2018 (12) TMI 694 - HC - Income Tax

Interest on interest with respect to the refund - ITAT allowed the claim of assessee - Held that - As decided in Gujarat Fluoro Chemicals (2013 (10) TMI 117 - SUPREME COURT) held it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest. The clarification has put it in the proper perspective and the facts in the present case do not commend such a drastic measure of interest on interest. We, hence, allow the appeals and set aside the order of the Tribunal on the sole issue of grant of interest on interest on the refunds and answer the question of law in favour of the Revenue and against the assessee.

Summary

Issues involved:
1. Granting interest on interest with respect to the refund for various periods.
2. Interpretation of the decision in Sandvik Asia Ltd. v. CIT and Commissioner of Income-tax v. Gujarat Fluoro Chemicals.
3. Claiming interest on interest by the assessee.
4. Applicability of the decision in Gujarat Fluoro Chemicals to the present case.

Analysis:
1. The judgment dealt with the question of whether the Tribunal was correct in granting interest on interest concerning the refund for different periods. The assessee, State Bank of Travancore, sought interest on interest based on the decision in Sandvik Asia Ltd. v. CIT. However, a later three-Judge Bench decision in Commissioner of Income-tax v. Gujarat Fluoro Chemicals clarified the position on such claims.

2. The Court noted that the Gujarat Fluoro Chemicals decision addressed the issue of compensating an assessee for delays in refund payments, emphasizing that it did not warrant interest on interest. The Court highlighted the inordinate delay in the Sandvik case, leading to the compensation directive, which was distinct from granting interest on interest.

3. In assessing the present case for assessment years 1989-90, 1990-91, 1991-92, 1995-96, 1997-98, and 2001-02, the Court observed that the statutory proceedings had been completed, resulting in refunds to the assessee with interest. Despite the assessee's claim for interest on interest, the Court found that the facts did not align with the circumstances necessitating such an exceptional measure.

4. Ultimately, the Court allowed the appeals, overturning the Tribunal's decision to grant interest on interest for the refunds. The judgment favored the Revenue and rejected the assessee's claim, citing the Gujarat Fluoro Chemicals decision as the guiding precedent. The parties were directed to bear their respective costs, concluding the matter in favor of the Revenue.