2015 (5) TMI 781 - AT - Income Tax

Refund granted by the department - Interest due to part refund - Interest on Interest - Held that - As admitted by the leaned counsel and also that, similar ground have been raised in A.Y. 1996-97, wherein this issue has been decided against the assessee, following ITAT order for the earlier year in assessee s own case. Thus, respectfully following the same, we dismiss the grounds raised by the assessee. Whether refund should have been first adjusted with the interest due on date of grant of refund, instead of being adjusted with the principal refund due? - Held that - As it is seen in the case of India Trade Promotion Organization Vs. CIT reported in 2013 (9) TMI 451 - DELHI HIGH COURT after detail analysis and discussion has held that, when the revenue does not pay full amount of refund, but part of amount is paid, they will be liable to pay interest on the balance outstanding amount, which consist, of tax paid on the interest, which is payable till the payment of the part amount and interest payable on the principal amount, which remained outstanding thereafter. . Accordingly this ground is set aside to the file of the AO with similar direction. Decided partly in fvaour of assessee for statistical purpose.

Issues Involved:
1. Eligibility for interest on interest under Section 244A.
2. Adjustment of refunds against interest due.
3. Levy of interest under Section 220(2).
4. Grant of interest under Section 244A for MAT credit adjustment.

Issue-wise Detailed Analysis:

1. Eligibility for Interest on Interest under Section 244A:

The assessee contended that the learned Commissioner of Income Tax (A) erred in confirming the order passed by the AO, which denied interest on interest under Section 244A amounting to Rs. 4,61,73,146/- for A.Y. 1996-97 and Rs. 74,21,805/- for A.Y. 2000-01. The Tribunal, following its previous decision dated 26.02.2014 in the assessee's own case for A.Y. 1986-87, held that the assessee is not eligible for interest on interest on the refund granted under Section 244A. Therefore, the grounds raised by the assessee were dismissed.

2. Adjustment of Refunds Against Interest Due:

The assessee raised an issue regarding the adjustment of refunds granted by the department against the principal tax to be refunded instead of adjusting it with interest outstanding and payable at the time of the grant of refund. The Tribunal referred to the Delhi High Court's decision in India Trade Promotion Organization Vs. CIT (2014) 361 ITR 646, which stated that when the revenue does not pay the full amount of refund but only a part, they are liable to pay interest on the balance outstanding amount, including the interest element accrued. Following this principle, the Tribunal directed the AO to adjust the refund in line with the Delhi High Court's decision. Thus, the assessee's ground was partly allowed for statistical purposes.

3. Levy of Interest under Section 220(2):

The assessee challenged the levy of interest under Section 220(2), arguing that the CIT(A) had not decided the issue on merits and had held that no appeal could arise from the order levying interest under Section 220(2). The Tribunal referred to the ITAT Chennai Bench's decision in Precot Meridian Ltd. Vs. DICT, which held that if the levy of interest under Section 220(2) is charged in the order giving effect, then the appeal is maintainable. Consequently, the Tribunal set aside the issue to the file of the CIT(A) to decide on merits in accordance with the law, treating the appeal as partly allowed for statistical purposes.

4. Grant of Interest under Section 244A for MAT Credit Adjustment:

For A.Y. 2001-02, the assessee raised grounds regarding the grant of interest under Section 244A amounting to Rs. 8,62,69,794/-, arguing that the CIT(A) erred in not granting interest due to the improper adjustment of MAT credit against tax liability. The Tribunal noted that similar issues had been decided against the assessee in earlier years. Therefore, the grounds were dismissed. However, regarding the additional ground of adjusting refunds against interest due, the Tribunal set aside the issue to the AO to follow the principle laid down by the Delhi High Court, treating it as partly allowed for statistical purposes.

Conclusion:

In conclusion, the Tribunal dismissed the grounds concerning the eligibility for interest on interest under Section 244A and the grant of interest under Section 244A for MAT credit adjustment. However, it partly allowed the grounds related to the adjustment of refunds against interest due and the levy of interest under Section 220(2) for statistical purposes, directing the AO to follow the principles laid down by the Delhi High Court. The appeals were treated as partly allowed for statistical purposes.

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