1983 (10) TMI 100 - AT - Income Tax

Summary

Issues:
1. Interpretation of sections 240 and 244 of the Income-tax Act, 1961 regarding payment of interest on refundable amounts.
2. Whether interest under section 220(2) should be paid under section 244(2) of the Act.
3. Application of section 244(1) in the context of refunds due to an assessee.

Detailed Analysis:
1. The judgment of the Appellate Tribunal ITAT Cochin dealt with appeals by the revenue for the assessment years 1961-62 to 1963-64, raising a common point regarding the payment of interest under sections 240 and 244 of the Income-tax Act, 1961. The issue revolved around whether interest should be paid under section 244(2) on the amount of interest under section 220(2) collected and later deemed refundable. The contention was that the Assistant Commissioner of Income Tax (AAC) erred in his decision related to the interest under section 220(2) becoming due to the assessee as a result of a Supreme Court order under section 263 of the Act.

2. The revenue argued that interest is not charged on the amount of interest under section 220(2) if it becomes due but remains unpaid, and the same principle should apply to the refund of interest collected earlier under section 220(2). It was highlighted that section 244(1A) of the Act only refers to tax and penalty, omitting any mention of interest. Conversely, the assessee contended that the language of section 244 is clear and inclusive, encompassing any amount due to an assessee as per section 240, which would include interest under section 220(2). The absence of an express prohibition against paying interest on such amounts under section 244(1) supported the assessee's position.

3. The Tribunal upheld the AAC's decision, emphasizing that section 240 authorizes the refund of "any amount" due to an assessee following an order passed in appeal or other proceedings under the Act. Section 244(1) stipulates the payment of interest by the Central Government to the assessee when a refund is due pursuant to an order mentioned in section 240. Notably, there is no prohibition within the provision against paying interest on interest collected under section 220(2. The Tribunal reasoned that the refund of interest under section 220(2) is an amount falling within the ambit of section 240, making it eligible for the interest outlined in section 244(1). The appeals by the revenue were ultimately dismissed, affirming the decision in favor of the assessee.