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TMI Blog2024 (9) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... to section 140A(1), we note that there is no such specific provision u/s. 244A with respect to adjustment of refund, already issued for computing amount of interest payable to assessee on the amount of refund due. The law is silent on this issue. In our mind, under these circumstances, it would be just and fair that the same principle is applied while granting the refund, as is applied while collecting the tax. We have perused the judicial precedents referred by assessee as quoted above and notice that Coordinate Benches have consistently held after taking into consideration the decision relied upon by the ld. CIT (DR) that ld. Assessing Officer is required to adjust the interest component first and then the taxes for the purpose of calculating interest u/s. 244A of the Act. Following the Rule of Consistency, we hold that assessee is entitled to interest on the unpaid refund in accordance with the principle laid down in the aforesaid decisions relied upon by the assessee. According to us, the manner in which the AO has adjusted the refund is not correct. Assessee has furnished detailed working of the manner in which the interest u/s. 244A ought to have been computed by the AO. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act needs to be computed. 2. Erred in not directing the AO to compute the interest u/s 244A of the Act by first adjusting the amount of refund already granted towards the interest due to the appellant and balance left, if any, to be adjusted towards the tax component. 3. The sole issue involved in the appeal filed by the Revenue is in respect of adjustment of refund arising out of the order giving effect to the order of appellate authority, which whether should be first adjusted against interest payable to the assessee and balance if any, to be adjusted towards tax payable for the purpose of calculating interest u/s. 244A of the Act or other-wise. 3.1. In ground no.3, Revenue has contested that direction given by the ld. CIT(A) to the ld. Assessing Officer for computing refund and interest u/s. 244A would amount to paying compound interest, i.e., interest on interest to the assessee, even though assessee had given its NOC before passing of rectification order u/s. 154 of the Act. 3.2. Assessee is in appeal on the same issue raising the ground that ld. CIT(A) has not given a clear finding as to how the interest u/s. 244A needs to be computed, i.e., by first adjusting the amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xes which were due to be refunded and then the balance towards interest receivable by the assessee. According to the assessee, the method of working of interest by the AO is incorrect and interest u/s 244A should be computed by first adjusting the amount of refund already granted towards the interest component and balance left, if any, to be adjusted towards the tax component 5. Before us, ld. Counsel for the assessee referred to notice issued u/s. 154 of the Act, dated 21.02.2017, wherein at para 2, particulars of mistake proposed to be rectified mentions due to arithmetical mistake total income was computed at Rs. 10428.23 lakhs instead of correct income of Rs. 10458.23 lakhs . He thus, pointed out that there is no mention about rectification of computing the interest u/s. 244A. He also referred to the reply furnished by the assessee vide its letter dated 28.02.2017, whereby assessee submitted its no objection for the proposed rectification mentioned in the said notice. For ease of reference, both the copy of notice u/s. 154 and reply furnished by the assessee are reproduced below: 6. In this context, ld. CIT, DR through her written synopsis submitted that upward revision in inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Assessee submitted a comparative working showing adjustment of refund issued to the assessee on, both as claimed by the assessee and as claimed by the Revenue. The narrative of the said working furnished by the assessee in its written submission is reproduced hereunder: a. Principal tax of Rs 5,27,73,546 was refundable to the Assessee as on 01.04.1997. Interest u/s 244A of the Act of Rs 63,32,826 has been computed on this principal tax amount from 01.04.1997 to 27.03.1998. A refund of Rs 4,10,29,814 was issued to the Assessee on 27.03.1998, against total refund due of Rs 5,91,06,372 (i.e. principal amount of Rs 5,27,73,546 and interest u/s 244A of the Act of Rs 63,32,826). The Assessee adjusted the refund issued first towards interest u/s 244A of the Act of Rs 63,32,826 and balance towards principal tax of Rs 3,46,96,988 (i.e. Rs 4,10,29,814-Rs 63,32,826). Thus, as on 27.03.1998, no interest u/s 244A of the Act was due to be paid to the Assessee. Further, principal tax of Rs 1,80,76,558 (i.e. Rs 5,27,73,546-Rs 3,46,96,988) was pending to be issued to the Assessee. b. As per the Department, entire refund of Rs. 4,10,29,814 was adjusted towards Principal amount of tax. Thus, as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided this issue in favour of the assessee after taking into consideration, decisions by higher forums. (1) Union Bank of India v ACIT (2016) 162 ITD 142 (Mum ITAT) (refer Pg 11 to 18) In this case, the division bench of the Mumbai ITAT after considering the decision of SC in case of Gujarat Fluoro Chemicals (supra) followed the decision of Delhi HC in case of India Trade Promotion Organisation (supra) and held that adjustment of refund shall be first towards interest receivable u/s 244a and balance towards principal amount of tax and same does not result into payment of interest on interest. (refer para 3.8 of the decision) (2) Grasim Industries Ltd V DCIT (2021) 188 ITD 675 (Mum ITAT) (refer Pg 19 to 23) In this case, the division bench of the Mumbai ITAT following the decision of Union Bank of India (supra) held that the refund granted shall be first appropriated or adjusted against 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. (refer para 8 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me principle is applied while granting the refund, as is applied while collecting the tax. 9.2. On the reliance placed by the ld. CIT, DR in the case of decision of Gujarat Fluoro Chemicals (supra), assessee had distinguished it by submitting that Hon ble Supreme Court had held that assessee shall be compensated due to prejudice caused to the assessee on account of inordinate delay in payment of interest of refund which cannot be equated with interest on interest. It further held that in view of insertion of section 244A, assessee shall be granted the interest on refund as provided by the statute only. According to the assessee, it is not claiming interest on interest but its claim is that the part refund granted shall be first adjusted against interest due u/s. 244A on the date of grant of refund and balance shall be adjusted against the principal amount of tax due. Hence, the said decision is distinguishable. 10. We have perused the judicial precedents referred by assessee as quoted above and notice that Coordinate Benches have consistently held after taking into consideration the decision relied upon by the ld. CIT (DR) that ld. Assessing Officer is required to adjust the intere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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