2012 (9) TMI 725 - AT - Income Tax

Denial of interest u/s. 244A - no interest on the refund of self assessment tax - rectification application u/s. 154 withdrawing interest granted u/s 244A - Held that - As decided in CIT vs. Ashok Leyland Ltd. 2001 (10) TMI 71 - MADRAS HIGH COURT it is trite of law that wherever the assessee is entitled to refund, there is a statutory liability on the Revenue to pay interest on general principles on general principles on sums wrongfully retained. As decided in CIT vs. Gujarat State Warehousing Corporation 2001 (8) TMI 24 - GUJARAT HIGH COURT assessee is entitled to interest u/s. 244A (1A) payment of tax made u/s. 140A and as in the present case undisputedly, the refund is on account of self assessment tax made u/s. 140A ssessee is entitled to interest u/s. 244A - in favour of assessee.

Summary

Issues:
- Denial of interest u/s. 244A of the I.T. Act on refund of self-assessment tax.

Analysis:
1. The appellant filed an appeal against the order of Ld. CIT (A)- III, Baroda for the Assessment Year 1997-98, specifically challenging the denial of interest u/s. 244A of the I.T. Act.

2. The dispute centered around the rectification order u/s.154, where the A.O. refused to grant full credit of interest claimed u/s. 244A on the refund of self-assessment tax, citing that no interest is allowable on such refunds as per the I.T. Act. The assessee contended that interest u/s. 244A should be liberally interpreted in their favor, supported by decisions of High Courts and Tribunals.

3. The Ld. CIT (A) upheld the A.O.'s decision, stating that the grant of interest u/s. 244A on self-assessment tax refunds is debatable, and the right course for the appellant was to appeal against the order where interest was not granted. The assessee then appealed before the ITAT, emphasizing their entitlement to interest u/s. 244A based on various decisions and precedents.

4. The ITAT considered the precedent set by the Hon'ble High Courts in cases like CIT vs. Cholamandalam Investment & Finance Co. Ltd. and CIT vs. Gujarat State Warehousing Corporation, where it was established that interest u/s. 244A is applicable on self-assessment tax payments u/s. 140A. Relying on these judgments, the ITAT held in favor of the appellant, directing the A.O. to grant interest u/s. 244A on the self-assessment tax refund.

5. The judgment emphasized the statutory liability of the Revenue to pay interest on sums wrongfully retained from the assessee, stating that the government is liable to pay interest for the delay in refunding amounts lawfully due. The decision was based on the principles of the I.T. Act and established legal precedents, ensuring the appellant's entitlement to interest u/s. 244A.

6. Ultimately, the ITAT allowed the appeal of the assessee, concluding that they are entitled to interest u/s. 244A on the self-assessment tax refund, in alignment with the decisions of the Hon'ble High Courts in similar cases.