2016 (4) TMI 390 - SC - Income Tax

Interest on refund - Held that - The amount in question, though found refundable to the assessee, was utilized by the Department and, therefore, interest was payable under Section 244(1A) of the Income Tax Act.

Summary

Issues:
Entitlement to interest on the amount kept by Revenue from 1988 to 1991.

Analysis:
The case involved the question of whether the assessee was entitled to interest on an amount kept by the Revenue from 1988 to 1991. The respondent filed its return for Assessment Year 1987-88 and paid a sum of Rs. 3,23,68,834 based on self-assessment. The Assessing Authority found an amount of Rs. 2,03,29,841 refundable to the assessee but chose to adjust it against the demand for the previous year. The issue was whether the assessee should receive interest on this amount for the period it was held by the Revenue. The Commissioner of Income Tax (Appeals) allowed the appeal invoking Section 244(1A) of the Income Tax Act, holding that interest was payable. This decision was upheld by the Income Tax Appellate Tribunal and the High Court.

The Supreme Court, comprising A.K. Sikri and Rohinton Fali Nariman, JJ., reviewed the impugned order and found no error in it. The Court noted that the amount, although refundable to the assessee, was used by the Department, warranting the payment of interest under Section 244(1A) of the Income Tax Act. Consequently, the appeal was deemed without merit and dismissed.