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2021 (4) TMI 752 - HC - Income TaxInterest on interest u/s 244A - Whether Tribunal was right in its conclusion that the department should pay interest on interest especially when there was no inordinate delay in the payment of refund? - HELD THAT - As following the judgments of the Hon'ble Supreme Court reported in 2013 (10) TMI 117 - SUPREME COURT (SC) and 2009 (12) TMI 35 - SUPREME COURT (SC), the Hon'ble Division Bench of Delhi High Court in CIT Vs. Indian Farmer Fertilizer Co-operative 2015 (3) TMI 280 - DELHI HIGH COURT held that to the extent it directs payment of any sum over and above interest payable under Section 244A(1) to the assessee cannot be upheld. Following the ratio laid down by the Apex Court and the Delhi High Court, the substantial questions of law are decided in favour of the appellant - Revenue and the order passed by the Income Tax Appellate Tribunal is set aside and the matter is remitted back to the Assessing Officer for fresh consideration. The Assessing Officer is directed to decide the matter afresh, following the ratio laid down by the Hon'ble Supreme Court of India in the judgments reported in CIT Vs. Gujarat Fluoro Chemicals 2013 (10) TMI 117 - SUPREME COURT AND CIT Vs. H.E.G. Ltd. 2009 (12) TMI 35 - SUPREME COURT and pass orders after giving notice to the assessee.
Issues:
1. Interpretation of Section 244A - entitlement to interest on interest 2. Legitimacy of interest payment by the department when there is no inordinate delay in refund Analysis: 1. The appeal challenged the order regarding the assessment year 1997-98, where the Income Tax Appellate Tribunal allowed the refund but denied interest under Section 244A with interest on interest. The Commissioner of Income Tax (Appeals) followed the judgment of Sandvik Asia Limited and granted the relief sought by the assessee. The Revenue then appealed to the Income Tax Appellate Tribunal, which dismissed the appeal based on a different judgment. The substantial questions of law admitted for consideration were related to the entitlement of interest on interest under Section 244A and the legitimacy of interest payment by the department in the absence of significant delay in refund. 2. The appellant, representing the Revenue, argued that as per the Supreme Court judgments in various cases, including CIT Vs. Gujarat Fluoro Chemicals and CIT Vs. H.E.G. Ltd., only interest can be claimed by an assessee for delayed payment, and no interest on such statutory interest is payable. Referring to the Delhi High Court case of CIT Vs. Indian Farmer Fertilizer Co-operative, it was highlighted that any sum over and above the interest payable under Section 244A to the assessee cannot be upheld. The Court emphasized that the judgments of the Supreme Court and the Delhi High Court are binding, and the law declared in these cases permits no deviation. 3. The Court examined the relevant provisions of Section 244A of the Income Tax Act and the interpretations provided by the Supreme Court in past judgments. It was noted that the Supreme Court decisions clarified that interest on delayed payment can only be claimed by the assessee, and no additional interest on such statutory interest is payable. The Court found that the substantial questions of law raised in the appeal were adequately covered by the decisions of the Supreme Court and the Delhi High Court. Consequently, the Court set aside the order of the Income Tax Appellate Tribunal and remitted the matter back to the Assessing Officer for fresh consideration, directing the Officer to follow the rulings of the Supreme Court in the mentioned cases and pass orders after giving notice to the assessee. In conclusion, the Tax Case Appeal was allowed in favor of the Revenue, with the matter being sent back to the Assessing Officer for reconsideration in line with the interpretations provided by the Supreme Court and the Delhi High Court.
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