2016 (2) TMI 670 - HC - Income Tax

Calculation of interest under section 244A - Whether, the Tribunal erred in law in holding that the interest portion of the refund arising out of the order giving effect to appellate authority has to be ignored for the purpose of calculating interest under section 244A? - Held that - As decided in Commissioner of Income Tax-2, Mumbai Versus M/s. Tata Power Company Ltd. 2015 (8) TMI 87 - BOMBAY HIGH COURT both the CIT(A) and the Tribunal have on examination of facts correctly held that when a refund of tax has to be reduced by refund already granted it is only the tax element which has to be adjusted and not the interest element paid on the delayed refund of the tax. This is so as the interest which is paid to the assessee is for the wrongful withholding of the assessee s refund by the revenue. It has no element of tax which would justify reducing the same from the refund due while computing the interest payable on the delayed payment of refund. - Decided against revenue.

Summary

Issues:
- Interpretation of provisions of section 244A of the Income Tax Act 1961
- Whether interest portion of the refund should be ignored for calculating interest under section 244A to the assessee

Analysis:
1. The judgment involves two appeals under section 260A of the Income Tax Act 1961 challenging a common order of the Income Tax Appellate Tribunal related to Assessment Years 2002-03 and 2005-06. The counsel for the parties requested to hear Income Tax Appeal No.194 of 2014 along with Income Tax Appeal No.2297 of 2013, which raised identical questions from the common order dated 3rd July 2013 of the Tribunal.

2. The key legal questions raised by the Revenue in both appeals were whether the Tribunal correctly interpreted the provisions of section 244A of the Income Tax Act 1961 and whether the interest portion of the refund arising from the order giving effect to the appellate authority should be excluded for calculating interest under section 244A to the assessee.

3. The judgment highlighted that the Tribunal's order dated 3rd July 2013, which was challenged in the appeals, followed a previous order in the case of the Respondent for AY 1997-98. The High Court had previously refused to entertain the Revenue's appeal from the order dated 6th March 2013 for AY 1997-98, which settled the issue of adjusting/refunding the interest element on delayed refunds in favor of the Respondent.

4. It was established that the issue regarding the adjustment of refund consequent to the order of the Appellate Authority had been settled in favor of the Respondent by a previous decision of the Court dated 7th July 2015. The Court noted that the questions raised in the present appeals were already covered by the previous order, and hence, did not give rise to any substantial question of law. Consequently, both appeals were dismissed, with no order as to costs.

5. In conclusion, the judgment clarified the interpretation of section 244A of the Income Tax Act 1961 and the treatment of the interest portion of refunds in calculating interest to the assessee. It emphasized the precedents set by previous decisions and the binding nature of those decisions on similar legal issues.