2015 (2) TMI 152 - AT - Income Tax

Interest on refunds - Method of computation of interest u/s 244A - CIT(A) upheld the method adopted by the AO by reducing the total refund granted (including the interest under section 244A already granted) from the tax refund due to the appellant and computing interest on the remaining amount - Held that - CIT(A) has not gone into the question of correctness of method adopted by the AO but decided the issue on the ground that the method adopted by the AO is being consistently followed in respect of the assessee. Therefore, the impugned order of the CIT(A) qua this issue is not sustainable in law and liable to be set aside as interest determined by the AO is lower than the amount the assessee is entitled for. We accordingly restore the matter to the AO with a direction to calculate interest due to the assessee without reducing the interest u/s 244A, which is part of the refund earlier granted from the refund due. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Appeals filed by assessee against CIT(A) order for assessment years 1991-92, 1997-98, 1999-2000, 2007-08 & 2008-09 regarding computation of interest under Section 244A of the Income Tax Act, 1961.

Analysis:
The common issue in all appeals concerns the method of calculating interest under Section 244A. The grievance of the assessee is that the AO computed interest by reducing the refund (including interest already granted) from the tax refund due, resulting in a lower interest amount than entitled to. The AR argued that the refund granted should be reduced from tax and interest separately, citing sec 244A(3) and a decision by ITAT - Mumbai in a similar case. The AR referred to a previous case where the Tribunal restored the matter to the AO for recalculating interest without reducing the interest u/s 244A from the refund due. The DR argued against granting interest on interest, citing relevant case laws.

The Tribunal considered the method adopted by the AO for interest calculation under Section 244A. It was observed that the AO reduced the total refund granted, including interest u/s 244A, from the tax refund due, leading to a lower interest amount. The Tribunal agreed with the AR that only the refund already granted should be reduced, not the interest on such refund. Referring to a previous case, the Tribunal concluded that the AO's method resulted in a reduction of interest payable to the assessee, which was incorrect. The Tribunal directed the AO to calculate interest without reducing the interest u/s 244A from the refund due.

The Tribunal found that the CIT(A) did not assess the correctness of the AO's method but upheld it based on consistency. Therefore, the Tribunal set aside the CIT(A)'s decision and directed the AO to recalculate interest without reducing the interest u/s 244A from the refund due. The Tribunal referred to relevant case laws and emphasized that the interest calculation method adopted by the AO was erroneous, resulting in a lower entitlement for the assessee. Consequently, all appeals of the assessee for different assessment years were allowed for statistical purposes.