitled to interest on the refund of self-assessment tax.

2. Interpretation of the Explanation below clause (b) of sub-section (1) of section 244A:
The Tribunal held that the Explanation below clause (b) of sub-section (1) of section 244A merely stipulates the period for which interest is to be granted. The court agreed with this interpretation, stating that the Explanation clarifies that the interest is payable from the date of payment of tax or penalty to the date of refund. The court noted that the Tribunal's interpretation aligns with the purpose of section 244A, which is to ensure fair compensation for the assessee for the period during which the tax amount was wrongfully retained by the Revenue.

3. Date of payment of self-assessment tax for the purpose of section 244A:
The court addressed whether the date of payment of self-assessment tax can be considered the date of payment of tax for the purposes of section 244A. The Tribunal had observed that self-assessment tax, once adjusted against the assessed tax, is deemed to have been paid towards the regular assessment. The court upheld this view, emphasizing that the date of payment of self-assessment tax should be considered for calculating the interest on the refund under section 244A.

4. Correctness of the Tribunal's inference from the Explanation below clause (b) of sub-section (1) of section 244A:
The Tribunal inferred that the period for which interest is granted should be from the date of self-assessment tax adjustment to the date of actual refund. The court found this inference correct, reiterating that the Explanation below clause (b) of sub-section (1) of section 244A specifies the period for which interest is payable. The court dismissed the Revenue's appeal, concluding that the Tribunal's inference was consistent with the statutory provisions and judicial precedents.

Conclusion:
The court dismissed the Revenue's appeal and upheld the Tribunal's decision, confirming that the assessee is entitled to interest under section 244A(1)(b) on the refund of self-assessment tax. The court emphasized that the Explanation below clause (b) of sub-section (1) of section 244A merely stipulates the period for which interest is to be granted and that the date of payment of self-assessment tax should be considered for calculating the interest on the refund.

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