2017 (11) TMI 590 - SCH - Income Tax

Payment of interest on refund u/s 244A - refund of excess tax deposited u/s 195(2) - responsibility of revenue u/s 244A for payment of interest on the refund of tax made to the resident/deductor u/s 240 - Whether the resident/deductor is also entitled to interest on refund of excess deduction or erroneous deduction of tax at source u/s195 of the Act Held that - It is clear that the appeal of the department deserves to be dismissed as the matter is covered by the judgment of this Court in Union of India Through Director of Income Tax Vs. Tata Chemicals Limited 2014 (3) TMI 610 - SUPREME COURT wherein held Interest on refund is a kind of compensation of use and retention of the money collected unauthorizedly by the Department - When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited - Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded - There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/foreign company. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances - The obligation to refund money received and retained without right implies and carries with it the right to interest. The interest is payable from the date of payment of tax - the resident/deductor is entitled not only the refund of tax deposited under Section 195(2) of the Act, but has to be refunded with interest from the date of payment of such tax Decided against Revenue.

Summary

The Supreme Court dismissed the appeal of the department as it was covered by a previous judgment in Union of India Through Director of Income Tax Vs. Tata Chemicals Limited 2014 (6) SCC 335.