2024 (2) TMI 1335 - AT - Income Tax

Excess grant of interest contrary to the practice followed by the Department - recomputation of interest u/s 244A - As alleged CIT A directing the AO to adjust the refund granted first towards interest amount refundable and thereafter consider the balance amount of tax amount refundable - HELD THAT - CIT A by directing the AO to verify the details of tax payment submitted by the assessee and the amount of tax paid on period of tax payment to recompute the amount of interest u/s 244A of the act till date of granting of refund. He has further held that in view of the observation of the honourable Supreme Court in 2006 (1) TMI 55 - SUPREME COURT and the provisions of section 244A should be considered. Nothing was shown to us that how the learned AO is aggrieved when he is directed to recompute the interest by following the decision of the honourable Supreme Court and considering the provisions of the act. Further, coordinate bench decision has also been referred to. Section 244A of the Income Tax Act pertains to the payment of interest on refunds. It states that if the taxpayer is entitled to a refund, they shall be paid an additional interest amount as determined by the Act. According to assessee from the tax refund, nothing is to be reduced and tax and refund already determined should be reduced from interest refund, so that tax on which interest is eligible u/s 244A is always higher than the amount determined by the dl AO because tax amount eligible for interest would always be higher, resulting into higher interest out go. Therefore, we do not find any merit in the appeal of learned AO as ld. AO is directed to verify the claim of assessee in accordance with law - ground of appeal raised is that if the order of the learned CIT A is followed it will lead to excess grant of interest which is contrary to the practice followed by the Department and the intention of the legislation. We find that the practice followed by the Department should be in consonance with the provisions of the income tax act - Appeal of AO dismissed.

Summary

Issues involved:
The judgment involves the issue of adjustment of refund towards interest amount and tax amount, interpretation of Section 244A of the Income Tax Act regarding payment of interest on refunds, and the dispute between the revenue and the assessee regarding the calculation of interest under Section 244A.

Issue 1: Adjustment of refund towards interest and tax amount
The appeal was filed by the Assistant Commissioner of Income Tax against the appellate order passed by the National Faceless Appeal Centre for the assessment year 2015-16. The dispute arose when the learned CIT-A directed the AO to adjust the refund granted first towards interest amount refundable and then consider the balance amount of tax refundable. The AO contended that this adjustment would lead to an excess grant of interest contrary to the Department's practice and legislative intent.

Issue 2: Interpretation of Section 244A of the Income Tax Act
The case involved the State Bank of Bikaner and Jaipur, which later merged with the State Bank of India. The assessee claimed entitlement to interest under Section 244A, arguing that interest should be granted by first adjusting the refund towards the interest component and then towards the tax component. The learned CIT-A directed the AO to verify the tax payment details submitted by the assessee and recompute the interest under Section 244A until the date of granting the refund.

Issue 3: Dispute over calculation of interest under Section 244A
The revenue contended that taxes already refunded should be reduced from the tax amount eligible for interest under Section 244A. In contrast, the assessee argued that tax refunds should not be reduced from the tax amount eligible for interest, resulting in a higher interest payout. The Tribunal found no merit in the AO's appeal, as the AO was directed to verify the assessee's claim in accordance with the law and the Department's practice should align with the provisions of the Income Tax Act.

The judgment dismissed the appeal of the learned Assessing Officer, emphasizing the need for the Department's practice to be consistent with the statutory provisions.