2020 (11) TMI 226 - HC - Income Tax

Interest payable u/s 244A(1) - Whether Tribunal was right in law in holding that the interest u/s 244A is not payable on the amount determined as refundable (inclusive of interest up to that date) for the period for which there was a delay in payment of the amount to be refunded? - Tribunal held there is no inordinate delay in the grant of refunds - HELD THAT - We find that this issue regarding the adjustment of interest was not specifically considered by the CIT(A) and the Tribunal. Therefore, we are of the considered view that the matter should be remanded. Appeal is allowed, the orders passed by the CIT-A and the Tribunal are set aside only on the aspect indicated above and the matter is remanded to the CIT(A) to consider whether under explanation to Section 140A(1), it is stipulated where the amount paid by an assessee under self-assessment falls short of the aggregate amount of tax and interest aforesaid, the amount paid shall first be adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax payable.

Summary

Issues:
1. Interpretation of interest under Section 244A of the Income Tax Act for a delayed refund.
2. Assessment of inordinate delay in the grant of refunds.

Analysis:
1. The appeal raised substantial questions of law regarding the adjustment of interest under Section 244A of the Income Tax Act for a delayed refund. The appellant contended that interest should be first adjusted against the refundable amount before adjusting the balance against the principal refund. The appellant challenged the order of the Commissioner of Income Tax (Appeals) and the Tribunal, arguing that the adjustment of interest was not done correctly. The Tribunal seemingly misunderstood the appellant's argument, assuming it was contesting the quantum of interest rather than the manner of adjustment. The respondent cited the Supreme Court's decision in Commissioner of Income Tax, Gujarat vs. Gujarat Fluoro Chemicals, emphasizing that only statutory interest is payable for delays, and compensation is only warranted for inordinate delays.

2. The respondent further relied on the decision in Commissioner of Income Tax vs. Brakes India Limited, where it was held that interest under Section 244A is the only payable amount by the revenue, with no additional interest on statutory interest. The appellant clarified that they were not seeking interest on interest but were concerned with the proper adjustment of interest. The High Court noted that the issue of interest adjustment was not explicitly addressed by the Commissioner of Income Tax (Appeals) or the Tribunal. Consequently, the Court allowed the appeal, setting aside the previous orders and remanding the matter to the Commissioner of Income Tax (Appeals) to consider the specific issue of interest adjustment as per the explanation to Section 140A(1) of the Act. The Court left the substantial questions of law open and directed no costs to be awarded, closing the connected miscellaneous petition.