2016 (10) TMI 398 - HC - Income Tax

Interest on refunds - whether the Chief commissioner was justified in rejecting interest for the period of delay? - Unexplained inordinate delay in payment of interest within the statutory period by the department - Held that - A certificate to the effect that tax has been deducted and specifying the amount so deducted, rate of tax and such other particulars, as may be prescribed. Therefore, there cannot be any dispute about the fact that the obligation to provide a certificate for deducting tax is on the deductor. The question is, if there is any defect in such certificate, and the petitioner fails to get it cured before filing of the return, petitioner can be termed as a person who had caused the delay. No doubt, as rightly held by the respondent, if the defect is noticeable on receipt of the certificate, it is for the deductee who makes a claim on the basis of the certificate to get the defects cured. This is an instance where substantial time had elapsed for curing the defects, which according to the Department, is attributable to the assessee. When such a view is possible and the claim for interest is denied on that specific period, do not think that this Court will be justified in taking a different view. No doubt, as rightly contended by the learned counsel for the petitioner, once the defect is cured, the parties have to go back to their original position, but the question is whether there is an obligation on the part of the Department to pay interest on the amount to be refunded. When a statute in the form of Section 244A(2) clearly specifies that interest need not be paid if the proceedings of refund is delayed for reasons attributable to the assessee, in that event, the respondents having refused interest on the basis of factual finding relying upon the statutory provision, do not think that this Court will be justified in interfering with the said orders. Coming to the judgment in Sandvik Asia Ltd. (2006 (1) TMI 55 - SUPREME Court), that was a case in which the question that had arisen was whether the assessee was entitled to interest on the amounts of interest paid under Section 214 or 244 of the IT Act. Question considered was whether an assessee was entitled to be compensated by the Department for the delay in paying to the assessee all amounts admittedly due to it, the delay ranging from 12 to 17 years. Thus do not think that the factual issues arising in the present case and the judgment in Sandvik Asia Ltd. (supra) has any resemblance. Even otherwise, this is an instance where interest has been paid but denied only for certain period for reasons stated in the impugned orders, since the delay has been attributed to the assessee.

Summary

Issues Involved:
1. Entitlement to interest on refund under Section 244A of the Income Tax Act, 1961.
2. Attribution of delay in proceedings resulting in refund.
3. Interpretation of "proceedings resulting in the refund" under Section 244A(2).
4. Applicability of the Supreme Court judgment in Sandvik Asia Ltd. v. Commissioner of Income Tax.

Issue-wise Detailed Analysis:

1. Entitlement to Interest on Refund under Section 244A of the Income Tax Act, 1961:
The petitioner, an assessee under the Income Tax Act, 1961, challenged the orders (Ext.P1 to P5) denying interest on the refund for various assessment years. The Chief Commissioner of Income Tax had rejected the petitioner’s application for interest on the ground that the delay in curing defects in the TDS certificates was attributable to the assessee. The petitioner argued that under Section 244A, interest is statutorily payable and non-payment can only be due to delays caused by the assessee while considering the refund application.

2. Attribution of Delay in Proceedings Resulting in Refund:
The respondent contended that the obligation to submit defect-free TDS certificates lies with the assessee. The delay in curing defects in the TDS certificates and resubmitting them was attributed to the assessee, thus excluding the period of delay from the interest calculation as per Section 244A(2). The counter affidavit highlighted specific periods for different assessment years where interest was not granted due to delays in resubmitting corrected TDS certificates.

3. Interpretation of "Proceedings Resulting in the Refund" under Section 244A(2):
The petitioner contended that "proceedings resulting in the refund" should refer only to the proceedings culminating in the final order (Ext.P1) and not the entire process of return filing and assessment. The court, however, clarified that the amount becomes due only after the finalization of returns, and any delay attributable to the assessee in this process would exclude the period from interest calculation. The court emphasized that the delay in curing defects in TDS certificates is part of the proceedings resulting in the refund.

4. Applicability of the Supreme Court Judgment in Sandvik Asia Ltd. v. Commissioner of Income Tax:
The petitioner relied on the Supreme Court judgment in Sandvik Asia Ltd., which dealt with compensation for delayed payment of interest on refunds. The court distinguished the present case from Sandvik Asia Ltd., noting that the latter involved a delay of 12 to 17 years and compensation for interest on interest. In contrast, the present case involved denial of interest for specific periods due to delays attributable to the assessee. The court concluded that the factual circumstances and legal issues in Sandvik Asia Ltd. were not applicable to the present case.

Conclusion:
The court dismissed the writ petition, upholding the orders denying interest for the period of delay attributable to the assessee. The court found that the statutory provisions under Section 244A(2) were correctly applied, and the delay in curing defects in TDS certificates was rightfully attributed to the assessee, excluding those periods from interest calculation.