2013 (4) TMI 980 - AT - Income Tax

Summary

Issues Involved:
1. Validity of invoking provisions u/s 154 of the Income Tax Act.
2. Withdrawal of Broken Period Interest (BPI) of Rs. 16,48,83,258.
3. Claim of interest u/s 244A on the refund withheld by AO.

Summary:

Issue 1: Validity of invoking provisions u/s 154 of the Income Tax Act

The CIT (A) erred in upholding the action of the AO in passing an order u/s 154 of the Income Tax Act and invoking the provisions of section 154 of the Act. Ground No.1 is general in nature, hence does not require any adjudication.

Issue 2: Withdrawal of Broken Period Interest (BPI) of Rs. 16,48,83,258

The CIT (A) erred in confirming the action of AO in withdrawing BPI of Rs. 16,48,83,258 on securities purchased prior to the previous year relevant to AY 2000-01 and sold in the previous year relevant to AY 2000-01. The assessee argued that the amounts claimed and allowed were actually not allowed in the respective years, therefore, the question of withdrawal does not arise. AO did not agree and made the adjustment of the above sum u/s 154. The CIT (A) dismissed the contentions, stating that the broken period interest was allowable on the basis of the year of purchase of securities, and the mistake apparent from the record resulting in double deduction could be rectified u/s 154 of the Act.

The Tribunal found that there was no double claim and no necessity for any modification u/s 154 on the facts of the case. The amounts were not allowed as deduction in the year of purchase, thus becoming part of the cost of acquisition of the securities sold during the year. The Tribunal allowed Ground No.2 raised by the assessee.

Issue 3: Claim of interest u/s 244A on the refund withheld by AO

The CIT (A) did not allow the claim for interest on interest, stating that section 244A provides for payment of interest on delayed payment of refund but does not provide for payment of any interest on interest. The Tribunal, however, referred to the decision in the case of Sandvik Asia Ltd. vs. CIT (280 ITR 643 (SC)) and other relevant cases, directing the AO to allow interest u/s 244A in accordance with the decision of the Hon'ble Supreme Court in the case of H.E.G. Ltd. (324 ITR 331 (SC)). The Tribunal allowed Ground No.3 raised by the assessee.

Conclusion:

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 10th April, 2013.