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2014 (11) TMI 899 - HC - Income TaxInterest payable u/s 244A(1)(b) on refund of excess amount Excess amount paid on self-assessment u/s 10A Held that - Amount paid by the petitioner as tax on self-assessment would not stand covered by Section 244A(1)(a) - the payment of tax made by resident/ depositor is in excess and the department chooses to refund the excess payment of tax to the depositor - the interest requires to be paid on such refunds - In the absence of an express provision as contained in clause (a), it cannot be said that the interest is payable from the 1st of April of the assessment year - the requirement to pay interest arises whenever an amount is refunded to an assessee as it is a kind of compensation for use and retention of money collected by the revenue. The payment has not been made pursuant to any notice of demand but prior to the filing of the return of income in accordance with Section 140A of the Act - Secondly, the provisions of Section 244A(1) (b) very clearly mandate that the revenue would pay interest on the amount refunded for the period commencing from the date the payment of tax is made to the revenue upto the date when refund is granted to the revenue relying upon Karnataka High Court in Commissioner of Income Tax v/s Vijaya Bank 2011 (7) TMI 582 - KARNATAKA HIGH COURT - interest is payable from the date of payment of the tax on self-assessment to the date of refund of the amounts u/s 244A thus, the order is set aside and the AO is directed to compute the interest payable from the date of payment on self-assessment tax i.e. 31 August 1994 till the date of refund i.e. 24 October 1998 Decided in favour of assessee.
Issues Involved:
1. Whether interest is payable under Section 244A(1)(b) of the Income Tax Act on the refund of excess tax paid on self-assessment under Section 140A. 2. Applicability of the Supreme Court decision in Union of India v/s Tata Chemicals to the present case. 3. Interpretation of Section 244A(1) and its explanation regarding the payment of interest on refunds. 4. The effect of the CBDT Circular No. 549 dated 30 October 1989 on the interpretation of Section 244A. 5. The date from which interest should be calculated on the refund of self-assessment tax. Detailed Analysis: 1. Interest Payable Under Section 244A(1)(b): The central issue is whether interest is payable on the refund of excess tax paid on self-assessment under Section 140A. The court analyzed Section 244A(1) and concluded that tax paid on self-assessment falls under Section 244A(1)(b), which is a residuary clause covering refunds not specified in Section 244A(1)(a). The court emphasized that if a type of tax payment is not covered under clause (a), it must fall under clause (b), thereby entitling the assessee to interest on the refund. 2. Applicability of Tata Chemicals Decision: The petitioner argued that the Supreme Court's decision in Union of India v/s Tata Chemicals, which mandates the payment of interest on refunded excess tax, applies to this case. The court agreed, noting that the principle of compensating for the use and retention of money by the revenue, as established in Tata Chemicals, is applicable here. The court dismissed the revenue's argument that the Tata Chemicals case was distinguishable because the tax in that case was deducted pursuant to an order, while in the present case, the tax was paid voluntarily. 3. Interpretation of Section 244A(1) and Its Explanation: The revenue contended that interest is not payable unless the tax paid is in excess of the demand specified under Section 156. The court rejected this interpretation, stating that Section 244A(1) clearly mandates interest on any amount refunded under the Act, and the explanation to Section 244A(1)(b) applies only to payments made pursuant to a notice under Section 156. Since the payment in the present case was made under Section 140A, the explanation does not apply. 4. Effect of CBDT Circular No. 549: The court referred to the CBDT Circular No. 549, which clarifies that interest is payable on refunds of any tax other than advance tax or tax deducted at source, from the date of payment to the date of refund. The circular supports the view that interest is payable on self-assessment tax refunds, reinforcing the court's interpretation of Section 244A. 5. Date from Which Interest Should Be Calculated: The court determined that interest should be calculated from the date of payment of the self-assessment tax (31 August 1994) to the date of refund (24 October 1998). This conclusion is supported by the provisions of Section 244A(1)(b), which specify that interest is payable from the date of payment of the tax. Conclusion: The court set aside the impugned order dated 28 September 1999 and directed the Assessing Officer to compute and pay the interest due to the petitioner from the date of payment of the self-assessment tax to the date of refund. The petition was allowed, and the revenue was ordered to comply within six weeks. No order as to costs was made.
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