2017 (6) TMI 1158 - HC - Income Tax

Declining interest on refund of TDS to the petitioners - Held that - We are of the view that the delay up to the date of filing the petition before CBDT i.e., 26.02.2008 is attributable to the petitioners and they are not entitled to claim interest on refund until this date but the delay thereafter had essentially been on the part of the respondents; and it had been squarely against the plain statutory provisions as also against the spirit of law that the respondents chose to deny interest altogether to the petitioners. As observed, the right of receiving interest is available to the petitioners as per the statute and nothing of any estoppel could be considered operating against the petitioners over the statutory provisions contained in Section 244-A of the Act. Thus, we are clearly of the view that the impugned orders in so far the respondent No.1 had declined the payment of interest over the refundable amount of tax and consequential denial of interest in the impugned assessment orders cannot be approved and in modification of the impugned orders, the petitioners deserve to be allowed interest on the refundable amount of tax w.e.f. 26.02.2008. Declined refund of TDS for want of confirmation from the deductors - Held that - No reason that refund of the said amount of ₹ 11,44,821/- was denied to the petitioners in the aforesaid assessment orders dated 30.12.2013. The claim of the petitioners in this regard deserves to be allowed. Entitlement to compensation for delayed payment of interest in the form of interest over interest - Held that - The peculiar circumstances of the present case, as already noticed, had been that the initial long delay is attributable to the petitioners themselves. The other part of delay in ordering and making refund is adequately taken care of by the amount of interest, which the petitioners are held entitled to w.e.f. 26.02.2008. Though accepting the claim for refund in the assessment orders dated 30.12.2013 but issuing refund cheques in the month of May, 2014 cannot be appreciated but, in the overall circumstances of this case, we find no reason to award any further interest over the statutory interest to the petitioners. This part of the claim of the petitioners is, therefore, declined.

Summary

Issues Involved:

1. Denial of interest on refund of TDS.
2. Refusal to refund TDS amounting to ?11,44,821/- due to non-confirmation from deductors.
3. Entitlement to compensation for delayed payment of interest in the form of interest over interest.

Issue-wise Detailed Analysis:

1. Denial of interest on refund of TDS:

The petitioners argued that denial of interest on the refund of TDS was contrary to Section 244-A of the Income Tax Act, 1961, which mandates interest on refundable amounts. The respondents contended that the delay in claiming the refund was attributable to the petitioners, and thus, interest was justifiably denied under Section 244-A(2). The court held that while the initial delay in claiming the refund was attributable to the petitioners, the delay after filing the petition for condonation of delay with the CBDT on 26.02.2008 was not. Therefore, the petitioners were entitled to interest from 26.02.2008 onwards. The court emphasized that the statutory right to interest cannot be nullified due to procedural delays by the tax authorities.

2. Refusal to refund TDS amounting to ?11,44,821/- due to non-confirmation from deductors:

The petitioners contended that the refusal to refund ?11,44,821/- due to non-confirmation from deductors was unjustified as they had provided all necessary details and TDS certificates. The court noted that the TDS was deducted by government agencies and the genuineness of the TDS certificates was not in question. Citing the principle that the assessee should not be penalized for the deductor's failure to confirm, especially when the deductor is a government entity, the court directed that the refund of ?11,44,821/- be granted along with interest.

3. Entitlement to compensation for delayed payment of interest in the form of interest over interest:

The petitioners sought compensation for the delayed payment of interest, citing the Supreme Court decision in Sandvik Asia Ltd. The court acknowledged the considerable delay by the respondents but noted that the initial delay was attributable to the petitioners. The court held that the statutory interest from 26.02.2008 adequately compensated for the delay and declined to award further interest over interest.

Conclusion:

The court partly allowed the writ petition, directing that:

(a) The petitioners are entitled to interest on the refundable amount of tax from 26.02.2008 until the date of payment.

(b) The denial of refund amounting to ?11,44,821/- is disapproved, and the petitioners are entitled to this refund with interest.

(c) The claim for compensation in the form of interest over interest is rejected.

(d) The Assessing Officer is directed to make fresh assessment orders within three months, and the respondents must ensure payment within two months of the new assessment orders.

(e) No costs were awarded.