2015 (1) TMI 790 - AT - Income Tax

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

Dy. CIT-7(3) Mumbai Versus Tata BP Solar India Ltd.

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 ... Interest on self- assessment tax u/s 244A by filing rectification application u/s 154 - rejection of claim - eligibility of assessee for interest on refund as per clause (b) of Sub-section (1) of section 244A - Held that:- Nothing in the language of the provision or the Explanation thereto, that would suggest the commencement date of the interest as the date of the processing of the return qua which the refund is being granted, i.e., as being argued before us in context of refund of self assessment tax. True, it is only upon processing of the return that the excess is determined under the procedure of assessment provided for under the Act. However, the payment of self-assessment tax assumes the nature of income tax on its payment by the assessee itself (refer: s. 140A). The date of payment of the excess is not to be confused with the date on which it is so found, i.e., to be in excess; the payment of interest being even otherwise compensatory in character. The issue involved is debatable and, thus, outside the ambit of sec. 154. However, as sought to be clarified hereinbefore, the reading of the order, the language of sec. 244A(1) is patently clear and admits of no debate. Even the argument raised by the Revenue with reference to the Explanation thereto arises only out of a misreading of the same. Under the circumstances, we, for the reasons afore-stated, confirm the order of the first appellate authority in principle. The AO shall verify if any interest has been allowed to the assessee on the processing of its return for the year or not, and allow interest u/s. 244A(1)(b) on the self-assessment tax of ₹ 150 lacs accordingly. Decided against revenue. 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.