2023 (12) TMI 875 - AT - Income Tax

Adjustment of refund for arriving at interest - calculation of interest u/s 244A is the way in which the AO has adjusted the refunds issued - AR submitted that where the refunds have been issued in parts, the AO while adjusting the refund issued earlier has erred in apportioning amount of earlier refund towards the principal and interest component determined then i.e. without considering the present relief - AO has reduced interest only to the extent it was determined at the point of issuance of the earlier refunds, thus, leading to larger adjustment of the refund towards the tax component as against the interest component - HELD THAT - Amount of interest u/s. 244A is to be calculated by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component. Therefore we hold that the manner in which the assessing officer has adjusted the refund is not correct and that the assessee would be entitled for interest on the unpaid refunds in accordance with the principle laid out in the aforesaid decision of Tribunal. AR during the course of hearing submitted a detailed working of the manner in which the AO has calculated the interest and also the correct way in which the same is to be calculated - Accordingly the assessing officer is directed to compute interest u/s 244A as per the claim of the assessee after giving a proper opportunity of being heard. Thus as relying on Pfizer Limited 1991 (3) TMI 121 - BOMBAY HIGH COURT as well as the decision of CIT vs. K.E.C International 2005 (7) TMI 733 - BOMBAY HIGH COURT assessee is justified in seeking interest u/s 244A of the Act upto the date of receipt of the refund order, i.e. 18.08.2022. Accordingly the AO is directed to re-calculate the interest up to the date of actual receipt of refund by the assessee. Interest calculation is that additional interest u/s. 244A(1A) to be calculated on the total amount of refund including Interest - The provisions of sub-section (1A) to section 244A are inserted by the Finance Act, 2016 as a remedial measure to compensate the assessee in cases where there are delays in granting refunds due on account of delay in passing order giving effect to appellate or revisional orders. Applying the ratio laid down in the case of Bharat Petroleum Corporation Ltd 2021 (7) TMI 215 - ITAT MUMBAI we are of the considered view that the provisions of section 244A(1A) would be applicable in assessee's case from 01.06.2016 till the date of actual receipt of refund and accordingly we remit the issue back to the AO to examine the issue afresh and calculate the additional interest under section 244A(1A) in accordance with law.

Summary

Issues Involved:
1. Incorrect adjustment of earlier refunds.
2. Calculation of interest for the interim period.
3. Calculation of interest under section 244A(1A).
4. Grant of interest on interest due to inordinate delay.
5. Remanding the matter to the Assessing Officer.

Summary:

1. Incorrect Adjustment of Earlier Refunds:
The assessee contended that the Assessing Officer (AO) erred in adjusting earlier refunds without considering the present relief, leading to a larger adjustment of the refund towards the tax component instead of the interest component. The Tribunal referred to the principle of equity and the decision in Union Bank of India v/s ACIT, emphasizing that the AO should first adjust the refund towards the interest component and then the tax component. The Tribunal directed the AO to compute the correct amount of interest under section 244A as per the assessee's claim after giving a proper opportunity of being heard.

2. Calculation of Interest for the Interim Period:
The assessee argued that the AO did not calculate interest for the period from the date the order giving effect (OGE) was passed (08.03.2016) to the actual receipt of the refund (18.08.2022). The Tribunal, following precedents from the Hon'ble Bombay High Court and other cases, directed the AO to re-calculate the interest up to the date of actual receipt of the refund by the assessee.

3. Calculation of Interest under Section 244A(1A):
The assessee claimed additional interest under section 244A(1A) due to the delay in granting the refund. The Tribunal noted that the provisions of section 244A(1A) apply prospectively from 01.06.2016 and directed the AO to examine the issue afresh and calculate the additional interest accordingly, referencing the decision in Bharat Petroleum Corporation Ltd.

4. Grant of Interest on Interest Due to Inordinate Delay:
The Tribunal did not specifically address this issue in the summary provided, as it was intertwined with the other issues regarding the calculation and adjustment of interest.

5. Remanding the Matter to the Assessing Officer:
The Tribunal did not adjudicate on the issue of remanding the matter to the AO, as no arguments were presented by the assessee's representative regarding this ground.

Conclusion:
The appeal of the assessee was partly allowed, with directions to the AO to re-calculate the interest and additional interest as per the Tribunal's findings and the principles laid out in relevant judicial precedents. The order was pronounced in the open court on 06-12-2023.