2018 (10) TMI 441 - HC - Income Tax

Undue delay in granting the refund - Credit to the refund due to the petitioner and the interest u/s 244A (1) and 244 (1A) - additional compensation due to the petitioner - Held that - As and when applicable, newly inserted subsection 1A of Section 244A provides for additional interest. The statutory provisions thus govern the situations where the interest on delayed refund would be paid as also the rate on which such interest is to be calculated. There cannot be any further direction for payment of interest over and above such statutory prescriptions. This is not a case where the principal refund is granted at one point of time, withholding the interest and the Revenue thereafter, having frozen the liability of interest seeks to avoid making any further payment of compensation on the amount of interest which remained unpaid for a long period of time. The petition is disposed of with the following observations and directions - i The petitioner would not be entitled to additional interest under subsection 1A of Section 244A of the Act during the entire period after passing of the appellate order, but would be entitled to such additional interest after introduction of the relevant statutory provisions w.e.f 1st June 2016 in terms of the observations made in this judgment. ii The petitioner cannot claim any further interest or compensation over and above the statutory interest prescribed. However, looking to long delay which has clearly remained explained in giving effect to the appellate order, the respondent shall pay cost of ₹ 1,00,000/ rupees one lakh to the petitioner. iii It is expected that the concerned Assessing Officers would pass necessary orders giving effect to the appellate or revisional orders in case of petitioner and other group entities as expeditiously as possible. We expect that the Revenue would not drive the petitioner to unnecessary litigation in this respect.

Issues Involved:
1. Delay in granting refund of excess tax.
2. Entitlement to additional interest under Section 244A(1A) of the Income Tax Act.
3. Compensation for delay in refund.
4. Systemic issues in processing refunds for the petitioner and related entities.

Detailed Analysis:

1. Delay in Granting Refund of Excess Tax:
The petitioner, a Trust, filed a return for AY 2004-2005, declaring an income of ?3,63,92,470 with a tax liability of ?50,77,588 and claimed a refund of ?31,69,265 for excess tax paid. The assessment order dated 29th December 2006 raised a tax demand of ?97,41,109, which was recovered by adjusting the refund for AY 2002-2003. The petitioner’s appeal to the Commissioner (Appeals) was substantially allowed on 5th March 2009, making the tax collected refundable. Despite the Tribunal dismissing the Department’s appeal on 30th June 2011, and no stay being granted, the refund was delayed until June 2018. The court emphasized that an order by a judicial or quasi-judicial authority must be implemented within a reasonable period, and mere pendency of an appeal without a stay does not justify delaying the implementation of the order.

2. Entitlement to Additional Interest under Section 244A(1A):
Section 244A(1A), inserted by the Finance Act, 2016 effective from 1st June 2016, mandates additional interest on refunds arising from appellate or revisional orders if the refund is delayed beyond the prescribed time. The court analyzed that the provision is remedial, intended to address delays in implementing appellate orders. However, it was concluded that this provision is not retrospective. For cases where the appellate order was passed before 1st June 2016 but the refund was delayed beyond this date, additional interest would apply from 1st June 2016 onwards, not for the entire period since the original order.

3. Compensation for Delay in Refund:
The petitioner sought compensation for the delay independent of interest under Section 244A. The court referred to the Supreme Court’s judgments in Sandvik Asia Limited and Gujarat Flourochemicals Limited, which established that while statutory interest governs delayed refunds, compensation can be awarded for inordinate delays. The court ruled that while no additional interest beyond statutory provisions is payable, the petitioner is entitled to costs due to the unexplained delay. The court ordered the respondent to pay ?1,00,000 as costs to the petitioner.

4. Systemic Issues in Processing Refunds:
The petitioner highlighted systemic delays in processing refunds for itself and related entities, arguing that the Department’s practices necessitated multiple petitions for small refund claims. The court acknowledged the issue and directed the Assessing Officers to expedite orders giving effect to appellate or revisional orders for the petitioner and related entities, to prevent unnecessary litigation.

Conclusion:
The court disposed of the petition with the following directions:
- The petitioner is entitled to additional interest under Section 244A(1A) from 1st June 2016 onwards.
- No further interest or compensation beyond statutory interest is granted, except for costs of ?1,00,000 due to the delay.
- The Department is expected to expedite the processing of appellate or revisional orders for the petitioner and related entities to avoid unnecessary litigation.

Petition is disposed of accordingly.

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