Court grants interest on refund, rejects Dept's interpretation, orders prompt payment, awards costs.

The court held that the petitioner is entitled to interest on the refund amount from the date of actual deposit to the date of actual refund. The Department's interpretation of the Explanation to Section 244A was rejected, and the court directed the Department to pay the interest within one month. Additionally, the court awarded Rs. 5,000 towards the petitioner's costs and left the issue of interest on interest open for the Department's consideration.

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Issues Involved:
1. Entitlement to refund of excess tax deposited.
2. Entitlement to interest on delayed refund.
3. Interpretation of Section 244A and its Explanation.
4. Department's responsibility and inaction.
5. Entitlement to interest on interest.

Detailed Analysis:

1. Entitlement to Refund of Excess Tax Deposited:
The petitioner, a company incorporated under the Companies Act, 1956, deposited income tax for the assessment years 1992-93, 1993-94, and 1994-95 as per the assessment orders. These orders were challenged, and the petitioner received marginal relief from the first appellate authority and the Income-tax Appellate Tribunal. The Tribunal's orders became final, entitling the petitioner to refunds of Rs. 7,45,163, Rs. 6,39,771, and Rs. 2,05,770 for the respective years. The petitioner pursued the refund claim for five to six years without success until the Department issued refund vouchers in 2012.

2. Entitlement to Interest on Delayed Refund:
The petitioner confined the writ petition to the grant of interest on the delayed refund. The Department initially contended that no interest was payable as per Section 244A, arguing that the petitioner did not pay any amount in excess of the demand notices issued under Section 156. However, the court found that the petitioner is entitled to interest from the date of actual deposit to the date of actual refund, rejecting the Department's interpretation.

3. Interpretation of Section 244A and Its Explanation:
The court examined Section 244A, which provides for interest on refunds due to the assessee. The Explanation to Section 244A was interpreted to mean that the date of payment of tax or penalty is the date when the amount is deposited by the assessee in response to a demand notice. The court emphasized that the Explanation cannot control the substantive provision of Section 244A(1). The court referred to the Departmental Circular No. 549, which supports the view that interest on refund is due from the date of actual payment.

4. Department's Responsibility and Inaction:
The Department's counter-affidavit admitted delays in granting refunds due to frequent changes of Assessing Officers and inaction on the part of the petitioner. The court rejected this plea, stating that it is the Department's obligation to grant refunds without the assessee having to pursue it. The court noted that the delay attributable to the assessee is referable to the late filing of returns and not to the claim of refund.

5. Entitlement to Interest on Interest:
The petitioner claimed interest on the interest amount based on the Supreme Court judgment in Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643 (SC). The court left this question open for the Department to consider, directing it to pass a speaking order in light of the Supreme Court judgment.

Conclusion:
The court concluded that the petitioner is entitled to interest on the refund amount from the date of actual deposit to the date of actual refund. The Department's interpretation of the Explanation to Section 244A was rejected. The court directed the Department to pay the interest within one month and awarded Rs. 5,000 towards the cost to the petitioner. The court also left the question of interest on interest open for the Department's consideration.

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