2005 (12) TMI 59 - HC - Income Tax

Claim for interest on the amount of refund due to the petitioner under section 244 - It is not in dispute that the petitioner has made requests for payment of interest by means of repeated applications/representations. The petitioner has been deprived of his legitimate claim of interest and was obliged to approach this court by means of the present writ petition. In this view of the matter the petitioner is also entitled interest on the interest amount which was illegally denied by the respondents at 12 per cent per annum as payable on the date of the refund i.e. May 5, 1980 on this date cheque for Rs. 31, 060 was given to the petitioner till the date of actual payment

Issues Involved:
1. Claim of interest on the amount of refund under section 244 of the Income-tax Act.
2. Validity of the order dated November 9, 1989, by the Commissioner of Income-tax denying interest on the refund amount.
3. Applicability of sections 132B(4) and 244 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Claim of interest on the amount of refund under section 244 of the Income-tax Act:
The petitioner sought interest on the refund amount from January 31, 1977, to May 5, 1980, under section 244 of the Income-tax Act. The petitioner argued that the interest should be granted for the period after the completion of the regular assessment order and until the date of the refund. The petitioner cited the judgment in Anilkumar D. Gajjar v. CIT [1996] 220 ITR 470 (Guj) to support the claim.

2. Validity of the order dated November 9, 1989, by the Commissioner of Income-tax denying interest on the refund amount:
The Commissioner of Income-tax, in the order dated November 9, 1989, rejected the claim for interest, stating that special provisions under section 132B for dealing with seized cash and payment of refund and interest exclude the applicability of the general provisions under section 244. The petitioner challenged this order, arguing that sections 132B(4) and 244 operate in different fields and there is no overlap between them.

3. Applicability of sections 132B(4) and 244 of the Income-tax Act:
The court examined the provisions of sections 132B(4) and 244. Section 132B(4) deals with the interest payable by the Central Government up to the date prior to the framing of the assessment or reassessment order. Section 244 deals with the interest payable for the period after the completion of the assessment/reassessment order. The court found that these sections relate to different periods and do not overlap.

The court noted that section 132B(3) mandates that any surplus assets after discharging liabilities should be released "forthwith" to the person from whose custody they were seized. The legislative intent is clear that retention of assets after discharging liabilities is not sanctioned by law.

The court concluded that the petitioner is entitled to interest under section 244 for the period from April 1, 1978, to the date of actual payment of the excess/refund amount. The petitioner had made repeated requests for payment of interest, and the delay in refunding the excess amount was unjustified.

The court quashed para. 2(ii) of the order dated November 9, 1989, by the Commissioner of Income-tax, Allahabad, and allowed the writ petition. The petitioner was also entitled to interest on the interest amount, which was illegally denied, at 12 percent per annum from the date of the refund (May 5, 1980) until the date of actual payment.

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