2013 (10) TMI 117 - SC - Income Tax

Interest u/s 214 and 244 - Interest on interest for late grant of refund - whether interest is payable by the Revenue to the assessee if the aggregate of installments of Advance Tax OF TDS paid exceeds the assessed tax? - Correctness or otherwise of the decision of this Court in the case of Sandvik Asia Limited vs. Commissioner of Income Tax & Ors. 2006 (1) TMI 55 - SUPREME Court - Held that - it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest.

Summary

Issues:
1. Doubt on correctness of previous decision regarding interest payment by Revenue to assessee.
2. Interpretation of judgment in Sandvik case regarding compensation for delay in payment by Revenue.
3. Misquoting and misinterpretation of the previous judgment by assessees and Revenue.
4. Clarification on interest payment under Section 244A of the Income Tax Act.

Analysis:
The Supreme Court addressed the doubt raised on the correctness of a previous decision regarding interest payment by the Revenue to the assessee. The main issue under consideration was whether interest is payable by the Revenue to the assessee if the aggregate of installments of Advance Tax or TDS paid exceeds the assessed tax. The Court examined the judgment in the Sandvik case, where it was determined that the assessee should be compensated for the delay in payment by the Revenue. The Court highlighted the inordinate delay in refunding the amount due to the assessee in the Sandvik case and directed the Revenue to pay compensation by way of interest for the specified periods.

The Court clarified that the judgment in the Sandvik case had been misquoted and misinterpreted by both assessees and the Revenue. It was emphasized that the Court had directed compensation for delay in payment, not interest on interest. The Court explained that the Revenue is only obligated to pay interest provided for under the statute, as per Section 244A of the Income Tax Act. The legislative insertion of Section 244A under the Act provides for interest on refunds under various contingencies, and it was clarified that only this statutory interest can be claimed by an assessee from the Revenue, not any additional interest on such statutory interest.

In conclusion, the Supreme Court referred all matters back to a Two-Judge Bench to consider each case independently and make appropriate decisions accordingly. The judgment provided clarity on the issue of interest payment by the Revenue to the assessee, emphasizing the distinction between compensation for delay and interest on statutory interest as provided under Section 244A of the Income Tax Act.