2024 (9) TMI 1683 - HC - Income Tax

Interest on refund - interest calculation on the refund amount - petitioner claims that the interest was required to be computed till the date of release of the payment that is, till 18.10.2019 and not 30.03.2019 - Contention that the date of grant of the interest must be construed as the interest due till the date of passing of the order and not the date on which the amount is released to the assessee, is insubstantial. The expression refund is granted would necessarily mean refund of payment of the amount. HELD THAT - It is well settled that the interest is paid to compensate the payee for time value of money. Bearing in mind the aforesaid principle, it is difficult for this Court to accept that the date on which refund is granted as used in Section 244A of the Act must be read as the date on which an order accepting the petitioner s claim for the grant of refund is passed and not the date on which the funds are released. Accepting the Revenue s contention would imply that the Revenue could pass an order for the grant of refund, which would stop the clock for the payment of interest and yet continue to withhold the amount without the payment of interest. Clearly, the said contention is unacceptable. We direct the concerned Assessing Officer to recalculate the interest till 18.10.2019 and release the said amount to the petitioner as expeditiously as possible and preferably within a period of four weeks from date. As clarified that this Court has not examined the question regarding the validity of the action to adjust the amount of refund due against the dues allegedly payable by the assessee in respect of the other AY, as the same is the subject matter in another petition. Thus, the examination in this petition is confined to the question whether interest is payable till the date of the order directing the refund of amount due or till the date of payment.

Summary

In the case before the Delhi High Court, the petitioner sought a writ of mandamus to direct the respondents to release a refund of INR 1,81,06,76,400/- along with applicable interest for the Assessment Year 2017-18. The refund amount has already been released, but the dispute remains over the interest calculation on the refund amount, which was initially computed by the respondents as INR 5,65,83,638/- up to 30.03.2019. The petitioner contends that interest should be computed until the actual date of refund payment, 18.10.2019, not the earlier date when the refund order was passed.

The court held that the term "refund is granted" under Section 244A of the Income Tax Act, 1961, should be interpreted to mean the date when the refund amount is actually paid to the assessee, not the date of the order granting the refund. The court emphasized that interest compensates for the time value of money, and accepting the respondents' interpretation would allow the Revenue to avoid paying interest while withholding the refund. Consequently, the court directed the Assessing Officer to recalculate the interest up to 18.10.2019 and release the additional amount to the petitioner within four weeks.

The court clarified that it did not address the validity of adjusting the refund against other dues, as that issue is pending in a separate petition. The decision focused solely on whether interest is payable until the refund order date or the actual payment date. The petition and any pending applications were disposed of accordingly.