2015 (12) TMI 109 - AT - Income Tax

Eligibility for interest on refund - Held that - Identical issue has been deliberated upon and decided by the Tribunal in other group cases, following the order of the Special Bench, that the Hon ble Gujarat High Court had upheld the order of the Special Bench in Punitaben K. Patel OSFDT (2008 (6) TMI 576 - GUJARAT HIGH COURT refund should be granted with interest. We are in full agreement with the order of the Special Bench of the Tribunal. We repeat that Revenue should not drag the respondents to unnecessary avoidable litigation. But assessee is not entitled to interest on interest.

Issues Involved:
1. Entitlement to interest on refund of Rs. 4,170.
2. Entitlement to interest on refund of Rs. 2,430.
3. Eligibility for additional compensation on delayed grant of interest under Section 244A of the Income Tax Act.
4. Conduct of the Revenue in not following judicial precedents.

Issue-wise Detailed Analysis:

1. Entitlement to Interest on Refund of Rs. 4,170:
The assessees, beneficiaries of a specific family trust, sought a refund of Rs. 4,170 along with interest. The Assessing Officer (AO) initially denied interest, stating that the refund arose due to the main trust's settlement under the Kar Vivad Samadhan Scheme (KVSS). The AO argued that since the main trust did not receive interest on the disputed income, the beneficiary trust was also not entitled to interest. The Tribunal, however, referred to the Special Bench's decision and the Gujarat High Court's ruling, which upheld that beneficiaries are entitled to interest on refunds. The Tribunal directed the Revenue to grant interest, emphasizing that the income should not be taxed twice and refunds must include interest as per Section 244A.

2. Entitlement to Interest on Refund of Rs. 2,430:
Similar to the first issue, the refund of Rs. 2,430 was also denied by the AO on the same grounds. The Tribunal reiterated its stance based on previous decisions, asserting that the refund must include interest. The Tribunal criticized the Revenue for dragging the assessees into unnecessary litigation despite clear judicial precedents. Consequently, the Tribunal directed the Revenue to grant interest on the refund of Rs. 2,430.

3. Eligibility for Additional Compensation on Delayed Grant of Interest under Section 244A:
The assessees sought additional compensation for the delay in granting interest on refunds. The Tribunal referred to the Supreme Court's decision in CIT vs. Gujarat Flouro Chemicals, which clarified that no additional interest on statutory interest under Section 244A can be granted. Therefore, the Tribunal held that the assessees are not entitled to interest on interest, aligning with the Supreme Court's ruling.

4. Conduct of the Revenue in Not Following Judicial Precedents:
The Tribunal expressed strong disapproval of the Revenue's conduct in disregarding the decisions of the Special Bench and the Gujarat High Court. The Tribunal noted that the AO's actions were contrary to established judicial principles and that the CIT(A) had unjustifiably disregarded the Special Bench's order. The Tribunal emphasized that the Revenue should not engage in avoidable litigation, as directed by the Gujarat High Court. While the Tribunal considered imposing costs on the Department for its conduct, it refrained from doing so as no such request was made by the assessees.

Conclusion:
The Tribunal concluded by allowing the appeals in part, directing the Revenue to grant interest on the refunds of Rs. 4,170 and Rs. 2,430, but denying the claim for additional compensation on delayed interest. The Tribunal's decision was pronounced in the open court on 24th November, 2015.

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