2025 (1) TMI 1340 - AT - Income Tax

Interest u/s 244A(1)(b) on refund arising out of self- assessment tax - scope of amendment introduced by Finance Act 2016 - there was an inordinate delay of 68 months from December 2014 to July 2020 in granting refund due to the assessee thus argued that the assessee is entitled to additional interest @3% per annum u/s 244A(1)(b) for the entire period - HELD THAT - It is seen that section 244A dealing with interest on refund was amended by the Finance Act 2016 and clause (aa) specifically providing for interest on self-assessment tax was introduced w.e.f. 01.06.2016. Thus the assessee s claim for interest on self-assessment tax is clearly covered under the provisions of clause (b) of section 244A(1). Even though the self-assessment tax was not specifically mentioned therein it has been held that the assessee is entitled to interest on refund arising out of excess amount paid as self- assessment tax. Scope of amendment introduced by Finance Act 2016 - The insertion of subsection (aa) in section 244A(1) was made by the Finance Act 2016 to clarify the intent of revenue to grant interest on self- assessment tax. The issue is also covered by the decision of Stock Holding Corporation of India Ltd. 2014 (11) TMI 899 - BOMBAY HIGH COURT . The contention of the revenue is that the decision was rendered prior to insertion of clause (aa) which was brought in with prospective effect is not acceptable. There have been numerous decisions both before and after the insertion of clause (aa) on this issue granting the assessee s claim for interest u/s 244A on excess self-assessment tax. Accordingly we hold that the assessee is entitled to interest on refund arising out of excess self-assessment tax from the date of payment of self-assessment tax till the date of grant of refund. Interest on delayed grant of refund - claim for additional interest - it is seen that there has been an inordinate delay of more than five years in giving effect to the order of Ld. CIT(A) by the AO - Since a specific provision to grant interest on delayed refunds was introduced by the Finance Act 2016 by inserting subsection (IA) in section 244 w.e.f. 01.06.2016 we are of the view that the assessee is entitled to get interest on the delayed refund from the date of introduction of this provision i.e. 01.06.2016 till the date of grant of refund. Decision of Nima Specific Family Trust 2018 (10) TMI 441 - GUJARAT HIGH COURT is squarely applicable to the facts of this case. It was held therein that the assessee would be entitled to get additional interest w.e.f. 01.06.2016 in view of the insertion of subsection (1)(A) by finance Act 2016 w.e.f. 01.06.2016 prospectively. Assessee s appeal with regard to the claim of additional interest on delay refund is partly allowed and revenue s appeal is dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the assessee is entitled to interest under section 244A(1)(b) of the Income-tax Act, 1961, on the excess payment of self-assessment tax for the assessment year 2009-10, despite the amendment introduced by Finance Act, 2016.

2. Whether the assessee is entitled to additional interest under section 244A(1A) for the delay in granting the refund due to the assessee, given that the delay occurred before the statutory introduction of this provision.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Interest on Excess Self-Assessment Tax

Relevant Legal Framework and Precedents: Section 244A of the Income-tax Act, 1961, provides for interest on refunds due to the assessee. Clause (aa) was introduced by the Finance Act, 2016, effective from 01.06.2016, specifically addressing interest on self-assessment tax. Prior to this amendment, the provision under section 244A(1)(b) covered residuary cases, including self-assessment tax.

Court's Interpretation and Reasoning: The Tribunal examined the applicability of section 244A(1)(b) before the amendment. It relied on the Bombay High Court's decision in the case of Stock Holding Corporation of India Ltd., which held that interest is payable on excess self-assessment tax from the date of payment to the date of refund.

Key Evidence and Findings: The Tribunal found that the assessee had paid excess self-assessment tax and was entitled to a refund. The amendment in 2016 was intended to clarify the revenue's intent to grant interest on such refunds.

Application of Law to Facts: The Tribunal applied the pre-amendment provisions of section 244A(1)(b) to the assessee's case, concluding that interest is due on the excess self-assessment tax for the period before the amendment.

Treatment of Competing Arguments: The revenue argued that the amendment was prospective. However, the Tribunal noted that the amendment clarified existing provisions rather than introducing a new entitlement.

Conclusions: The Tribunal concluded that the assessee is entitled to interest on the excess self-assessment tax under section 244A(1)(b) for the period before the amendment.

Issue 2: Entitlement to Additional Interest for Delay in Refund

Relevant Legal Framework and Precedents: Section 244A(1A) provides for additional interest on delayed refunds, introduced by the Finance Act, 2016, effective from 01.06.2016. The Gujarat High Court in Nima Specific Family Trust held that additional interest is applicable from the date of this amendment.

Court's Interpretation and Reasoning: The Tribunal considered the statutory provisions and the timing of the amendment. It acknowledged the significant delay in processing the refund but noted that the statutory framework for additional interest was only introduced in 2016.

Key Evidence and Findings: The Tribunal found that the refund delay exceeded five years, but the statutory provision for additional interest was not applicable before 01.06.2016.

Application of Law to Facts: The Tribunal applied the amended section 244A(1A) to the period after its introduction, granting additional interest from 01.06.2016 onward.

Treatment of Competing Arguments: The assessee argued for additional interest for the entire delay period, while the revenue contended that the provision was not retroactive. The Tribunal sided with the revenue's interpretation.

Conclusions: The Tribunal concluded that the assessee is entitled to additional interest only from 01.06.2016, the effective date of section 244A(1A).

SIGNIFICANT HOLDINGS

Core Principles Established:

The Tribunal reaffirmed that interest under section 244A(1)(b) is applicable to excess self-assessment tax payments for periods before the 2016 amendment. It also clarified that additional interest under section 244A(1A) applies prospectively from its introduction date.

Final Determinations on Each Issue:

1. The assessee's appeal regarding interest on excess self-assessment tax was allowed, affirming entitlement under section 244A(1)(b).

2. The assessee's appeal for additional interest on delayed refunds was partly allowed, granting interest only from 01.06.2016.

3. The revenue's appeal was dismissed, upholding the CIT(A)'s decision to grant interest on excess self-assessment tax under the pre-amendment provisions.