1990 (5) TMI 15 - HC - Income Tax

Summary

Issues:
Claim of interest on delayed refund
Maintainability of writ petition for interest claim
Interpretation of sections 240 and 244 of the Income-tax Act

Analysis:
The petitioner filed a writ petition claiming interest on a delayed refund of Rs. 73,928, which was due since March 29, 1979, but paid on October 12, 1982. The petitioner was initially assessed to income tax for the year 1974-75, and various rectifications were made subsequently, leading to a demand of Rs. 1,08,824. However, after legal proceedings, it was determined that a refund of Rs. 73,928 was owed to the petitioner. The respondent contested the claim for interest, arguing that a civil suit should have been filed instead of a writ petition. The court held that a writ petition was maintainable, citing precedents where such claims were entertained, even if interest was not always granted.

The main contention revolved around the interpretation of sections 240 and 244 of the Income-tax Act regarding the payment of interest on refunds. The respondent argued that interest was payable only when a refund arose due to a second appeal or reference under the Act, not due to provisions under section 263. However, the court disagreed, stating that section 244 applies to all orders within the meaning of section 240, including those arising from section 263 proceedings. The court rejected the respondent's narrow interpretation of "other proceedings" and emphasized that the petitioner was entitled to interest on the delayed refund as per the provisions of the Act.

Ultimately, the court allowed the writ petition, directing the respondent to pay interest on the refund amount of Rs. 73,928 at the rate of 12% per annum from the date of the Commissioner's order in 1979 to the date of actual payment in 1982. The petitioner was also awarded costs. The judgment clarified that the petitioner's claim for interest was valid under the relevant sections of the Income-tax Act, and the respondent was obligated to fulfill this obligation as per the court's decision.