2015 (8) TMI 704 - AT - Income Tax

Assessee entitled to interest on refunds under Section 244(1)(a) - Appeals partially allowed

The Tribunal ruled that the assessee is entitled to interest on refunds of Rs. 40,442/- and Rs. 11,138/- under section 244(1)(a) of the Act, based on ... Allowability of interest on refunds due and paid to the assessee - eligibility for interest on interest - the assessee was deferred corpus and was beneficiary of M/s. K. Kachradas Patel Specific Family Trust deriving @5% accumulated beneficiary share, as per Schedule-II attached and forming part of the Trust Deed - Held that:- The assessee in the present case had moved an application under section 154 of the Act for granting of interest on refunds due to the assessee under the provisions of section 244A of the Act. In view of the ratio laid down in the case of Punitaben Karsanbhai Patel Oral Specific Deferred Family Trust [2006 (7) TMI 239 - ITAT AHMEDABAD-A] and also Hon'ble Gujarat High Court [2008 (6) TMI 576 - GUJARAT HIGH COURT] in the hands of the other beneficiaries and also the order of the Tribunal in the case of M/s. Vaibhavi Discretionary Family Trust (2015 (4) TMI 3 - ITAT MUMBAI) we hold that the issue of granting of interest on refunds due to the assessee is squarely covered and consequently we direct the AO to grant the said interest to the assessee. It may be clarified at this juncture that the earlier bunch of appeals decided by the Mumbai Benches of the Tribunal in M/s. Vaibhavi Discretionary Family Trust and others was in respect of the beneficiaries listed in Schedule-I whereas the present bench of appeals relate to beneficiaries listed in Schedule-II on account of deferred corpus where the right to receive the income comes after 18 years. Following the parity of reasoning of the orders of the different Benches of the Tribunal and also following the direction of the Hon'ble Gujarat High Court (supra) we allow the grounds of appeal raised by the assessee vis-a-vis grant of interest on refunds due under section 244(1)(a) of the Act. However, the assessee is not entitled to interest on interest in view of the ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Gujarat Fluoro Chemicals [2013 (10) TMI 117 - SUPREME COURT] - Decided partly in favour of assessee. Issues Involved:1. Entitlement to interest on refund of Rs. 40,442/-.2. Entitlement to interest on refund of Rs. 11,138/-.3. Entitlement to interest on interest.Detailed Analysis:Entitlement to Interest on Refund of Rs. 40,442/-The primary issue concerns the allowability of interest on refunds due to the assessee. The Tribunal noted that the assessee, a beneficiary of M/s. K. Kacharadas Patel Specific Family Trust, had paid taxes amounting to Rs. 51,580/- for the assessment year 1984-85. However, the income was assessed on a protective basis in the hands of the assessee, while the substantive assessment was made in the hands of the trust. After the trust settled the dispute under the KVSS scheme and paid the due taxes, the AO deleted the income protectively assessed in the hands of the assessee and granted a refund of Rs. 40,442/-.The Tribunal referred to a similar case decided on 25.03.2015, where it was held that the assessee was eligible for interest on refunds. The Tribunal emphasized that the issue was covered by the decision of the Special Bench and upheld by the Hon'ble Gujarat High Court, which directed the Revenue to grant interest on refunds due to the assessees. Consequently, the Tribunal directed the AO to grant the interest on the refund of Rs. 40,442/-.Entitlement to Interest on Refund of Rs. 11,138/-The second issue pertains to the interest on the balance refund of Rs. 11,138/-. The Tribunal observed that the assessee sought interest on this refund from the date it became due until the date of actual refund. The Tribunal reiterated that the issue was identical to the one previously decided, where it was held that the assessee is entitled to interest on refunds under section 244(1)(a) of the Act. Following the earlier decision, the Tribunal directed the AO to grant interest on the refund of Rs. 11,138/-.Entitlement to Interest on InterestThe third issue concerns the assessee's claim for interest on interest. The Tribunal noted that the Hon'ble Supreme Court in the case of CIT vs. Gujarat Fluoro Chemicals (358 ITR 291) held that the interest granted under section 244A of the Act is compensatory and no additional interest on such statutory interest can be provided. Therefore, the Tribunal dismissed the assessee's claim for interest on interest.ConclusionThe Tribunal concluded that the assessee is entitled to interest on refunds of Rs. 40,442/- and Rs. 11,138/- under section 244(1)(a) of the Act, following the decisions of the Special Bench and the Hon'ble Gujarat High Court. However, the claim for interest on interest was dismissed in line with the Supreme Court's ruling. The appeals were partly allowed, granting interest on the refunds but denying interest on interest.