2015 (12) TMI 969 - HC - Income Tax

Entitlement to interest under section 244A paid by them under section 140A - Held that - The entitlement of a person to interest on the refund arises out of substantive part of sub-section (1) of section 244A. Clauses (a) and (b) relate only to the method of computation. The method of computation dealt with by clause (a) relates to specific cases of refund under certain provisions. Therefore, the starting point for calculation of the interest is fixed as 1st April in clause (a). Clause (b) is a residuary clause, as could be seen from the usage of the expression in any other case . Therefore, the starting point for the computation of interest under clause (b) is the date of payment. The provisions under section 244A do not distinguish the cases where payment is made on assessment under section 140A. The explanation to section 244A does not really talk about the entitlement or disentitlement. The explanation, which we have extracted above, would show that the expression date of payment of tax or penalty means the date on and from which the amount of taxes or penalty specified in the notice of demand issued under section 156 is paid in excess. The above explanation does not give room for an interpretation that if a person has paid money otherwise than by way of demand under section 156, he is not entitled to interest on refund under section 244A. The explanation cannot, really, curtail the method of computation prescribed in clause (b) or the substantive part of section 244A. Therefore, the question of law is answered in favour of the assessee. The Tax Case Appeal is allowed. No costs. The connected miscellaneous petitions are closed.

Summary

Issues:
Entitlement to interest under section 244A on the amount paid under section 140A; Disallowance of claim under section 80 HHC; Interpretation of section 244A for interest calculation; Applicability of interest on self-assessment tax and interest on refund due.

Entitlement to interest under section 244A on the amount paid under section 140A:
The appellant filed a return of income for the assessment year 1991-92 and paid a sum of Rs. 20,00,000/- as tax due under section 140A, which later became refundable due to appellate proceedings. The assessing officer granted a refund of Rs. 20,23,272/-, but the appellant claimed interest under section 244A. The Commissioner of Income Tax (Appeals) held that the assessee is entitled to interest under section 244A, but the case regarding section 80 HHC was dismissed. The Tribunal allowed the appeals of both the assessee and the Revenue, partially allowing the cross-objection of the assessee. The questions raised revolved around the entitlement of the appellant to interest, leading to a detailed analysis of section 244A for interest calculation.

Disallowance of claim under section 80 HHC:
The assessing officer partially granted relief under section 80 HHC, leading to an appeal before the Commissioner. The Commissioner dismissed the assessee's case regarding section 80 HHC, prompting further appeals before the Tribunal. The Tribunal's common order allowed the appeals of both the assessee and the Revenue, partially granting the cross-objection of the assessee. The Revenue did not appeal against the Tribunal's decision, while the assessee appealed against the rejection of their interest claim under section 244A.

Interpretation of section 244A for interest calculation:
The Tribunal's decision was based on the premise that since the refund was paid before the completion of assessment, the assessee might not be entitled to interest under section 244A. However, a detailed analysis of sub-section (1) of section 244A revealed that the entitlement to interest arises from the substantive part of the section, with clauses (a) and (b) specifying the method of computation. The starting point for interest calculation under clause (b) is the date of payment, which does not distinguish cases where payment is made on assessment under section 140A. The explanation to section 244A clarifies the date of payment of tax or penalty, supporting the entitlement to interest on refund under section 244A.

Applicability of interest on self-assessment tax and interest on refund due:
The Tribunal's decision was critiqued for misinterpreting the provisions of section 244A, as the entitlement to interest on refund is not contingent upon the completion of assessment. The explanation in section 244A does not restrict the entitlement to interest based on the method of payment, emphasizing that the starting point for interest calculation under clause (b) is the date of payment. Therefore, the Tribunal's decision was overturned, and the Tax Case Appeal was allowed in favor of the assessee, with no costs incurred.