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2020 (9) TMI 580 - HC - Income TaxInterest u/s 244A on delayed refund - ITAT was right in law in directing the department to pay compensation in the shape of simple interest on the amount due at the rate - HELD THAT - In view of the ratio laid down in M/S. HEG. LIMITED 2009 (12) TMI 35 - SUPREME COURT the interest on the delayed refund becomes part of the principle amount and the delayed interest includes the interest for not refunding the principle amount. Accordingly, it also includes the interest on the delayed refund. Mainability of appeal - Revenue Authorities have been directed vide Notification dated 08.08.2019 to file appeals in income tax cases before the High Court where the monetary limit is less than ₹ 1.00 crore and where it is above the said amount, that shall not be a subject matter of appeal before the High Court. But in the Notification dated 11th July, 2018, there is an exception to the effect that in certain circumstances, an appeal should be contested on merits notwithstanding the fact that the tax effect entailed is less than ₹ 1.00 crore. Monetary limit to prefer an appeal before High Court is less than ₹ 1.00 crore, but if there is a valid question, where an Order, Notification, Instruction or Circular is to be challenged as illegal or ultra vires, an appeal could be filed before the High Court. In the present case, no such exception is available to the appellant.
Issues:
1. Interpretation of Section 244-A of the Income Tax Act regarding interest on delayed refunds. 2. Validity of the direction by the ITAT to pay compensation in the form of simple interest. 3. Jurisdiction of ITAT to decide issues under Section 254(2) of the Act. Analysis: Issue 1: Interpretation of Section 244-A of the Income Tax Act The appellant contested that there is no provision under Section 244-A for payment of interest on delayed refunds. However, the High Court referred to a Supreme Court judgment in Commissioner of Income Tax Vs. HEG Ltd, emphasizing that interest on delayed refunds becomes part of the principal amount. The delayed interest includes interest for not refunding the principal amount, thus encompassing interest on the delayed refund. Issue 2: Validity of ITAT's direction on compensation The ITAT directed the department to pay compensation in the form of simple interest, which the appellant challenged. The High Court noted that the ITAT's direction was contrary to the Supreme Court's ruling and upheld that interest on delayed refunds is part of the principal amount. The High Court dismissed the appellant's argument and upheld the ITAT's decision. Issue 3: Jurisdiction of ITAT under Section 254(2) of the Act The ITAT dismissed the appellant's Miscellaneous Application, stating it was misconceived and not maintainable. The High Court reviewed the ITAT's decision and found that the issue raised could be contested before the High Court based on specific circumstances, as per relevant notifications. Since no exceptional circumstance applied to the appellant's case, the High Court upheld the ITAT's decision and dismissed the appeal. In conclusion, the High Court dismissed the appeal, emphasizing that the observations made in the judgment are not to be treated as a precedent. The appellant was granted liberty to seek appropriate remedies if needed, and pending applications were disposed of accordingly.
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