Assessee wins interest on excess TDS refund, remand on interest-on-interest.

The Tribunal ruled in favor of the assessee, granting interest on the refund of excess TDS from the date of payment and remanding the issue of interest on interest to the Assessing Officer for further consideration. The appeal was partly allowed.

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Issues Involved:
1. Disallowance of assessee’s claim of interest on refund.
2. Entitlement of interest on interest for delayed refund.

Issue-wise Detailed Analysis:

1. Disallowance of Assessee’s Claim of Interest on Refund:

The assessee, a joint venture engaged in the construction of commercial buildings, entered into an agreement with a third party (LIFL) for providing a specified built-up area. Due to changes in the project plan, the agreement was terminated, and the margin money paid by LIFL was returned with interest. The assessee deducted tax at source (TDS) on the interest and credited it to the Central Government. However, realizing that TDS was not required, the assessee filed revised returns and sought a refund of the excess TDS amounting to Rs. 29,27,400. Despite repeated claims and a petition to the Ombudsman, the refund was delayed, and the assessee received Rs. 16,29,669 after adjustments in August 2012 without any interest. The assessee’s applications for interest under section 244A were rejected by the Assessing Officer, and this rejection was upheld by the Commissioner (Appeals), citing voluntary payment and relevant CBDT circulars.

2. Entitlement of Interest on Interest for Delayed Refund:

The assessee argued that the delay in refund entitled them to interest under section 244A, supported by the Supreme Court’s decision in Tata Chemicals Ltd., which emphasized compensation for wrongful retention of money. The Tribunal noted that the Department accepted the excess TDS was not due and refunded it, albeit delayed. The Tribunal held that the Department’s negligence in refunding the excess TDS warranted interest payment, aligning with the Supreme Court’s stance that interest on delayed refunds is compensatory. The Tribunal also referenced CBDT Circular No. 11 of 2016, which supports interest payment on refunds from the date of payment.

Additional Ground - Interest on Interest:

The Commissioner (Appeals) rejected the additional ground for interest on interest due to procedural reasons and the initial disallowance of interest. The Tribunal, referring to the Supreme Court’s decision in National Thermal Power Corp. Ltd., allowed the additional ground, emphasizing that primary facts were available in the Department’s records. The Tribunal remanded this issue to the Assessing Officer for a decision based on the facts, statutory provisions, and relevant case law.

Conclusion:

The Tribunal ruled in favor of the assessee, granting interest on the refund of excess TDS from the date of payment and remanding the issue of interest on interest to the Assessing Officer for further consideration. The appeal was partly allowed.

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