2014 (1) TMI 837 - AT - Income Tax

Admissibility of Interest 244A of the Act Refund on tax payment Held that - The decision in CIT Vs Cholamandalam Investment & Finance Co. Ltd. 2007 (6) TMI 69 - HIGH COURT , MADRAS and Sandvik Asia Ltd. v. CIT 2006 (1) TMI 55 - SUPREME Court followed - The object behind the insertion of section 244A, is that an assessee is entitled to payment of interest for money remaining with the Government which would be ordered to be refunded - when the amount is ordered to be refunded the interest is to be calculated from the date of such payment of tax - how the Department has understood the section coupled with the fact that the principle underlying the said section is that, any excess payment of tax paid by the assessee is not only to be refunded but it has to be refunded with interest, if the case of the assessee does not fall under clause (a) or the Explanation to clause (b), the excess tax paid shall be refunded with interest from the date of payment of such tax - the AO is directed to allow interest u/s. 244A from the date of the payment of tax Decided in favour of Assessee.

Summary

Issues:
Claim for interest u/s. 244A on refund arising from a tax payment made after 15 months from filing return for A.Y. 2006-07.
Interpretation of provisions of Sec. 244A for allowing interest on refunds arising from various types of tax payments.

Analysis:
The appellant contested the denial of interest u/s. 244A on a refund of Rs. 45,01,234/- arising from a tax payment of Rs. 47,36,000/- made 15 months after filing the return for A.Y. 2006-07. The Assessing Officer (AO) rejected the claim, stating that self-assessment tax must be paid before filing the return, which was not the case here. The AO also emphasized that Sec. 244A does not mention interest on self-assessment tax. The Commissioner of Income Tax (Appeals) upheld the AO's decision, noting that the payment was not made as a result of any AO order.

The appellant argued that the tax payment included various components, with Rs. 47,36,000/- specifically designated as tax, surcharge, education cess, and interest u/s. 234. Citing decisions from the Madras and Karnataka High Courts, the appellant claimed entitlement to interest. The Departmental Representative supported the lower authorities' findings.

The Tribunal analyzed the judicial decisions cited by the appellant. The Madras High Court held that interest is payable on refunds as a statutory liability, emphasizing the obligation to pay interest on wrongfully retained sums. The Karnataka High Court clarified that interest under Sec. 244A is payable from the date of tax payment if the case does not fall under specified clauses, rejecting the Revenue's contention that no interest is payable in such cases.

Based on the judicial precedents and interpreting Sec. 244A, the Tribunal directed the AO to allow interest u/s. 244A from the date of the tax payment. The appeal was allowed in favor of the appellant, emphasizing the principle that excess tax paid should be refunded with interest.