2001 (2) TMI 114 - HC - Income Tax

Income-tax refund including s. 214 interest: s. 244 applies to entire refund amount, not barred as 'interest on interest'

The dominant issue was whether interest under s. 244 of the Income-tax Act is payable on a refund amount that includes interest payable under s. 214, or ... Refund - entitlement of interest u/s 244 - Whether, the Tribunal is right in holding that the assessee is entitled to interest u/s 244 on the amount of interest amount payable u/s 214 ? - HELD THAT:- It is the stand of learned counsel for the Revenue that in essence the Tribunal's order means grant of interest on interest which is not permissible under the statute. Section 244 refers to the liability fastened on the Central Government in case of failure to grant refund within the stipulated time in a case where refund is due to the assessee in pursuance of an order referred to in section 240. A combined reading of both the provisions makes the position crystal clear that it is any amount which becomes due to the assessee and not necessarily the tax component. Undisputedly, a sum which qualifies for interest became payable to the assessee on the basis of an order passed under section 240 of the Act. Merely because this was inclusive of an amount which was payable under section 214 of the Act, that would not make the position any different. It is an amount which became due to the assessee on the basis of the appellate order. Therefore, the assessee was entitled to interest in terms of section 244 of the Act. A similar view has been taken by the Gujarat High Court in D. J. Works v. Deputy CIT [1991 (10) TMI 33 - GUJARAT HIGH COURT] and Chiman Lal S. Patel [1993 (10) TMI 20 - GUJARAT HIGH COURT] though with different conclusions. Above being the position, we answer the question in the affirmative, in favour of the assessee and against the Revenue. Issues involved:The issue involves the entitlement of interest under section 244 of the Income-tax Act, 1961 on the amount of interest payable under section 214 for the assessment year 1967-68.Judgment Details:The dispute centered around the assessee's claim for interest on the advance tax paid under section 214 of the Act. The Income-tax Officer initially denied part of the interest claim, which led to subsequent appeals and orders. The Appellate Assistant Commissioner directed the Income-tax Officer to allow interest up to a certain date, which was granted to the assessee. However, the assessee further claimed interest on this amount itself under section 244, which was rejected by the Income-tax Officer and the Commissioner of Income-tax (Appeals). The Tribunal, on appeal, held in favor of the assessee, stating that the amount became refundable as a result of the appellate order falling under section 240, entitling the assessee to interest under section 244.Legal Analysis:The Revenue contended that interest on interest payable under section 240 was impermissible, citing section 237 which defines refunds based on excess tax paid. On the other hand, the assessee argued that the clear language of section 244 entitles them to interest. The court examined sections 214, 237, 240, and 244 of the Act. Section 244 deals with interest on refund where no claim is needed, specifying that the Central Government must pay interest if a refund is due to the assessee as a result of an order under section 240. The court emphasized that it is any amount due to the assessee, not just the tax component, that entitles them to interest under section 244. Relying on precedents and the statutory provisions, the court held that the assessee was entitled to interest on the amount under section 244.Conclusion:The High Court answered the question in the affirmative, in favor of the assessee and against the Revenue, affirming the entitlement of interest under section 244 on the amount determined under section 240 for the assessment year 1967-68.