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2011 (7) TMI 1322 - AT - Income TaxInterest on Refund u/s 244A - The AO has passed order on January 2006 under sec. 254/154/148 of the IT Act, 1961 vide which a refund amount has been determined - But refund has actually been granted on 29th May, 2006 - HELD THAT - There was statutory liability on the Revenue to pay the interest on the refund which was retained for seeking the administrative approval. As the refund was granted to the assessee only on 29th May, 2006, therefore, the assessee was entitled for the interest upto the said date and the AO was not justified in granting the interest only upto January, 2006 - Decision in favour of Assessee. Interest on Retained Interest u/s 244A - Assessee's contention was that interest was short allowed for four months, so interest on interest was also payable u/s 244A - AO stated that there was no delay in granting relief or refund as procedure and instructions of CBDT were followed HELD THAT - Following the ratio laid down by the Hon'ble Supreme Court in the SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS 2006 (1) TMI 55 - SUPREME COURT , where it was held that even assuming that there is no provision for payment of compensation, compensation for delay is required to be paid as per the act itself recognizes in principle of the liability of the Department to pay interest when excess tax was retained and the same principle should be extended to cases where interest was retained. We, therefore, direct the AO to allow the interest to the assessee also on the interest which was payable on the amount to be refunded. - Decision in favour of Assessee.
Issues Involved:
1. Entitlement to interest on interest under Section 244A of the Income Tax Act, 1961. 2. Interpretation of the date on which refund is considered "granted" under Section 244A. 3. Eligibility for interest on refunds due to TDS certificates submitted late. 4. Applicability of the Supreme Court decision in Sandvik Asia Ltd. v. CIT for interest on interest. Detailed Analysis: Issue 1: Entitlement to Interest on Interest under Section 244A The assessee argued that interest on interest should be allowed under Section 244A till the date of actual grant of interest, citing the Supreme Court decision in Sandvik Asia Ltd. v. CIT. The CIT(A) distinguished the case, stating that there was no wilful/wrongful withholding of the grant of interest, and the delay was only due to the time required for administrative approval. The Tribunal, however, agreed with the assessee, referencing multiple judicial pronouncements, including the Gujarat High Court in Garden Silk Mills Ltd. v. Dy. CIT and the Supreme Court in Sandvik Asia Ltd., which supported the notion that interest on interest is payable when there is a delay in refunding the interest amount. Issue 2: Interpretation of the Date on Which Refund is Considered "Granted" The core dispute revolved around the interpretation of the provisions of Section 244A regarding the date on which the refund is considered "granted." The AO granted interest only up to January 2006, the date when the refund order was signed. However, the Tribunal held that the refund was granted only when the refund voucher was issued on 29th May 2006. This interpretation aligns with the Delhi High Court's decision in CIT v. Sutlej Industries Ltd., which stated that interest should be calculated up to the date of the actual refund issuance, not just the date of the refund order. Issue 3: Eligibility for Interest on Refunds Due to TDS Certificates Submitted Late For the assessment year 2002-03, the assessee submitted TDS certificates late and argued that interest should be granted from the 1st day of the assessment year till the actual grant of the refund. The CIT(A) and Tribunal agreed with the assessee, referencing previous decisions where interest was allowed from the start of the assessment year provided the tax deductor had deposited the tax in time. Issue 4: Applicability of the Supreme Court Decision in Sandvik Asia Ltd. v. CIT for Interest on Interest The Tribunal found the principles laid down in Sandvik Asia Ltd. v. CIT applicable to the present case. The Supreme Court had ruled that interest on interest is payable when there is a delay in refunding the interest amount. This was further supported by the Gujarat High Court in Garden Silk Mills Ltd., which held that interest on interest is due when the refund of tax is delayed. Conclusion: The Tribunal concluded that the assessee was entitled to interest under Section 244A till the date of actual refund issuance and also to interest on the delayed interest amount. The appeals of the Department were dismissed, and those of the assessee were allowed. The Tribunal's decision was based on the interpretation that the refund is considered granted only when the refund voucher is issued, and any delay in issuing the refund, even if due to administrative reasons, entitles the assessee to interest on the delayed amount. The Tribunal also upheld the applicability of the Supreme Court's decision in Sandvik Asia Ltd. for granting interest on interest.
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