Tribunal restores interest under Section 244A, denies interest on interest.

The Tribunal held that the AO's initial order granting interest under Section 244A was correct and the subsequent withdrawal of interest was not sustainable. The Tribunal set aside the AO's order and restored the interest granted under Section 244A. However, the Tribunal concluded that the assessee was not entitled to interest on interest for the delayed refund, as Section 244A does not provide for such compensation. The appeal of the assessee was partly allowed, setting aside the order withdrawing interest under Section 244A, but denying interest on interest.

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Issues Involved:
1. Legality of the order passed under Section 154 of the IT Act withdrawing interest under Section 244A on the refund due from self-assessment tax.
2. Entitlement of the assessee to interest on interest on delayed refund.

Issue-wise Detailed Analysis:

1. Legality of the Order Passed under Section 154 of the IT Act:
The primary issue revolves around whether the AO's order withdrawing the interest under Section 244A on the refund due from self-assessment tax under Section 140A of the IT Act was legally sustainable. The assessee contended that the CIT(A) erred in confirming the withdrawal of interest under Section 244A, arguing that this was a debatable issue and therefore not rectifiable under Section 154.

Findings and Reasoning:
- The assessee filed its return for AY 1996-97, including a self-assessment tax payment of Rs. 75 lakhs. The return was processed, and a refund of Rs. 1,32,65,511 was granted without interest under Section 244A.
- The assessee applied for rectification under Section 154, seeking interest on the refund, which was initially granted by the AO but later withdrawn.
- The CIT(A) upheld the withdrawal, citing that the issue was debatable and thus not rectifiable under Section 154. The AO's subsequent rectification order was challenged by the assessee.

Judicial Precedents and Legal Provisions:
- The Tribunal considered various judicial precedents, including the Supreme Court's decision in Modi Industries Ltd. vs. CIT, which held that interest under Section 244A is payable on refunds irrespective of the nature of payment.
- The Tribunal also considered the Board's Circular No. 549, which explained the provisions of Section 244A.
- The Tribunal concluded that the non-granting of interest on the refund was a mistake apparent from the records and rectifiable under Section 154.

Conclusion:
The Tribunal held that the AO's initial order granting interest under Section 244A was correct and that the subsequent withdrawal of interest was not sustainable. The Tribunal set aside the AO's order dated 16th March 2000 and restored the interest granted under Section 244A.

2. Entitlement of the Assessee to Interest on Interest on Delayed Refund:
The second issue pertained to whether the assessee was entitled to interest on the interest due to the delayed payment of the refund.

Findings and Reasoning:
- The assessee raised an additional ground claiming interest on interest, which was admitted by the Tribunal.
- The Tribunal considered various judicial precedents, including the Supreme Court's decision in Sandvik Asia Ltd. vs. CIT, which held that the Revenue must compensate the assessee for delays in refund payments.

Judicial Precedents and Legal Provisions:
- The Tribunal noted that the provisions of Section 244A do not explicitly provide for interest on interest.
- The Tribunal referred to the decision of the Ahmedabad Bench in Gujarat State Fertilizers & Chemicals Ltd. vs. CIT, which held that no interest on interest is allowable under the Act.

Conclusion:
The Tribunal concluded that the assessee was not entitled to interest on interest, as the provisions of Section 244A do not provide for such compensation. The Tribunal decided this issue against the assessee.

Final Outcome:
- The Tribunal set aside the AO's order withdrawing the interest granted under Section 244A on the refund due from self-assessment tax.
- The Tribunal held that the assessee was not entitled to interest on interest for the delayed refund.

Majority Opinion:
- The Third Member (Shri R.P. Garg, Senior Vice President) agreed with the view taken by the learned JM regarding the legality of the withdrawal of interest under Section 244A.
- The Third Member agreed with the view taken by the learned AM regarding the issue of interest on interest.

Final Order:
- The appeal of the assessee was partly allowed, with the order of the AO withdrawing interest under Section 244A being set aside.
- The issue of interest on interest was decided against the assessee.

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