2020 (1) TMI 694 - HC - Income Tax

Interest on delayed refund u/s 244A - HELD THAT - In this case, the amount paid by the petitioner s employer alone has been refunded back without interest vide 1st mentioned impugned order of the 1st respondent dated 5.10.2012. There is however no discussion as to why the interest under Section 244A was not payable to the petitioner. Honourable Supreme Court in Sandvik Asia Ltd versus Commissioner of Income Tax 2006 (1) TMI 55 - SUPREME COURT has ordered payment of interest in case of delayed payment of refund. There it was held amount paid during pendency of the appeal are to be considered as deposits and therefore they should be refunded back together with interest. Sub-clause (1) (a) to section 244 A of the Income Tax Act, 1961 permits interest on delayed payment of refund. That being the case, the petitioner is justified in asking for interest on delayed refund of tax that was paid by his employer which has been held to be not payable by the employer. Further, once there is a refund and if there is a delay, interest is payable by the employer. There is no basis for denying interest on such delayed refund of the amounts. Petitioner has made out sufficient case for interfering with the impugned orders of this Court to give a positive direction to the respondents to pay interest to the petitioner on such delayed refund of the amount.

Summary

Issues:
Tax deduction at source (TDS) on shares allotted by employer, refund of tax paid without interest, entitlement to interest under Section 244 A of the Income Tax Act, 1961.

Analysis:

The judgment dealt with the issue of tax deduction at source (TDS) on shares allotted by the employer to the petitioner. The Income Tax Appellate Tribunal, Bangalore, ruled in favor of the petitioner's employer, stating that TDS was not required on the shares allotted. This decision was upheld by the High Court and the Supreme Court. However, during this process, the employer paid a proportionate amount of tax demanded by the Income Tax Department, which was debited against the petitioner's dues.

The petitioner then filed a revised return for the assessment year 1999-2000, seeking a refund of the tax paid by the employer along with interest. The initial order for refund by the 1st respondent did not include interest. The petitioner requested a revision, citing entitlement to interest under Section 244 A of the Income Tax Act, 1961. The subsequent order also denied interest without providing any reasoning.

The petitioner argued that interest under Section 244 A was mandatory in cases of delayed tax refunds. The petitioner referred to previous court decisions where interest was granted under similar circumstances. The respondents contended that the orders were well-reasoned and should not be interfered with. They argued that the previous court decisions cited by the petitioner were not applicable to this case.

The judge considered the submissions and highlighted that the tax paid by the employer, which was later deemed non-payable, should be refunded with interest. Referring to a Supreme Court case, it was established that interest should be paid in cases of delayed refund. Section 244 A of the Income Tax Act permits interest on delayed refunds, justifying the petitioner's claim for interest. The judge concluded that the petitioner had a valid case for receiving interest on the delayed refund amount and directed the respondents to pay the interest to the petitioner.

In conclusion, the writ petition was allowed, granting relief to the petitioner and ordering the payment of interest on the delayed refund.