2012 (11) TMI 810 - AT - Income Tax

Interest on delayed refund Period of for which interest granted - Assessee contended that the interest of refund should be allowed from the 1st of April of the F.Y. in which TDS was deducted, i.e. from 1-4-1984 and not from the date of regular assessment order - AO granted interest u/s 244(1)A on the refund from the date of regular assessment order till the date of granting of the refund - Held that - As the contention of the assessee is not correct, that the judgment in case of Sandvik Asia Ltd. (2006 (1) TMI 55 - SUPREME COURT), has in any manner diluted the ratio and the proposition of law laid down in case of Modi Industries Ltd.( 1995 (9) TMI 324 - SUPREME COURT). In the case of Sandvik Asia Ltd. (supra), the Hon ble Supreme Court, was besieged with the issue of withholding of refund without sanction of law. Issue decides in favour of assessee Interest on refund - Assessee contended that interest should be paid on the amount of refund delayed after the expiry of 3 months from date of ITAT s order till the date of actual granting of refund AO argued that the interest should have to be paid in after the expiry of three months from the date of ITAT order, till the date of passing of the order giving effect of the ITAT and further interest on balance amount of refund shall become payable from the date of issue of the refund - Held that - As the view taken by some ITO that the date of the assessment order is to be taken as the date of the order granting the refund is not correct. Thus, in cases where interest is payable by the Central Government to assessee u/s 243, such interest is to be calculated upto the date of issue of the refund voucher. Therefore, assessee is entitled for interest for the amount of refund and interest withheld from the period after the expiry of 3 months from the date of order till the date of actual grant of refund voucher. Issue decides in favour of assessee.

Summary

Issues:
1. Calculation of interest due to the appellant from the date of payment of tax up to the date of assessment order.
2. Calculation of interest due to the appellant on the amount of refund granted based on ITAT's order.

Issue 1:
The appeal was filed by the assessee against the order passed by CIT(A)-XXXI, Mumbai regarding the interest due to the appellant from the date of payment of tax up to the date of the assessment order. The assessee contended that interest should be allowed from 1-4-1984 till the date of the assessment order, challenging the CIT(A)'s decision based on the Supreme Court's ruling in the case of Modi Industries Ltd. The Supreme Court held that advance tax and TDS are treated as payment of income tax from the date of the assessment order, not from the date of payment. The tribunal upheld this decision, stating that Section 244A, applicable from A.Y. 1989-1990, was not relevant for A.Y. 1984-1985. The argument that a later Supreme Court judgment diluted the earlier ruling was dismissed, as the latter case dealt with withholding refunds without legal sanction.

Issue 2:
Regarding the interest on the amount of refund based on ITAT's order, the tribunal found that the delay in granting the refund after the ITAT's order violated statutory provisions. The tribunal referred to Section 240, stating that the AO must refund the amount due to the assessee as a result of an appellate order without the assessee's claim. Sections 244(1) and 244(2) specify a three-month limit for refund after the order, which was not adhered to in this case. The assessee was entitled to interest on the refund from the date of the regular order to the date of the refund and also for the delay in granting the refund post ITAT's order. Citing various case laws and a CBDT circular, the tribunal allowed the assessee's appeal on this ground, granting interest for the delayed refund amount.

In conclusion, the tribunal partly allowed the appeal of the assessee, upholding the interest calculation from the date of the assessment order for Issue 1 and granting interest for the delayed refund amount post ITAT's order for Issue 2.