2016 (9) TMI 1326 - AT - Income Tax

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 ... Disallowance of assessee’s claim of interest on refund - Held that:- CBDT abiding by the view expressed by the Hon'ble Supreme Court in Tata Chemicals Ltd. (2014 (3) TMI 610 - SUPREME COURT ) had issued Circular no.11 of 2016 dated 26th April 2016, wherein, it is stated that if a resident deductor is entitled for refund of tax deposited, then it has to be refunded with interest under section 244A from the date of payment of such tax. In the said Circular, Departmental Authorities have also been advised not to contest the claim of interest in appeal. Thus, in view of the decision of the Hon'ble Supreme Court as referred to above and the CBDT circular no.11 of 2016 dated 26th April 2016, we hold that the assessee is entitled to receive interest on excess TDS refunded to him from the date of payment. Interest on interest - Held that:- The primary facts relating to the payment of excess TDS to the Government account as well as claim of interest on refund are available in the records of the Department, therefore, the legal issue pertaining to the assessee’s claim of interest on interest can be decided on the basis of those facts. In that view of the matter, the learned Commissioner (Appeals) was not justified in rejecting additional ground raised by the assessee. We, therefore, restore this issue back to the file of the Assessing Officer for deciding assessee’s claim of interest on interest in the light of the facts and material on record and in consonance with the relevant statutory provisions as well as the decisions which may be relied upon by the assessee. 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.