2015 (9) TMI 862 - SC - Income Tax

Interest on refund and interest on interest - HC 2007 (7) TMI 221 - GUJARAT HIGH COURT directed compensation by way of interest at the rate of 9% per annum on the amount for period from July 1, 1987 to November 13, 1990 refunded as well as to make payment of running interest at the rate of 9% per annum on the interest accrued on the aforesaid amounts to the assessee/respondent - Held that - Since the High Court has primarily relied upon Sandvick Asia case (2006 (1) TMI 55 - SUPREME Court) and directed the Revenue to pay interest on the amounts refunded as provided for under the provisions of Section 244(1A), in light of the decision by this Court in Gujarat Fluoro case (2013 (10) TMI 117 - SUPREME COURT ) wherein held it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest, in our considered opinion, the impugned judgment and order requires to be set aside and the matter be remanded back to the High Court for re- consideration of the stand of the assessee as well as the Revenue once over again. - Decided in favour of revenue for statistical purposes.

Issues:
1. Delay in payment of interest on refunded amount.
2. Entitlement of assessee to compensation by way of interest.
3. Interpretation of provisions under Section 244(1A) of the Income Tax Act, 1961.
4. Application of legal principles from previous judgments.

Analysis:
1. The case involved a delay in the payment of interest on the refunded amount to the assessee. The High Court directed the Revenue to grant compensation by way of interest at the rate of 9% per annum on the refunded amounts and the interest accrued on those amounts. The appellant had initially paid a sum to a Non-Resident company and later claimed a refund due to an amendment in the Income Tax Act. The Income Tax Officer granted a refund, but the assessee sought interest on the excess amount refunded.

2. The High Court relied on a previous judgment and concluded that the assessee is entitled to compensation by way of interest for the delayed payment of the refunded amounts wrongfully withheld by the Revenue. However, the Supreme Court, in a subsequent decision, clarified that interest on refunds can only be claimed as provided for under the statute and not on any other interest on such statutory interest. Therefore, the High Court's decision to grant interest on the refunded amounts was set aside, and the matter was remanded back for re-consideration.

3. The interpretation of provisions under Section 244(1A) of the Income Tax Act was crucial in this case. The Supreme Court clarified that interest on refunds can only be claimed as per the statutory provisions and not beyond that. The Court emphasized that the legislative amendment inserted Section 244A to the Act, providing for interest on refunds under various contingencies, and only this interest could be claimed by the assessee from the Revenue.

4. The legal principles from previous judgments were extensively discussed in the judgment. The Court referred to a specific case where it was decided that an assessee should be compensated for delays in payment of interest on the refunded amount due to the Revenue's inordinate delays. However, the Court clarified that this compensation should not be interpreted as interest on interest but as compensation for the delay in payment. The judgment highlighted the need for a proper understanding and application of legal principles in determining the entitlement of the assessee to compensation or interest on refunded amounts.

This detailed analysis of the judgment provides insights into the issues involved, the legal interpretations made by the courts, and the application of relevant provisions of the Income Tax Act in deciding the case.

← Previous Next →