2022 (4) TMI 345 - HC - Income Tax

Interest on refunds u/s 244A - Refund of amount after the rectification of ITR by the assessee - Revenue did not accept the appellant s interest claim while refunding the excess amount received for the return period - delay in finalisation of return - HELD THAT - The construction principles are well established and familiar enough that by applying the golden rule of construction, the section must receive a meaning, as spelt out in the enactment. Section 244A, when construed by the golden rule of interpretation, we hold that refund of any amount firstly becomes due to the assessee upon order of assessment made by the assessing officer. In addition to a refund of excess tax received or collected, the assessee is also entitled to interest on the excess refunded by order of assessment; however, the period of interest is governed by Section 244A (2). Section 244A (2) provides that the period taken by the assessee to cure the defects in finalising the assessment is excluded for interest calculation. As it stood for the applicable assessment years, sub-Section (2) merely refers to reasons attributable to the assessee. Therefore, omission or commission in the return filed by the assessee resulting in a delay in assessment is attributable to the assessee; hence, the time taken to cure those omissions and defects is excluded for interest calculation. Having availed the time for rectifying the defects and claiming interest for the defect rectification time is unavailable. Such an interpretation does not fit into the requirement of filing a return fully compliant with the order of assessment, levy of interest, refund etc. The period taken by the assessee for curing the defects cannot be excluded while calculating interest; then, for no fault of the Department, the Department is called upon to compensate by way of interest. For the above discussion, and by relying on judgments of the Supreme Court in Tata Chemicals Limited . 2014 (3) TMI 610 - SUPREME COURT and Sandvik Asia Ltd 2006 (1) TMI 55 - SUPREME COURT we hold that the assessee is not entitled to interest for the period taken by the assessee for curing the defects or omissions in the return or in the annexures filed along with the returns. In other words, the interregnum period, i.e., the period taken by the assessee for rectifying the defects or curing the omissions, does not entail the receipt of interest. Appeal dismissed.

Summary

Issues Involved:
1. Entitlement to interest on refund under Section 244A of the Income Tax Act, 1961.
2. Interpretation of Section 244A(2) concerning delays attributable to the assessee.
3. Applicability of previous judgments and principles laid down by higher courts.

Detailed Analysis:

Entitlement to Interest on Refund under Section 244A of the Income Tax Act, 1961:
The appellant, a bank, claimed interest on the refund of surplus TDS for various assessment years. The Revenue rejected this claim, leading to the filing of a writ petition. The core issue revolves around Section 244A of the Act, which stipulates that an assessee is entitled to simple interest on refunds due. The appellant argued that the delay in finalizing the return was due to defects in TDS certificates, which should not negate their entitlement to interest.

Interpretation of Section 244A(2) Concerning Delays Attributable to the Assessee:
The court examined whether delays caused by the assessee in rectifying defects in TDS certificates should exclude the period for which interest is payable on the refund. Section 244A(2) explicitly states that if the proceedings resulting in a refund are delayed due to reasons attributable to the assessee, this period should be excluded from the interest calculation. The appellant contended that the delay was not due to their fault, but the court found that any delay in curing defects in the TDS certificates is attributable to the assessee.

Applicability of Previous Judgments and Principles Laid Down by Higher Courts:
The appellant cited several judgments, including Commissioner of Income-tax v. State Bank of Travancore, Commissioner of Income-Tax v. Larsen and Toubro Ltd, and Union of India v. Tata Chemicals Limited, to support their claim for interest. However, the court distinguished these cases, noting that they did not address the specific issue of delays attributable to the assessee under Section 244A(2). In Tata Chemicals Limited, the Supreme Court emphasized that interest is a statutory obligation but also recognized that no interest is payable for the period attributable to the assessee's delay.

The court also referred to the Sandvik Asia Ltd v. Commissioner of Income Tax case, which highlighted that interest on refunds is due as per statutory provisions and that delays caused by the assessee should not result in interest liability for the Revenue.

Conclusion:
The court concluded that the appellant is not entitled to interest for the period taken to rectify defects in the TDS certificates. The interpretation of Section 244A(2) mandates that any delay attributable to the assessee must be excluded from the interest calculation. The court upheld the view expressed by the Division Bench, agreeing that the appellant's claim for interest during the delay period is untenable. Consequently, the appeal was dismissed with no order as to costs.