2024 (7) TMI 1427 - AT - Income Tax

Interest u/s. 244A - refund of advance tax paid - contention of the assessee is that the CIT(A) has allowed interest on refund of advance tax paid by the assessee for AY 2004-05, per contra stand of the department is that the CIT(A) has erred in allowing interest on MAT credit allowed by the AO in proceedings u/s. 154 - HELD THAT -CIT(A) following the decisions rendered in the case of CIT vs. Tulsyan NEC 2010 (12) TMI 23 - SUPREME COURT the decision of Hon ble Bombay High Court in the case of CIT vs. Apar Industries 2010 (4) TMI 151 - BOMBAY HIGH COURT and Bharat Aluminum 2011 (5) TMI 565 - DELHI HIGH COURT has directed AO to allow interest u/s. 244A of the Act on the refund arising from advanced tax paid by the assessee. However, in the last line of the order it appears that the CIT(A) inadvertently mentioned refund arising on account of MAT credit . It is settled position that the department is liable to pay interest u/s. 244A of the Act on the refund arising from advance payment of tax by the assessee. Since, in the instant case there is some ambiguity in the findings of the CIT(A) in allowing interest. We deem it appropriate to restore this issue back to the file of AO for the limited purpose of verification. If refund has accrued to the assessee from advance payment of tax, the AO shall allow interest to the assessee on such refund u/s. 244A - However, if it is a case of refund on account of MAT credit no interest shall be allowable. Appeal of the department is partly allowed for statistical purpose.

Summary

Issues:
Department's appeal against order allowing interest u/s. 244A of the Income Tax Act, 1961 for assessment year 2004-05.

Analysis:
The Department appealed against the order of the Commissioner of Income Tax (Appeals)-38, New Delhi, specifically challenging the allowance of interest u/s. 244A of the Income Tax Act, 1961. The Department contended that interest was wrongly allowed to the assessee on MAT credit, citing Section 115JAA of the Act which restricts interest on tax credit. On the other hand, the assessee argued that interest was claimed on the refund of advance tax paid, not on MAT credit. The assessee supported this claim by referring to the computation of income, showing advance tax paid and refunded amounts. The dispute centered on whether interest was rightly allowed on advance tax refund or MAT credit.

The Appellate Tribunal examined the arguments and previous decisions cited by both parties. The Tribunal noted that the CIT(A) had directed the AO to allow interest u/s. 244A on the refund arising from advance tax paid by the assessee, relying on relevant case laws. However, the Tribunal observed an error in the CIT(A)'s order where it mentioned "refund arising on account of MAT credit" instead of advance tax. Due to this ambiguity, the Tribunal decided to remand the issue back to the AO for verification. The Tribunal clarified that interest should be allowed on refunds from advance tax payments as per the Supreme Court's decision in CIT vs. Tulsyan NEC, but no interest should be granted on refunds related to MAT credit.

In conclusion, the Department's appeal was partly allowed for statistical purposes, and the issue of interest on refunds was remanded to the AO for proper verification and application of interest u/s. 244A based on the nature of the refund - whether from advance tax payment or MAT credit.