2016 (2) TMI 564 - AT - Income Tax

Interest u/s 244A - Interest on refund where no claim is needed - Whether Commissioner (Appeals) erred in holding that delay in issue of refund was attributable to the assessee without considering the fact that application for rectification of mistake was filed on 17-12-2008. - Held that - After going through the provisions of section 244 and 244A we are of the considered opinion that the appellant is entitled for simple interest on the excess tax paid, by whatever name called, such as TDS or Advance Tax or self assessment tax. Such interest is payable to the assessee after adjustment of taxes due, from the date from which the assessee claims it. - Decided in favour of assessee

Issues Involved:
1. Entitlement to interest under Section 244A on income tax refund.
2. Attribution of delay in issuing the refund.
3. Applicability of law for passing rectification order under Section 154.
4. Interpretation of Supreme Court judgments regarding interest on self-assessment tax.
5. Binding nature of Delhi High Court judgments.
6. Calculation of interest on refund under Section 244A.
7. Entitlement to interest on interest accrued for delayed refund.

Detailed Analysis:

1. Entitlement to Interest under Section 244A on Income Tax Refund:
The primary issue was whether the assessee was entitled to interest under Section 244A for the period from the date of filing the rectification application (17-12-2008) to the date of grant of refund (04-12-2012). The Tribunal concluded that the assessee is entitled to simple interest on the excess tax paid, by whatever name called, such as TDS, Advance Tax, or self-assessment tax. This is based on the principle that the government must compensate the taxpayer for the wrongful retention of money.

2. Attribution of Delay in Issuing the Refund:
The Commissioner (Appeals) had held that the delay in issuing the refund was attributable to the assessee. However, the Tribunal found that the assessee had filed a rectification application on 17-12-2008, and thus the delay should not be attributed to the assessee. The Tribunal emphasized that the assessee should be compensated for the period during which the refund was delayed.

3. Applicability of Law for Passing Rectification Order under Section 154:
The assessee argued that the law as on the date of passing the rectification order under Section 154 (04-12-2012) should be relevant, not the law as on the date of passing the appellate order. The Tribunal agreed, stating that since the law on 04-12-2012 provided for interest on refund arising from self-assessment tax, the assessee was entitled to such interest.

4. Interpretation of Supreme Court Judgments:
The Tribunal addressed the conflicting interpretations of Supreme Court judgments. The assessee argued that the specific rule laid down in Cholamandalam Investment & Finance Co. Ltd., which states that self-assessment tax is covered under Section 244A(1)(b), should be followed over the general rule in Gujarat Fluoro Chemicals. The Tribunal sided with the assessee, emphasizing the specific rule.

5. Binding Nature of Delhi High Court Judgments:
The assessee contended that the decision of the two-member bench of the Delhi High Court in Sutlej Industries Ltd. should prevail over the later judgment in Engineers India Ltd. The Tribunal did not explicitly address this issue but implicitly followed the precedent set by Sutlej Industries Ltd., which supports the assessee's claim for interest on self-assessment tax.

6. Calculation of Interest on Refund under Section 244A:
The Tribunal noted that interest on refund should be calculated on the same basis on which interest is charged by the income tax department under Section 201. Therefore, the interest payable to the assessee from 17-12-2008 to 04-12-2012 should be for 49 months in line with the interest charged by the department.

7. Entitlement to Interest on Interest Accrued for Delayed Refund:
The assessee claimed interest on the interest accrued for not refunding Rs. 8,63,139 for 49 months, amounting to Rs. 2,11,469. The Tribunal held that the assessee is not entitled to claim interest on interest. Section 244 and 244A describe the procedure and calculation of refund of any amount due to the assessee, and interest on interest is not permissible.

Conclusion:
The Tribunal allowed the appeal, granting the assessee simple interest on the excess tax paid, including self-assessment tax, from the date of the rectification application to the date of the refund. The claim for interest on interest was denied. The judgment emphasized the principle of compensating taxpayers for the wrongful retention of their money by the government.

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