2017 (5) TMI 308 - HC - Income Tax

Interest on refund - Expression in any other case occurring in Section 244A (1) (b) - whether would include the amount of refund which constitutes the interest that has been waived by the Income Tax Department ( Department ) under Section 220 (2A) of the Act? - Held that - The decision in Union of India v. Tata Chemicals Limited (2014 (3) TMI 610 - SUPREME COURT ) is clear in its enunciation that even if there is no express statutory provision for payment of interest, the government cannot avoid its obligation to reimburse the lawful monies together with accrued interest for the period of undue retention . Once it is clear that Section 244A (1) (b) of the Act which talks of any other case does not have to be interpreted restrictively and can include situations like in the present case, then it is evident that there is nothing in the said provision which prohibits the payment of interest on an amount of refund due to the Petitioners as a result of the waiver of interest under Section 220(2A) of the Act. The circular of the CBDT dated 26th April 2016 accepts the above proposition laid down in Union of India v. Tata Chemicals Limited (supra) in its entirety. The sum found refundable to the Petitioners as a result of the waiver of interest order passed by the CCIT is a definite sum that was wrongly deducted from the Petitioners as interest. Payment of interest on that sum by the Revenue cannot be characterised as payment of interest on interest . Thus this Court sets aside the impugned orders of the AO denying the Petitioners interest on the amounts refunded to them pursuant to the waiver order dated 30th March 2015 of the CCIT. The interest amount as claimed by the Petitioners on the amount refunded to them will now be paid by the Department to the Petitioners within four weeks from today in terms of Section 244 A (1) (b) of the Act from the date of recovery till the date of payment.

Issues Involved:
1. Interpretation of the expression "in any other case" in Section 244A(1)(b) of the Income Tax Act, 1961.
2. Entitlement to interest on the amount of refund due to waiver of interest under Section 220(2A) of the Income Tax Act.
3. Delay in filing the writ petitions.
4. Applicability of judicial precedents and CBDT circulars to the case.

Issue-wise Detailed Analysis:

1. Interpretation of "in any other case" in Section 244A(1)(b):
The central question was whether the expression "in any other case" in Section 244A(1)(b) includes the amount of refund constituting interest waived by the Income Tax Department under Section 220(2A). The court examined the language of Section 244A and concluded that the legislative intent does not limit the expression "any amount becomes due" or "in any other case" only to tax and penalty. The court interpreted that "in any other case" can include situations where refunds are due because of waived interest, thus entitling the assessee to interest on such refunds.

2. Entitlement to Interest on Waived Interest Refund:
The court addressed whether the petitioners were entitled to interest on the refunded amounts due to the waiver of interest under Section 220(2A). It was held that the refund of the waived interest amount is a definite sum wrongly deducted, and interest on that sum by the Revenue cannot be characterized as "interest on interest." The court relied on the Supreme Court's decision in Union of India v. Tata Chemicals Limited, which stated that the government must reimburse lawful monies with accrued interest for the period of undue retention. Therefore, the petitioners were entitled to interest under Section 244A(1)(b) from the date of recovery till the date of payment.

3. Delay in Filing the Writ Petitions:
The respondents argued that there was an unexplained delay in filing the writ petitions. The court noted that the waiver applications were disposed of after almost seven years, and the petitioners could not be held responsible for this delay. Given the substantial amounts involved, the court found that there was no undue delay in the petitioners approaching the court for relief.

4. Applicability of Judicial Precedents and CBDT Circulars:
The court considered various judicial precedents and the CBDT Circular No. 11/2016, which aligned with the decision in Union of India v. Tata Chemicals Limited. The court observed that the circular accepted the proposition that interest should be paid on refunds due to excess deductions. The court also referred to decisions in India Trade Promotion Organization v. CIT and Commissioner of Income Tax v. Birla Corporation Limited, which supported the petitioners' claim for interest on refunds.

Conclusion:
The court set aside the orders denying interest on the refunded amounts and directed the Department to pay the petitioners the interest as claimed, in terms of Section 244A(1)(b) from the date of recovery till the date of payment. The writ petitions were allowed with no orders as to costs.

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