2015 (3) TMI 639 - AT - Income Tax

Interest u/s 244A on the tax refund - as held by the ITAT that the benefit u/s 72A of the Act was to be granted in the assessment year relevant to the previous year in which the amalgamation takes place - since the scheme of amalgamation was to take effect from 01/04/1994, the benefit of tax credit was to be allowed to the assessee company for the A.Y. 1995-96 and not for 1996-97 as held by the CIT(A) in terms of his order passed u/s 154 - whether delay in proceedings is not attributable to the assessee? - whether assessee is entitled for interest for the period of 01/04/1995 to 23/08/2007? - Held that - As per provisions of sec. 244A(2) of the Act the issue of exclusion of any period for the purpose of grant of interest u/s 244A(1) of the Act was mandatorily to be decided either by the Chief Commissioner of Income Tax or Commissioner of Income Tax and the authorities below did not work in accordance with the provisions of law and to that extent the order of the AO and the CIT(A) suffers from legal infirmity. Respectfully following the decision of ITAT in the case of Power Finance Corporation Ltd. Vs. ACIT (2008 (12) TMI 432 - ITAT DELHI) and keeping in view the entirety of facts, circumstances and the relevant provisions of the law, we are of the considered opinion that it would serve the interest of justice if the matter is restored back to the file of AO with a direction to refer the issue regarding exclusion of period as prescribed in sub-section (2) of sec. 244A of the Act either to the Chief Commissioner of Income Tax or Commissioner of Income Tax, as the case may be, to get it determine. We may also point out that as per provision of sec. 244A(2) of the Act the decision of Chief Commissioner of Income Tax or Commissioner of Income Tax shall be final on this issue and, therefore, revenue authorities are duty bound to refer the matter to the competent authority for determination of the issue regarding exclusion of period as per provisions of the Act. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Reduction of deduction under Section 80HHC.
2. Denial of interest under Section 244A on tax refund.
3. Calculation of interest under Section 244A.
4. Withdrawal of interest allowed on self-assessment tax.
5. Non-compliance with Section 245 provisions.
6. Non-issuance of balance refund.

Issue-wise Detailed Analysis:

1. Reduction of Deduction under Section 80HHC:
The assessee contended that the Assessing Officer (AO) erred in reducing the deduction under Section 80HHC from Rs. 30,32,43,522/- to Rs. 30,19,20,104/- without providing any reasons or calculations. This reduction was challenged as it left the appellant unable to make appropriate submissions.

2. Denial of Interest under Section 244A on Tax Refund:
The AO denied interest under Section 244A on the tax refund of Rs. 663.12 lacs for the period from 1/4/1995 to 23/8/2007. The assessee argued that there was no delay attributable to them and that the refund arose due to the ITAT's order giving effect to the BIFR's order. The CIT(A) upheld the AO's decision, which was contested by the assessee on the grounds that the delay was not attributable to them.

3. Calculation of Interest under Section 244A:
The AO's calculation of interest under Section 244A was challenged on multiple grounds:
- Denying interest for March 1998 on the payment of Rs. 7,75,50,260/- made on 25/03/1998.
- Allowing interest on Rs. 74,357,749 after appropriating Rs. 3192511 towards the refund attributable to BIFR.
- Not allowing interest for the months of November 1998, August 1999, and March 2006 on Rs. 54,700,000.
- Calculating interest for September 1999 to May 2000 at NIL by wrongly taking the principal amount as (minus) Rs. 43,56,651/-.

4. Withdrawal of Interest Allowed on Self-Assessment Tax:
The AO withdrew Rs. 19,46,200/- being the interest allowed on the refund of self-assessment tax under Section 143(1). The assessee argued that the ITNS-150 accompanying the impugned order starts with post-section 143(1) orders only, thereby reducing the refund admissible to them.

5. Non-Compliance with Section 245 Provisions:
The AO did not comply with the mandatory provisions of Section 245 by not intimating the appellant in writing before setting off the refund against the amount payable for different years. The assessee argued that this adjustment was illegal and deserved to be reversed.

6. Non-Issuance of Balance Refund:
The AO erred in not issuing the balance refund of Rs. 49,21,194/- to the appellant as worked out in the ITNS-150 accompanying the impugned order.

Judgment Analysis:

Reduction of Deduction under Section 80HHC:
The Tribunal did not specifically address this issue in detail within the judgment text provided.

Denial of Interest under Section 244A on Tax Refund:
The Tribunal noted that the main issue revolved around Section 244A and the delay not being attributable to the assessee. It was contended that the CIT(A) ignored facts and wrongly reversed his own order denying relief under Section 72A, which led to the denial of interest under Section 244A.

Calculation of Interest under Section 244A:
The Tribunal observed that the AO excluded periods at his own discretion while processing the refund claim, which was outside his jurisdiction. As per Section 244A(2), any question regarding the exclusion of periods for interest calculation should be decided by the Chief Commissioner or Commissioner of Income Tax. The Tribunal held that neither the AO nor the CIT(A) had the authority to exclude any period for computation of interest on refund under Section 244A(1).

Withdrawal of Interest Allowed on Self-Assessment Tax:
The Tribunal did not specifically address this issue in detail within the judgment text provided.

Non-Compliance with Section 245 Provisions:
The Tribunal did not specifically address this issue in detail within the judgment text provided.

Non-Issuance of Balance Refund:
The Tribunal did not specifically address this issue in detail within the judgment text provided.

Conclusion:
The Tribunal restored the matter to the AO with a direction to refer the issue regarding the exclusion of periods for interest calculation under Section 244A(2) to the Chief Commissioner or Commissioner of Income Tax. The Tribunal emphasized that the decision of the Chief Commissioner or Commissioner would be final on this issue. The appeal was deemed allowed for statistical purposes, and the decision was pronounced on 2nd March 2015.