2024 (2) TMI 991 - HC - Income Tax

Entitlement for relief u/s 89(1) of IT Act - Employee under suspension from 01.03.1996 to 16.04.2007 got subsistence allowance for the said period. - IT department submits that petitioner preferred present petition without understanding calculations and under belief that relief u/s 89(1) has not been granted to him. However, the same was extended to petitioner and after adjusting amount, net payable amount was calculated and petitioner was found eligible for interest @ 0.5% per month according to Section 244A(1) of IT Act. Whether amount of relief granted under Section 89 of I.T. Act itself can be equated to refund amount? - HELD THAT - If assessee has received any sum in the nature of salary which was not for the assessment year, he may claim relief for not adding said amount for the purpose of assessment of income tax payable on the amount of salary received for the relevant financial year and be spread over in all relevant assessment years for the purpose of calculation of Income Tax. The relief under Section 89 is to be considered at the time of calculating payable amount of tax. There is no such provision in IT Act to refund the amount of relief granted under Section 89 as it is. There may be situation wherein even after adjusting / grant of relief under Section 89 of IT Act, assessee may be liable to pay tax. Amount of relief is adjustable or deductable from the amount of tax. Relief under Section 89 is a relief or rebate not a refund. First question is answered accordingly. Rectification of mistake u/s 154 - Relief under Section 89 of IT Act was duly extended to petitioner as claimed by him in petition and therefore, there was no mistake on the part of respondent in calculating refundable amount to the tune of Rs. 2,05,030/-. Whether petitioner is entitled for interest @ 18% p.a. despite statutory stipulation for payment of interest in Section 244(1)(b) of IT Act ? - Chartered Accountant calculated total payable amount of interest to Rs. 1,04,565/- in his both reports whereas Income Tax Department has paid interest to the tune of Rs. 1,08,650/- which is higher than amount calculated by Chartered Accountant and therefore, it cannot be accepted that Income Tax Department has committed any mistake in calculation of interest. When the rate of interest is already prescribed in the Section itself, no direction can be issued for payment of interest at any higher rate and it cannot be accepted that the interest was not calculated as per directions issued by this Court 2019 (3) TMI 143 - MADHYA PRADESH HIGH COURT Petitioner has not suggested any provision under which he is entitle to claim interest @ 18% p.a. It was also not pointed out by petitioner that if the amount of refund be considered as judgment debt, under which provision the same will fetch interest @ 18% p.a. In view of above calculations, we do not find any error, mistake, irregularity and illegality in calculation of refundable amount and interest. Accordingly, petition is dismissed.

Summary

Issues Involved:
1. Whether the amount of relief granted under Section 89 of the IT Act can be equated to the refund amount.
2. Whether the petitioner is entitled to interest at 18% p.a. despite statutory stipulation for payment of interest in Section 244(1)(b) of the IT Act.

Summary:

Issue 1: Equating Relief under Section 89 to Refund Amount
The petitioner, an ex-employee of Punjab and Sindh Bank, sought a refund of Rs. 2,81,797/- instead of Rs. 2,05,030/- and claimed interest at 18% p.a. The High Court examined whether the relief granted under Section 89 of the IT Act could be equated to a refund amount. The Court clarified that Section 89 provides relief when salary is paid in arrears or advance, allowing the spreading of income over relevant assessment years to avoid higher tax rates. The Court noted that relief under Section 89 is a rebate, not a refund. The total income for the assessment year was Rs. 20,87,089/-, and the relief granted under Section 89 was Rs. 2,81,797/-. After deducting TDS, the refundable amount was Rs. 2,05,030/-. The Court held that there was no mistake in the calculation by the respondents, as the relief under Section 89 was correctly extended.

Issue 2: Entitlement to Interest at 18% p.a.
The petitioner also claimed interest at 18% p.a. on the refundable amount. The Court referred to Section 244A(1) of the IT Act, which prescribes an interest rate of 0.5% per month (6% per annum) on refunds. The Court emphasized that payment of interest is a statutory obligation and non-discretionary. The respondents had calculated interest from 27.10.2010 to 25.04.2019 at 0.5% per month, resulting in an amount of Rs. 1,08,650/-. The Court found no error in this calculation and noted that the petitioner did not provide any legal basis for claiming interest at 18% p.a. Consequently, the Court concluded that the interest was correctly calculated as per statutory provisions.

Conclusion:
The petition was dismissed, with the Court affirming that the relief under Section 89 is not equivalent to a refund and that the interest was correctly calculated at the statutory rate of 0.5% per month. No further directions were issued for additional payments or higher interest rates.