Interest on self-assessment tax refund starts from payment date, not return processing date.

The Tribunal held that interest on the refund of self-assessment tax should be calculated from the date of payment, not from the date of processing the return. The Revenue's appeal was disposed of, affirming the direction to grant interest on the self-assessment tax of Rs. 150 lacs from the date of payment to the date of the refund under Section 244A(1)(b) of the Income Tax Act, 1961.

---

---

Issues Involved:
1. Eligibility for interest on refund under Section 244A(1)(b) of the Income Tax Act, 1961.
2. Interpretation of the commencement date for interest calculation on self-assessment tax refunds.

Issue-wise Detailed Analysis:

1. Eligibility for Interest on Refund under Section 244A(1)(b):
The primary issue in this appeal is whether the assessee is eligible for interest on the refund of self-assessment tax under Section 244A(1)(b) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) had directed the Assessing Officer to grant interest on the self-assessment tax of Rs. 150 lacs, which was found to be paid in excess upon assessment. The Revenue contested this direction, arguing that the self-assessment tax was not collected through a notice of demand, as provided in the Explanation to clause (b) of Subsection 244A(1).

2. Interpretation of Commencement Date for Interest Calculation:
The Tribunal examined the legal provisions and relevant case laws to determine the correct commencement date for calculating interest on the refund of self-assessment tax. The Tribunal noted that the refund of self-assessment tax falls under clause (b) of subsection (1) of Section 244A, which specifies that interest should be calculated from the date of payment of the tax to the date on which the refund is granted.

The Revenue argued that interest should commence from the date of processing the return, as the excess payment is determined only upon the issuance of an intimation under Section 143(1). However, the Tribunal clarified that the payment of self-assessment tax assumes the nature of income tax on its payment by the assessee itself, and interest should be calculated from the date of such payment.

The Tribunal referred to the Explanation to Section 244A(1)(b), which defines the "date of payment of tax or penalty" as the date on which the amount specified in the notice of demand issued under Section 156 is paid in excess of such demand. The Tribunal emphasized that the Explanation should harmonize with the main section and not widen its ambit.

The Tribunal also considered the Supreme Court's clarification in Modi Industries Ltd. vs. CIT, which stated that there is no right to interest on a refund except as provided by statute. The Tribunal further noted that the decisions referred to by the CIT(A) did not address the Explanation to Section 244A(1)(b).

Conclusion:
The Tribunal concluded that the refund of self-assessment tax should be considered from the date of its payment, and interest should be calculated accordingly. The Tribunal confirmed the order of the CIT(A) in principle and directed the Assessing Officer to verify if any interest had been allowed on the processing of the return. If no interest had been allowed, the AO should grant interest under Section 244A(1)(b) on the self-assessment tax of Rs. 150 lacs from the date of payment to the date of the refund.

Order:
The Revenue's appeal was disposed of on the aforesaid terms, and the order was pronounced in the open court on January 13th, 2015.

---