2011 (11) TMI 103 - HC - Income Tax

Interest on belated refund - LIC deducted TDS on Insurance maturity - Refund on account of excess TDS - delay of about ten years - Held That - Section 244 stipulate interest on refund where no claim is needed @ 15% p.a. on the amount of refund due from the date immediately following the expiry of period of three months to the date on which refund is granted. Accordingly, this writ petition is allowed.

Summary

Issues:
1. Excess TDS refund claim with delayed filing of return.
2. Denial of interest on belated refund.
3. Interpretation of Sections 244 and 244A of the Income Tax Act.

Issue 1: Excess TDS refund claim with delayed filing of return
The petitioner, an income tax assessee, sought refund of excess TDS by LIC on maturity of policies amounting to Rs.19,083 for the assessment year 1994-95. The delay of four days in filing the return of income was condoned by the Chief Commissioner of Income Tax, Udaipur, under Section 119(2)(b) of the Act. The petitioner approached the court after being aggrieved by the denial of interest on the refund due to the minor delay in filing the return.

Issue 2: Denial of interest on belated refund
The Chief Commissioner of Income Tax, Udaipur, granted the refund but added a condition that no interest would be paid on the belated refund. The petitioner argued that since the delay in filing the return was condoned, there was no justification to deny interest on the refund. The Revenue, citing a Kerala High Court decision, contended that interest could not be granted on belated refunds.

Issue 3: Interpretation of Sections 244 and 244A of the Income Tax Act
The court analyzed Sections 244 and 244A of the Income Tax Act. Section 244 provides for interest on refunds where no claim is needed, while Section 244A outlines the calculation of interest on refunds. The court noted that the tax deducted at source from the insurance maturity value was an advance tax payment on behalf of the assessee, and the refund claim required no further action from the assessee. Therefore, the court held that Section 244 applied in this case, entitling the assessee to interest on the excess TDS refund.

In conclusion, the court ruled in favor of the petitioner, allowing the writ petition and quashing the order denying interest on the belated refund. The Revenue was directed to compute and pay interest at 15% per annum on the refund amount from 01.01.1998 till the actual date of refund, as the delay in processing the refund was attributed to the Revenue itself.