2024 (6) TMI 567 - AT - Income Tax

Denial of interest on the delayed refund of Dividend Distribution Tax (DDT) - Rectification application rejected arguing that the issue was debatable and not a clear mistake - HELD THAT - It is evident from the order of the lower authorities that they seem to be more concerned about the rectification of the order and has spoken less about the entitlement of assessee to the interest on refund. Both Ld. AO and Ld. CIT(A) seems to have misinterpreted the provision of section 244A(1) which is the only provision applicable in case of the assessee and there is no requirement of applicability of subsequent part of section 244A. The subsequent part of the section has been wrongly applied by the Ld. lower authority on the wrong presumption that in the case of assessee no notice under section 156 was issued. The finding recorded by the Ld. Coordinate Bench in ITC Ltd. Vs. Commissioner of Income Tax, Kolkata 2016 (3) TMI 1005 - ITAT KOLKATA perfectly covers the facts and circumstances of this case wherein as relied the case of Supreme Court of India in Union of India Vs. Tata Chemicals Ltd. 2014 (3) TMI 610 - SUPREME COURT stating that the Interest payment is a statutory obligation and non-discretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244A is drafted and enacted. The language employed in Section 244A of the Act is clear and plain. It grants substantive right of interest and is not procedural. Thus we are of the considered opinions that Lower authority has committed illegality and perversity while denying the interest on the DDT refund amount and the impugned order is not legally sustainable in the eyes of law and accordingly set aside. We therefore accordingly hold that the appellant/assessee is very much entitled to payment of interest on the already ordered DDT refund from the date of payment of excess tax/additional tax till the payment of interest in pursuance of this order. Assessee appeal allowed.

Summary

Issues Involved:
1. Non-grant of Interest u/s 244A on Dividend Distribution Tax (DDT) refund.
2. Grant of interest on the principle of fairness and natural justice.

Summary:

Non-grant of Interest u/s 244A on DDT Refund:

The appellant/assessee challenged the order dated 13.09.2023 by the CIT(A), NFAC, which upheld the AO's decision not to grant interest u/s 244A on the DDT refund of Rs. 2,70,86,631/-. The AO had issued the refund without interest, claiming no provision under section 244A for such interest. The CIT(A) dismissed the appeal, holding that the issue of interest on DDT refund is debatable and not a mistake apparent from the record, thus not rectifiable u/s 154.

Grant of Interest on the Principle of Fairness and Natural Justice:

The appellant argued that the interest on DDT refund should be granted based on fairness and natural justice, as the delay was not attributable to the appellant. The CIT(A) and AO both rejected this claim, stating that DDT is an additional tax and not covered under section 244A for interest on refunds.

Judgment:

The ITAT examined the provisions of section 244A and relevant case laws, including the Supreme Court's decision in Union of India v. Tata Chemicals Ltd., which held that interest on refunds is a statutory obligation. The ITAT found that the lower authorities misinterpreted section 244A and wrongly applied the requirement of a demand notice u/s 156, which is not applicable in the case of DDT.

The ITAT concluded that the appellant is entitled to interest on the DDT refund from the date of payment of excess tax until the refund is granted. The appeal was allowed, and the orders of the lower authorities were set aside.

Order:

The appeal filed by the assessee is allowed, and the appellant is entitled to interest on the DDT refund of Rs. 2,70,86,631/- as per section 244A. The decision on ground no. 3 is rendered insignificant and disposed of accordingly. The order was pronounced in the open court on 27.05.2024.