2014 (11) TMI 270 - HC - Income Tax

Grant of interest on interest Amount due to assessee by way of refund - Whether an assessee under the Income Tax Act would be entitled to receive any amount by way of interest on interest under the Income Tax Act - Held that - The original petition as it claims interest on interest on the amounts that were due to the petitioner by way of refund failed - in Sandvik Asia Ltd. v. Commissioner of Income-Tax and Others 2006 (1) TMI 55 - SUPREME Court it has been held that although the assessee was not entitled to interest on interest under the Income Tax Act, he was nevertheless entitled to a reasonable amount by way of compensation for the delayed payment of amounts that were due to him by way of refund of tax and interest thereon, the Supreme Court on the facts of that case, proceeded to grant the assessee an additional amount towards compensation for the period during which the Department had delayed the payment of refund, and interest thereon, to the assessee. The prayer in the original petition with regard to interest on interest cannot be granted - While the assessee would point out that, even if interest on interest was not granted, it was open to the Court to consider the issue of grant of appropriate compensation in lieu of interest on interest, insofar as the computation shown reveals that assessee has computed interest in accordance with the provisions of the Act for the entire period for which they had withheld the amounts due to the assessee by way of refund, there is no scope for the issuance of a direction to grant a compensation over and above the statutory interest that has already been reckoned for the purposes of computation of the amounts due to the assessee Decided against assessee.

Summary

Issues:
1. Entitlement to interest on interest on refund amounts.
2. Claim for compensation in lieu of interest on interest.
3. Verification of payment of due amounts to the petitioner.

Issue 1: Entitlement to interest on interest on refund amounts:
The petitioner, an agriculturist, sought interest on interest on amounts due by way of refund following appellate orders for the assessment year 1976-77. The respondent initially granted interest under Section 132B(4) but omitted interest under Section 244(1A). The petitioner challenged this omission, citing entitlement to interest on interest. The High Court analyzed Supreme Court precedents, particularly the Sandvik Asia Ltd. case, where interest on interest was not allowed, but compensation for delayed payment was granted. Referring to Commissioner of Income-Tax v. Gujarat Fluoro Chemicals, the Court clarified that only interest provided under the statute could be claimed, not interest on statutory interest. Following these authoritative pronouncements, the Court held that the petitioner's claim for interest on interest could not be granted. The original petition was dismissed as the respondent had already computed interest in accordance with statutory provisions.

Issue 2: Claim for compensation in lieu of interest on interest:
The petitioner contended that if interest on interest was not granted, the Court could consider awarding compensation instead. However, the Court found that as per the computation provided by the respondent, interest had been calculated for the period the amounts were withheld, leaving no scope for additional compensation beyond statutory interest. The Court emphasized that since the respondent had already factored in statutory interest in the calculations, no further compensation was warranted. Consequently, the original petition failed on this ground and was dismissed.

Issue 3: Verification of payment of due amounts to the petitioner:
The petitioner raised concerns about the actual payment of the due amounts shown in the respondent's statement. In response, the Court directed the respondent to verify if the balance amounts indicated as payable had been disbursed to the petitioner or his legal representatives. If the amounts were found unpaid, the respondent was instructed to settle the dues within three months. Additionally, the petitioner was given the opportunity to present any relevant documents to clarify the amounts received from the respondent within one month to avoid any confusion regarding payments.

This detailed analysis of the judgment addresses the issues of entitlement to interest on interest, the claim for compensation, and the verification of payment of due amounts, providing a comprehensive overview of the legal proceedings and the Court's decision.