1994 (8) TMI 64 - AT - Income Tax

Summary

Issues:
Entitlement to interest under section 244(1A) of the Income-tax Act, 1961 on the interest paid by the assessee under section 220(2) of the Act which was ultimately refunded.

Analysis:
The judgment by the Appellate Tribunal ITAT Chandigarh delves into the issue of whether the assessee was entitled to interest under section 244(1A) of the Income-tax Act, 1961 on the interest paid under section 220(2) of the Act, which was later refunded. The Assessing Officer had computed the total income at nil for the assessment year 1980-81, resulting in a refundable amount to the assessee. The Assessing Officer calculated interest under section 244(1A) on the tax paid by the assessee, but did not allow interest on the interest paid under section 220(2) of the Act. The assessee appealed to the CIT(A) who dismissed the appeal, leading the assessee to approach the Tribunal for relief.

The assessee contended that interest under section 244(1A) should be allowed on the interest amount refunded, citing various decisions to support their claim. The Tribunal carefully analyzed the decisions referred to by the assessee, including cases from Gujarat, Madhya Pradesh, and Kerala High Courts. The Tribunal highlighted that the decisions cited by the assessee were related to interest on tax or penalty refunds, not specifically on interest paid under section 220(2) of the Act. The Tribunal emphasized the distinction between tax, penalty, and interest under the Income-tax Act, supported by legal provisions and past judgments.

The Tribunal further examined the provisions of section 244(1A) and noted that interest under this section is allowable only on the excess payment of tax or penalty, not on interest paid. The Tribunal pointed out that the legislature had explicitly outlined the conditions for granting interest under section 244(1A) and that there was no provision to pay interest on interest. Referring to the first proviso to section 220(2), the Tribunal highlighted that it did not provide for interest on interest. Therefore, the Tribunal concluded that no interest under section 244(1A) was allowable on the interest paid under section 220(2) that was later found refundable.

In conclusion, the Tribunal upheld the impugned order and dismissed the assessee's appeal, ruling that interest under section 244(1A) was not applicable to the interest amount refunded under section 220(2) of the Act.