2014 (5) TMI 745 - AT - Income Tax

Late grant of refund - Entitlement for interest on interest u/s 244A of the Act Held that - Following CIT v/s Gujarat Fluoro Chemicals 2013 (10) TMI 117 - SUPREME COURT - the provisions of section 244A only provides for interest on refund under various contingencies, and only the interest as provided in the statute can be claimed by the assessee and no other interest on such interest, which has been to be computed u/s 244A of the Act - Thus, order of the CIT(A) is set aside and the matter is remitted back to the AO who shall compute the interest which is allowable u/s 244A Decided in favour of Assessee.

Summary

Issues involved:
Challenge to orders of Commissioner (Appeals) for assessment years 2001-02 to 2005-06 regarding interest on interest under section 244A.

Analysis:

Issue 1: Entitlement to interest on interest under section 244A
The appeals were filed challenging separate orders passed by the Commissioner (Appeals) for the assessment years 2001-02 to 2005-06. The common issue in all these years was the entitlement of the assessee to interest on the amount of interest due to them under section 244A. The contention was that the assessee should have been granted interest on the refund amount, as they would have earned income on it if granted when due.

Issue 2: Interpretation of law regarding interest on interest
The Senior Counsel for the assessee argued that previous High Court decisions favored granting interest on interest, citing the Sandvick Asia Ltd. case. However, the Supreme Court in CIT v/s Gujarat Fluoro Chemicals clarified that interest under section 244A can only be claimed by the assessee, not interest on such interest. The matter was to be referred back to the Assessing Officer to compute interest in accordance with the Supreme Court's decision.

Issue 3: Tribunal's decision
After considering the Supreme Court's decision in CIT v/s Gujarat Fluoro Chemicals, the Tribunal held that section 244A only allows interest on refund under specific circumstances. The Tribunal set aside the Commissioner (Appeals)'s orders for all years and directed the Assessing Officer to compute the interest allowable under section 244A. The interest entitled to the assessee was to be granted in accordance with the Supreme Court's judgment. Consequently, the ground raised by the assessee in all years was treated as allowed for statistical purposes.

In conclusion, the appeals for the assessment years 2001-02 to 2005-06 were allowed for statistical purposes, and the matter was referred back to the Assessing Officer to calculate and grant the appropriate interest under section 244A based on the Supreme Court's interpretation.