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2015 (9) TMI 797 - AT - Income TaxEntitlement to interest u/s. 244A(1) - non granting of interest u/s.244A - assessee s contention that the interest u/s.244A was not allowed on such refund on the reason that the assessee has not made claims originally under section 244A (2) and any delay on the part of the assessee should be excluded - Held that - Assessee had filed its return in time,that the refund amount exceeded 10% of the tax demand, that the AO had not followed the directions of the CIT and had not recomputed the interest,that the claim about taxing the securities interest was part of the return filed by the assessee. Therefore,there was no justification on part of the AO not to grant further interest to it. As far as the order of the FAA is concerned,we would like to rely upon the decisions of South Indian Bank Limited (2010 (10) TMI 857 - Kerala High Court) and ACC Ltd.(2011 (12) TMI 350 - ITAT, Mumbai). We hold that the assessee is entitled for interest u/s.244A of the Act from first day of April of the AY. and that the AO was not justified in restricting it to the date from the order of the FAA.- Decided in favour of the assessee
Issues Involved:
1. Entitlement to interest under Section 244A of the Income Tax Act. 2. Calculation and period of interest entitlement. 3. Interpretation of Section 244A(1), 244A(2), and 244A(3) of the Income Tax Act. 4. Compliance with directions from higher authorities (CIT). 5. Attribution of delay in refund processing. Detailed Analysis: 1. Entitlement to Interest under Section 244A: The assessee challenged the orders of the CIT(A) for not granting interest under Section 244A. The primary contention was that the AO granted interest at a lower amount than claimed by the assessee. The AO's rationale was that the claim for interest accrued but not due was only made in the notes forming part of the return of income and not explicitly in the return itself. 2. Calculation and Period of Interest Entitlement: The assessee argued that a significant amount had become refundable due to the order under Section 143(3) read with Section 250 and that this refund was entitled to interest under Section 244A(1). The CIT(A) and AO contended that the provisions of Section 244A(3) were not applicable as the refund became due for the first time due to the appellate order, and there was no enhancement or reduction in the refund amount. 3. Interpretation of Section 244A(1), 244A(2), and 244A(3): The Tribunal discussed the principles governing the grant of interest and refund. It emphasized that interest is compensatory for money lying with the department and that the right to interest follows as a matter of course when money is retained without right. The Tribunal referred to various judgments, including Tata Chemicals, South Indian Bank Limited, and ACC Ltd., to elucidate that interest should be granted from the first day of the assessment year to the date of refund. 4. Compliance with Directions from Higher Authorities (CIT): The CIT, in his order under Section 264, had directed the AO to recompute the interest under Section 244A. However, the AO did not comply with these directions, which the Tribunal found to be against the provisions of the Act. The Tribunal held that the AO's approach was incorrect and that the CIT's directions should have been followed. 5. Attribution of Delay in Refund Processing: The Tribunal held that the delay in refund processing was not attributable to the assessee. The AO had claimed that the delay was due to the assessee not making the claim in the return of income. However, the Tribunal found that the claim was part of the return filed by the assessee and that the AO's selective approach in considering the notes was not justified. The Tribunal referred to the judgment in South Indian Bank Limited, which held that the assessee is entitled to interest from the first day of the assessment year unless the delay is attributable to the assessee, which was not the case here. Conclusion: The Tribunal concluded that the assessee was entitled to interest under Section 244A from the first day of April of the assessment year. The AO was not justified in restricting the interest to the date from the order of the FAA. The Tribunal reversed the order of the FAA and allowed the appeals filed by the assessee for both assessment years. The order was pronounced in the open court on 31st August 2015.
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