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2015 (3) TMI 280 - HC - Income TaxEntitlement to any amount for the delayed payment of interest under Section 244A on the principal refund amount claimed by it - Held that - Plain text of Section 244A does not provide for a construction which entitles the assessee aggrieved by delayed payment of principal to any amount over and above the interest directed by Section 244A(1) itself. See Commissioner of Income Tax V. Gujarat Fluoro Chemicals 2013 (10) TMI 117 - SUPREME COURT In Sandvik Asia Ltd. (2006 (1) TMI 55 - SUPREME Court), the Court admittedly was dealing with facts prior to the insertion of Section 244A. Therefore, it would be inappropriate for this Court to consider that judgment now as binding authority. More importantly, Sandvik Asia Ltd. (supra) was explained by the larger Bench i.e. three Judge Bench decision in Gujarat Fluoro Chemicals (supra) where the Supreme Court categorically held that the only amount which an assessee aggrieved by delayed payment can legitimately claim under the statute is interest and that no other interest on such statutory interest is payable. This ruling, in the opinion of this Court, rendered by a larger Bench, would have to be followed as opposed to the ratio in HEG Ltd. (2009 (12) TMI 35 - SUPREME COURT ) where the Supreme Court had expressed a contrary opinion by indicating that the interest component towards the delayed payment of the tax refund would partake of the character of the amount of due‟ under Section 244 A. In other words, HEG Ltd. seems to suggest that there would be dues on bar, refund and delayed interest. Clearly, that view has not been approved in Gujarat Fluoro Chemicals (supra). Decided against assessee.
Issues:
1. Entitlement to interest under Section 244A for delayed payment of interest on principal refund amount. Analysis: The case involved the question of whether the assessee was entitled to any amount for the delayed payment of interest under Section 244A on the principal refund amount claimed. The assessee's returns for the years 1997-98 and 1998-99 were processed under Section 143(1), with advance tax payments completed on time. The assessments were framed, adjustments made, and the assessee claimed a delay in payment of interest amounting to Rs. 2,55,19,914 for the two assessment years. The AO denied the amount, but the ITAT held in favor of the assessee, stating that interest on delayed payment of interest was payable as per the Supreme Court decision in Sandvik Asia Ltd. v. CIT & Ors. The ITAT relied on Sandvik Asia Ltd. to allow the appeal, emphasizing the entitlement to interest on delayed payment of interest. The revenue contended that the reliance on Sandvik Asia Ltd. was erroneous as it was delivered before the insertion of Section 244A. The revenue emphasized that Section 244A does not provide for an entitlement to any amount beyond the interest directed by the section itself. Citing Commissioner of Income Tax v. Gujarat Fluoro Chemicals, the revenue argued that only interest provided for under the statute could be claimed by the assessee, not interest on such statutory interest. The Court highlighted that the law declared in Gujarat Fluoro Chemicals was binding and did not permit deviation, indicating that the assessee could only claim interest under Section 244A(1) and not any additional amount. The assessee argued that the ITAT's order should stand, asserting that the refund sought was only for the interest payable, not an additional amount. Citing Commissioner of Income Tax v. HEG Ltd. and India Trade Promotion Organisation v. CIT, the assessee contended that the refund should include the interest payable, and any shortfall would attract interest payment by the Revenue. The Court clarified the situation using examples to explain the application of Section 244A in cases of full or partial refunds, emphasizing the payment of interest on the amount due and payable but not refunded. In conclusion, the Court held that the impugned order directing payment of any sum beyond the interest payable under Section 244A(1) to the assessee could not be upheld. The matter was remitted to the AO for further orders, and the question of law was answered in favor of the revenue. The judgment partly allowed the appeal, emphasizing the binding nature of the law declared in Gujarat Fluoro Chemicals and the inapplicability of interest on interest as per Section 244A.
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