2024 (5) TMI 87 - AT - Income Tax

Interest u/s. 244A - interest on unpaid interest - refund awarded in the order u/s. 154 - assessee was originally granted the refund with no interest given because the refund was less than 10% of the total tax liability and only in the rectification order that the refund of tax component was given. HELD THAT - We notice that assessee s case falls under the category of sec. 244A(1)(a)(i) of the Act because the refund order to the assessee is out of the tax deducted at source upto 31.03.2017 and the assessee had furnished its original return u/s 139(1). Even though the assessee has revised the return but for the purpose of calculating interest, assessee s return shall always be treated to be filed u/s. 139(1) of the Act. Though the refund in the present case has been awarded in the order u/s. 154 of the Act but even section 154 is also forming part of the fleet of other sections mentioned in sec. 244A(3) of the Act and that comes into action when a refund has already been granted but subsequent to the rectification order, the refund is increased or decreased then the interest given earlier also needs to be increased or decreased. However, in the instant case when the assessee was originally granted the refund no interest was given because the refund was less than 10% of the total tax liability. It was only in the rectification order dated 12.07.2022 that the refund of tax component was given. After considering the facts and circumstances of the case, and also considering the set off of MAT credit available with the assessee as on the beginning of the assessment year, we find sufficient merit in the contentions of assessee that the interest u/s. 244A of the Act in the case of the for AY 2017-18 needs to be computed from 01.04.2017 to the date of grant of refund. Accordingly, the effective issue raised in the instant appeal is allowed. Thus we hold that the assessee indeed is entitled for interest on unpaid interest and accordingly all the grounds raised by the assessee in this regard are allowed.

Summary

Issues Involved:
1. Entitlement to interest u/s 244A of the Income Tax Act, 1961.
2. Calculation period for interest u/s 244A.

Summary:

Issue 1: Entitlement to Interest u/s 244A

The appellant, a limited company, challenged the order passed u/s 250 of the Income Tax Act, 1961 by the Ld. CIT(A) which denied interest u/s 244A on the refund issued. The appellant argued that the Ld. CIT(A) erred in not granting interest u/s 244A and misinterpreted the provisions of the Act. The appellant contended that the issue was specifically raised in the rectification application filed u/s 154 and thus should be adjudicated.

Issue 2: Calculation Period for Interest u/s 244A

The appellant claimed that the interest should be calculated from 1st April 2017, as the refund was due from that date. The Ld. AO had only provided interest for five months, arguing that the refund claim increased due to the set-off of MAT credit u/s 115JJAA made on 06.06.2022. The Tribunal noted that the appellant had claimed TDS credit in the original return filed on 29.11.2017 and revised it on 30.03.2019. The Tribunal found merit in the appellant's contention that interest u/s 244A should be calculated from 01.04.2017, as the refund was out of tax deducted at source and the original return was filed u/s 139(1).

Conclusion:

The Tribunal concluded that the appellant is entitled to interest u/s 244A from 01.04.2017 to the date of the refund. The Tribunal's decision was supported by various judgments, including UOI Vs. Tata Chemicals ltd., CIT Vs. Birla Corporation ltd., and others. Consequently, the appeal was allowed, directing the AO to re-compute and grant interest accordingly.

Result:

Appeal allowed. The appellant is entitled to interest u/s 244A from 01.04.2017 to the date of refund.

Order Pronounced:

Order pronounced in the open court on 29th April, 2024.