2021 (2) TMI 526 - AT - Income Tax

Calculation of interest u/s.244A - entitled for interest on self-assessment tax - assessee has raised ground before us stating that refund granted to the assessee is to be first adjusted against the correct amount of interest due on that date and thereafter, the left over portion should be adjusted with the balance tax - HELD THAT - We find that in the instant case refund was granted to the assessee vide refund order in October 2013 and it was pleaded by the assessee that the said refund is to be adjusted against the correct amount of interest payable thereof to be computed as per the directions of the ld. CIT(A) and only the balance amount is to be adjusted against tax paid. Accordingly, unpaid amount is the tax component and therefore, the assessee would be entitled for claiming interest on the tax component remaining unpaid. In our considered opinion, the same would not tantamount to interest on interest as alleged by the ld. CIT(A). Similarly, the refund granted to the assessee in July 2016 is to be adjusted against the correct interest payable on the tax amount remaining unpaid and balance towards tax component. Accordingly, we direct the ld. AO to compute the correct amount of interest allowable to the assessee as directed by the ld. CIT(A) as on the date of giving effect to the Tribunal s order i.e.06/09/2013. We further hold that the refund granted on 06/09/2013 be first appropriated or adjusted against such correct amount of interest and consequently, the short fall of refund is to be regarded as shortfall of tax and that shortfall should then be considered for the purpose of computing further interest payable to the assessee u/s.244A of the Act till the date of grant of such refund. Accordingly, the grounds raised by the assessee in this regard are allowed for both the years. It cannot be said that assessee never made such a claim of interest in the return of income for the respective years. Accordingly, no delay could be attributable on the part of the assessee in this regard. Hence, the grounds and the arguments advanced by the ld. AR in this regard deserves to be rejected. We also find that the issue of assessee being entitled for interest on self-assessment tax from the date of payment of self-assessment tax till the date of actual payment of refund has been the subject matter of adjudication by the Hon ble Jurisdictional High Court in the case of Stock Holding Corporation of India Ltd., vs. CIT 2014 (11) TMI 899 - BOMBAY HIGH COURT wherein held interest is payable from date of payment of tax on self assessment to date of refund of amount under section 244A - Decided in favour of assessee.

Summary

Issues:
Calculation of interest u/s.244A of the Income Tax Act for A.Yrs. 2008-09 & 2007-08.

Analysis:

1. Background: The appeals arose from the order by the Commissioner of Income Tax (Appeals) against the assessment order passed by the Additional Commissioner of Income Tax, Range-6(3), Mumbai. The primary issue in the cross appeals for both years was the calculation of interest u/s.244A of the Act.

2. Initial Tribunal Order: The Tribunal had previously granted relief to the assessee for A.Yrs. 2006-07 and 2007-08, directing the reduction of certain items from the fringe benefits chargeable to tax. The AO correctly allowed interest on advance tax u/s.244A for A.Y.2006-07 but failed to do so for A.Y.2007-08 and 2008-09.

3. CIT(A) Decision: The CIT(A) allowed interest u/s.244A on advance tax and self-assessment tax paid by the assessee from the first day of the assessment year until the date of refund grant. However, the CIT(A) dismissed the claim for interest on the delay period, citing it as interest on interest.

4. Appeals: The assessee appealed seeking correct interest calculation u/s.244A, while the revenue challenged the direction to grant interest on self-assessment tax. The revenue did not challenge the direction to grant interest on advance tax, which had attained finality.

5. Assessment of Refund: The Tribunal held that the refund should first be adjusted against the correct interest due, with the remaining balance adjusted against the tax paid. This adjustment did not amount to interest on interest, as claimed by the CIT(A).

6. Judicial Precedents: The Tribunal relied on previous decisions to support the assessee's claim for interest on unpaid tax components and the correct calculation of interest payable.

7. Decision & Directions: The Tribunal directed the AO to compute the correct interest payable to the assessee as directed by the CIT(A) and adjust the refund accordingly. The assessee's grounds were allowed for both years.

8. Interest on Self-Assessment Tax: The revenue contended that interest on self-assessment tax was not payable due to delay attributed to the assessee. However, the Tribunal rejected this argument, citing the assessee's claim in the return of income and relevant court decisions supporting interest payment.

9. Court Decisions: The Tribunal referred to court decisions confirming the entitlement of the assessee to interest on self-assessment tax from the date of payment to the date of refund.

10. Conclusion: The Tribunal dismissed the revenue's grounds, stating they were devoid of merit. The tax effect involved in the revenue appeals for the relevant years was below the prescribed limits, leading to the dismissal of the revenue appeals. Ultimately, the assessee's appeals were allowed, and the revenue's appeals were dismissed.

This detailed analysis covers the key aspects of the judgment regarding the calculation of interest u/s.244A of the Income Tax Act for the specified assessment years.