2005 (11) TMI 35 - HC - Income Tax

Interest on the refund - (i) Whether the expression the date on which the refund is granted in clause (a) of sub-section (1) of section 244A, as was applicable in the relevant assessment year, in the facts and circumstances of the case, need to be construed to be the date of service of the refund order and the Tribunal acted contrary to law in modifying the order of the Commissioner of Income-tax (Appeals)? (ii) Whether the belated despatch of refund order is against the legislative intendment as contemplated under section 244A, and entitles the assessee for interest on the refund amount u/s 244A and also on equitable consideration till the date of service of refund order? - In clause (a) the words have been used refund is granted . Refund is granted the moment the concerned officer has signed the order regarding payment of the interest under section 244A. We see no error in the order of the Tribunal.

Summary

Issues:
1. Interpretation of the expression 'the date on which the refund is granted' in section 244A.
2. Determining the period for granting interest on a refund under section 244A.

Analysis:
The appeal in this case revolves around the interpretation of the expression 'the date on which the refund is granted' in section 244A of the Income-tax Act. The appellant questions whether this expression should be construed as the date of service of the refund order or the date when the order of the Commissioner of Income-tax (Appeals) is modified by the Tribunal. The crux of the matter lies in whether the interest on the refund should be granted until the despatch of the refund order or until the signing of the order regarding payment of interest. The relevant provision in question is clause (a) of sub-section (1) of section 244A, which specifies the calculation of interest on refunds. The clause mentions that interest shall be calculated from the 1st day of April of the assessment year to the date on which the refund is granted. The contention arises from the interpretation of the phrase 'refund is granted,' which, as per the court, occurs when the concerned officer signs the order for payment of interest under section 244A.

The court opines that the words 'refund is granted' in clause (a) of section 244A refer to the moment when the officer signs the order for payment of interest. Therefore, the interest on the refund should be calculated until the date when the order regarding payment of interest is signed, rather than the date of despatch of the refund order. The court finds no error in the Tribunal's decision regarding this matter and dismisses the appeal at the admission stage. The judgment clarifies the interpretation of the relevant provision and settles the controversy regarding the period for granting interest on refunds under section 244A of the Income-tax Act.