2020 (12) TMI 733 - HC - Income Tax

Grant of interest on refund of amount to the assessee u/s 244A - Interest u/s 220(2) - HELD THAT - The levy of interest under Section 220(2) of the Act is prescribed by the statute. When stay is granted to a party, it is always subject to a statutory provision and it is well settled in law that mere grant of stay does not prevent the running of the interest. Therefore, the finding recorded by the Commissioner as well as the Tribunal that the interest under Section 220(2) of the Act is not chargeable during the period of stay is perverse as the interest is mandatorily leviable under Section 220(2) of the Act.

Summary

Issues:
- Appeal under Section 260-A of the Income Tax Act, 1961 regarding interest under sections 234C and 220(2) of the Act.

Analysis:
1. Interest under Section 234C of the Act:
- The case involved an appeal regarding the deletion of interest under section 234C of the Income Tax Act. The Tribunal had deleted the interest, which was calculated during the processing of the return under section 143(1) of the Act. The issue was whether this deletion was justified.
- The Commissioner of Income Tax (Appeals) held that the interest under section 234C could not have been levied. The Tribunal also upheld this decision. The revenue challenged this before the High Court.
- The High Court did not address this issue specifically as the revenue chose not to press this substantial question of law. Therefore, the matter regarding interest under section 234C remained unresolved in this judgment.

2. Interest under Section 220(2) of the Act:
- The main issue in this case was the levy of interest under section 220(2) of the Act during the period of stay granted by the Assessing Officer. The Tribunal had held that the interest was not chargeable during the stay, contrary to the provisions of the Act.
- The Commissioner of Income Tax (Appeals) partially allowed the appeal, stating that the short period covered by the stay did not fall within the period for which interest was levied. The revenue appealed this decision before the Tribunal, which upheld the order of the Commissioner.
- The High Court analyzed the statutory provisions and legal principles, concluding that the interest under section 220(2) is mandatorily leviable even during the period of stay. The Court held that the mere grant of stay does not prevent the accrual of interest as prescribed by the statute.
- Consequently, the High Court answered the second substantial question of law in favor of the revenue and against the assessee, partially allowing the appeal on this ground.

In conclusion, the judgment primarily focused on the issue of interest under section 220(2) of the Income Tax Act, emphasizing the mandatory nature of the levy even during a period of stay. The High Court's decision provided clarity on this aspect of the law, overturning the Tribunal's ruling and ruling in favor of the revenue on this particular issue.