2019 (8) TMI 60 - HC - Income Tax

Interest on refund - Money wrongly attached and retained by the Revenue and was duly refunded - Tax recovery against Patiala Development Authority - attachment made of the amount belonging to the petitioner - HELD THAT - The arguments of the petitioner must prevail. The provision of interest in Section 244-A of the Income Tax Act would have no applicability in the present case because it is a case of illegal attachment and retention. In the written statement, the Revenue has accepted that the money was wrongly attached and retained. There can be no escape from the payment of interest. The rate of interest claimed also cannot be said to be excessive by any standards. The petition is allowed. The interest of ₹ 3.68 crores be now paid to the petitioner within two months from the date of receipt of certified copy of this order, failing which there would be further interest applicable thereafter @ 9% per annum on this amount.

Summary

Issues:
1. Petition against rejection of representation for interest for wrongful retention of amount by respondents.

Analysis:
The petitioner filed a petition against the respondents for rejecting their representation seeking interest for the wrongful retention of their amount. The facts revealed that there was a tax recovery against a different entity, Patiala Development Authority, but the attachment was made of the petitioner's amount. The petitioner challenged this attachment in the Court, and the Court held that the amount was wrongly attached, directing the Revenue to refund the same. However, the Revenue refunded the amount but rejected the petitioner's plea for interest, leading to the filing of this petition.

The petitioner claimed that they were entitled to interest for the period during which their money was wrongly retained by the Revenue. The respondents admitted that the money was wrongly attached and retained but argued that there is no provision for interest on any excess income tax recovered. The petitioner's senior counsel contended that the case was not about recovery of excess tax but about the wrongful attachment and retention of money belonging to a different person, emphasizing that this situation was not covered under the Income Tax Act, and the interest claimed was based on principles of equity and fairness.

The Court agreed with the petitioner's arguments, stating that the provision of interest under Section 244-A of the Income Tax Act did not apply in this case due to the illegal attachment and retention of the money. Since the Revenue accepted that the money was wrongly attached and retained, the Court ruled that there was no escape from the payment of interest. The Court found the rate of interest claimed by the petitioner reasonable and ordered the payment of the interest amount of ?3.68 crores within two months from the date of the order, with further interest applicable at 9% per annum if the payment was delayed beyond the stipulated period.