2024 (10) TMI 539 - AT - Income Tax

Non granting interest u/s 244A on excess self-assessment tax from January 2017 to October 2017 - Claim denied for the reason that the refund of self-assessment tax was found to be less than 10% of the tax determined in regular assessment u/s 143(3) - Assessee argued this self-assessment tax paid by the assessee had been adjusted against the demand raised on account of assessment framed on the assessee, accordingly the self-assessment tax had lost its character - HELD THAT - We are in agreement with the assessee that it is entitled to interest on refund of self-assessment tax. Considering the decision of AWP Assistance (I) Pvt. Ltd 2021 (4) TMI 397 - ITAT DELHI it is evident that self-assessment tax paid by the assessee losses its character as self-assessment tax once it got adjusted against the tax liability determined in regular assessment. Therefore, this tax paid by the assessee no longer retained its character of self-assessment tax and was not covered under sub-clause (aa) of Section 244A(1) of the Act. We agree with assessee that after adjustment of the self-assessment tax against the taxes determined to be paid by the assessee on regular assessment, the refund of this tax fell in the category of other taxes under sub-clause (b) of Section 244(A)(1) of the Act and therefore, was not hit by the proviso which applied to only clause (aa) of Section 244A(1) of the Act denying grant of interest on refund where the refund was below 10% of the tax determined to be paid by the assessee. Thus, assessee is entitled to interest on refund of self-assessment tax for the period from January 2017 to October 2017. Ground of appeal raised by the assessee is accordingly allowed.

Issues Involved:

1. Entitlement of the assessee to interest on the refund of self-assessment tax under Section 244A of the Income-tax Act, 1961.
2. Interpretation of the proviso to Section 244A(1)(aa) regarding the threshold of 10% for interest eligibility on tax refunds.

Detailed Analysis:

1. Entitlement to Interest on Refund of Self-Assessment Tax:

The primary issue in this case was whether the assessee was entitled to receive interest on the refund of self-assessment tax paid under Section 140A of the Income-tax Act, 1961. The assessee argued that the self-assessment tax, once adjusted against the tax liability determined in regular assessment, loses its character as self-assessment tax and should be treated as tax paid in pursuance of an assessment. The assessee relied on the decision of the ITAT, Delhi Bench in the case of AWP Assistance (I) Pvt. Ltd., which held that self-assessment tax, after adjustment, becomes tax paid in pursuance of the liability and is eligible for interest under Section 244A(1)(b) of the Act.

The Tribunal agreed with the assessee's contention, stating that the self-assessment tax paid by the assessee no longer retained its character as self-assessment tax once it was adjusted against the tax liability determined in regular assessment. Consequently, the refund of this tax fell under the category of "other taxes" as per sub-clause (b) of Section 244A(1) and was not subject to the proviso of sub-clause (aa) which denies interest if the refund is less than 10% of the tax determined. Therefore, the Tribunal held that the assessee was entitled to interest on the refund of self-assessment tax for the period from January 2017 to October 2017.

2. Interpretation of the Proviso to Section 244A(1)(aa):

The Revenue authorities, including the Assessing Officer and the CIT(A), denied the interest on the refund of self-assessment tax based on the proviso to Section 244A(1)(aa), which states that no interest shall be payable if the refund amount is less than 10% of the tax determined under Section 143(1) or on regular assessment. The CIT(A) upheld this view, stating that the self-assessment tax paid was only 1.19% of the tax payable, and thus, the proviso applied, denying the interest.

However, the Tribunal found that this interpretation was not applicable in the present case. It was noted that the self-assessment tax, once adjusted against the tax liability, should be treated as tax paid in pursuance of the assessment and not as self-assessment tax. Therefore, the proviso to Section 244A(1)(aa) did not apply, as the refund fell under the purview of Section 244A(1)(b), which does not have a similar proviso. The Tribunal concluded that the assessee was entitled to interest on the refund of self-assessment tax, as the proviso restricting interest for refunds below 10% did not apply to the case at hand.

Conclusion:

The Tribunal allowed the appeal of the assessee, granting interest on the refund of self-assessment tax for the specified period, by interpreting the relevant provisions of Section 244A in favor of the assessee. The decision emphasized the transformation of self-assessment tax into tax paid in pursuance of an assessment upon adjustment, thereby entitling the assessee to interest on the refund under Section 244A(1)(b).

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