2023 (12) TMI 1165 - HC - Income Tax

Interest on the claim of the refund - petitioners could not file the return of income claiming refund in time and such return was filed after condoning delay by the respondent under section 119(2)(b) - interest on the compensation amount is paid for acquisition of the agricultural land of the petitioners - TDS deducted under wrong section as correct section for deduction of tax at source is section 194A and not section 194C - HELD THAT - It is not in dispute that the amount of refund is already paid to the petitioners and therefore, as a natural corollary, the petitioners are entitled to have the right to get interest on such amount of refund claim. Even as per sub-section(2) of section 244A of the Act, 1961, as it existed during the relevant AY 2013-2014, when the proceedings resulting in the refund are not delayed for reasons attributable to the assessee whether wholly or in part, the period of the delay so attributable only can be excluded from the period for which interest is payable under subsections (1) or (1A)or (1B) to section 244A of the Act, 1961. In the facts of the case, the words or the deductor, as the case may be, which is inserted with effect from 01.04.2017 would not be applicable as the petitioners have been permitted to file the refund claim for the AY 2013-2014 after condonation of delay and such delay in claiming the refund cannot be said to be attributable to the petitioners as the petitioners were not made aware about the deduction of tax at source by the deductor in absence of issuance of Form No. 16-A which was mandatorily required as per Rule 31(3) of the Rules. In view of the foregoing reasons, the petitions succeed and are accordingly allowed. The respondent is directed to grant interest on the refund claim from the date of deposit of the TDS till the date of refund as per the provisions of section 244A of the Act, 1961. Such exercise shall be completed within a period of 12 weeks from the date of receipt of a copy of this order. Rule is made absolute to the aforesaid extent.

Summary

Issues Involved:
1. Entitlement to interest on the refund claim after condonation of delay in filing the return of income.
2. Applicability of Circular No. 9/2015 in denying interest on belated refund claims.
3. Fault attribution for the delay in filing the return of income.

Summary:

Entitlement to Interest on Refund Claim:
The petitioners challenged the order by the Principal Commissioner of Income Tax, Rajkot, which did not grant interest on the refund claim despite the delay being condoned under section 119(2)(b) of the Income Tax Act, 1961. The petitioners argued that the delay was not attributable to them as they were not informed about the TDS deduction by the Executive Engineer of the Irrigation Department, who also failed to issue Form-16A. The Court held that the petitioners were not at fault for the delay and referenced the Supreme Court's decision in Tata Chemicals Limited, which established that the state must refund money received without right along with interest.

Applicability of Circular No. 9/2015:
The respondent contended that as per Circular No. 9/2015, no interest is admissible on belated claims of refund. However, the Court found that this circular pertains to supplementary claims of refund after the completion of assessment for the same year, which was not the case here. Therefore, the reliance on this circular to deny interest was misplaced.

Fault Attribution for Delay:
The petitioners argued that they were not at fault for the delay in filing the return of income as the Executive Engineer did not issue the mandatory Form-16A. The Court agreed, noting that the delay was not attributable to the petitioners but to the Executive Engineer's failure to provide the necessary documentation. Consequently, the Court held that the petitioners are entitled to interest on the refund claim as per section 244A of the Income Tax Act, 1961.

Conclusion:
The Court directed the respondent to grant interest on the refund claim from the date of TDS deposit till the date of refund, as per the provisions of section 244A of the Act, 1961. The exercise was to be completed within 12 weeks from the date of the order.