2024 (5) TMI 701 - HC - Income Tax

Interest payable to petitioner u/s 244A - Failure on the part of AO to comply with the decisions / principles given by the ITAT and High Court - HELD THAT - As decided in TATA COMMUNICATIONS LIMITED case 2019 (7) TMI 32 - BOMBAY HIGH COURT AO was required to compute the interest under section 244A of the Act following the principles laid down in case of India Trade Promotion Organisation 2013 (9) TMI 451 - DELHI HIGH COURT It was not open for the Assessing Officer thereafter to dissect the ratio of the decision of the Delhi High court in case of India Trade Promotion Organisation and came to the conclusion that further interest under Section 244A is not payable. His role was limited to giving effect to the directions of the Tribunal. The question whether the interest is or is not payable was already decided by the Tribunal. We are satisfied that it has not been passed by applying the principles laid down in the case of India Trade Promotion Organisation V/s. 2013 (9) TMI 451 - DELHI HIGH COURT Therefore we hereby quash and set aside the order dated 26th August 2019. The matter is remanded to an AO who shall compute interest payable to petitioner u/s 244A of the Income Tax Act 1961 by strictly applying the principles laid down in India Trade Promotion Organisation 2013 (9) TMI 451 - DELHI HIGH COURT as directed by ITAT and by this Court. Therefore though one may call it as interest on interest in reality payment of interest on the unpaid amount occurs because of non-payment of the total amount refundable which is due and payable to the assessee consisting of the tax which had to be refunded and the interest accrued on the delayed refund of the tax. The principal amount and the interest due to be added and treated as primary amount and interest becomes due and payable on this primary amount. It will be incorrect to treat it as compounding of interest. If this interpretation or approach is taken it would ensure that the AO/Revenue refund the entire amount which is due and payable including interest payable u/s 244A.

Summary

Issues involved:
The issues in this judgment involve the disobedience of orders/directions by an Assessing Officer, computation of interest payable under Section 244A of the Income Tax Act, 1961, and the application of principles laid down by the Delhi High Court in the case of India Trade Promotion Organisation.

Writ Petition No. 3890 of 2021:
The High Court noted that the Assessing Officer, Mr. Rahul Singhania, disobeyed orders/directions of ITAT and the Court by exceeding his brief in computing interest under Section 244A. The Court set aside the impugned order and directed the Officer to compute interest by applying the principles laid down by the Delhi High Court in the India Trade Promotion Organisation case. The Court clarified that interest payable would be subject to the outcome of the pending Income Tax Appeal assessment order.

Income Tax Appeal No. 650 of 2019:
The appeal was dismissed as withdrawn due to a procedural error, with the appellant seeking leave to file a Writ Petition instead, as per a previous judgment. The appellant was granted liberty to file the Writ Petition within three weeks.

The Court emphasized that the interest payable under Section 244A becomes due and payable when the refund is issued, and the Revenue is required to pay interest on the total amount refundable, including the interest accrued. It clarified that this does not constitute interest on interest but rather ensures that the entire amount due to the assessee is refunded, discouraging part payments. The Court referred to a Supreme Court decision in HEG Limited, which supported the assessee's entitlement to interest on the principal amount not paid for a certain period.

The Court directed the Assessing Officer to complete the computation exercise by a specified date and assigned the matter to an officer other than Mr. Rahul Singhania, who repeatedly flouted directions. The Court also allowed the petitioner to assist the assigned officer with prior notice.