2007 (6) TMI 69 - HC - Income Tax

Whether the assessee is entitled to interest on refund of tax paid u/s 140A made on self assessment, bringing the same within the purview of any other case u/s 244A(i)(b) - Held yes, the assessee is entitle to compensation by way of interest for delay in refund

Summary

Issues:
1. Entitlement to interest on refund under Section 244A when the refund arises from payment of self-assessment tax under Section 140A.

Analysis:
The judgment of the High Court in this case revolved around the issue of whether the assessee is entitled to interest on the refund of tax paid under Section 140A for self-assessment, falling under Section 244A(1)(b). The Revenue contended that the interest amount granted under Section 244A should be withdrawn as the refund arose from the payment of self-assessment tax. However, the Commissioner of Income-Tax (Appeals) and the Income-tax Appellate Tribunal allowed the interest on refund. The substantial question of law raised was whether the Tribunal was correct in holding that the assessee is entitled to interest under Section 244A in such a scenario.

The court referred to Section 140A, which deals with self-assessment tax payment, and Section 244A, which provides for interest on refunds. It was noted that Section 244A(1)(a) specifies conditions for interest calculation on certain types of tax payments, while Section 244A(1)(b) covers other cases. The court emphasized that no interest is payable if the refund amount is less than 10% of the tax as determined under Section 143(1) for specific tax payments, but this proviso does not apply to Section 244A(1)(b).

Furthermore, the court cited precedents to support the assessee's entitlement to interest on refunds, irrespective of the nature of the tax payment. The court referred to the case law of Commissioner of Income-tax vs. Ashok Leyland Ltd. and the decision in Sandvik Asia Ltd. vs. Commissioner of Income-tax, which affirmed the statutory liability of the Revenue to pay interest on refunds as a compensation for delays in payment of lawfully due amounts.

Ultimately, the court found no substantial question of law warranting consideration and dismissed the appeal, affirming the assessee's entitlement to interest on the refund of tax paid under Section 140A, in line with the provisions of Section 244A and established legal principles.