1999 (9) TMI 116 - AT - Income Tax

Summary

Issues involved: The only issue in this appeal is the allowance of interest u/s 244A of the Income-tax Act, 1961 in respect of a refund arising to the assessee.

Details of the Judgment:

1. The assessee filed its return of income for the assessment year 1994-95, claiming credit for tax deducted at source and self-assessment tax. The Assessing Officer accepted the income disclosed but did not allow interest u/s 244A on the refund amount. Both the CIT(A) and the Assessing Officer upheld this decision.

2. The assessee contended that interest should be allowed as per section 244A(1)(b), which specifies the calculation of interest on refunds. The Explanation attached to this section was also discussed, emphasizing the date of payment of tax or penalty. The assessee argued that the intimation issued under section 143(1)(a) should be deemed as a notice of demand under section 156 for the purpose of claiming interest.

3. The CIT(A) held that the intimation under section 143(1)(a) cannot be equated to a notice of demand under section 156, limiting the applicability of the Explanation to section 244A(1)(b). She concluded that the assessee was not entitled to interest based on this interpretation.

4. The assessee referred to Circular No. 549 and a judgment by the ITAT, New Delhi, supporting the payment of interest on refunds. It was argued that the intimation should be deemed as a notice of demand, and failure to do so would lead to an absurd and discriminatory situation. The Tribunal agreed with the assessee's arguments and directed the Assessing Officer to pay interest u/s 244A on the refund amount.

5. The Tribunal emphasized that interest is payable to the assessee for holding excess money paid as tax. It was noted that the Government should pay interest when refunding excess amounts to the assessee, especially when the excess tax paid was not immediately required to meet the tax liability.

6. Ultimately, the Tribunal reversed the CIT(A)'s order and directed the Assessing Officer to pay interest u/s 244A to the assessee on the refund amount, considering the self-assessment tax paid by the assessee. The appeal filed by the assessee was allowed.