Tax Tribunal Allows Interest Set-Off: Assessee Can Offset Refund Interest Against Tax Interest Paid.

The Tribunal dismissed the revenue's appeal, allowing the assessee to set off interest received on income tax refunds against interest paid to the income tax department. This decision aligned with the judgment of the Hon'ble HC of Bombay, which supported the netting of such interests. The A.O was directed to permit the set off.

---

---

Issues Involved:
- Disallowance of set off interest on income tax refund
- Interpretation of the judgment of the Hon'ble High Court of Bombay regarding setting off interest received on income tax refund against interest paid to the income tax department

Issue 1: Disallowance of set off interest on income tax refund
The appeal filed by the revenue was against the order passed by the CIT-(LTU), Mumbai, which arose from the order passed by the A.O under Sec.143(3) of the Income Tax Act, 1961. The assessee, engaged in the business of manufacturing pharmaceutical products, had e-filed its return of income for A.Y. 2007-08. The case was taken up for scrutiny assessment under Sec. 143(2) of the Act. The assessee had received interest on income tax refunds and claimed set off against the interest paid to the income tax department for late payment of tax for various years. The A.O declined the set off claim, citing lack of nexus between the interest paid and received. On appeal, the CIT(A) allowed the set off, but the Tribunal initially restored the A.O's order. However, upon a miscellaneous application by the assessee, the Tribunal recalled its order.

Issue 2: Interpretation of the judgment of the Hon'ble High Court of Bombay
The authorized representative for the assessee argued that the issue was covered by the judgment of the Hon'ble High Court of Bombay in a specific case, allowing the netting of interest received on tax refunds against interest paid on taxes. The representative cited various cases supporting this contention. The Departmental Representative relied on the A.O's order. The Tribunal, after hearing both parties, found that the assessee had the right to set off interest received on income tax refunds against interest paid to the income tax department, as per the judgment of the Hon'ble High Court of Bombay. The Tribunal referred to the specific observations made by the High Court and directed the A.O to allow the claim of the assessee for setting off the interest on income tax refund against the interest paid to the income tax department.

In conclusion, the appeal of the revenue was dismissed based on the Tribunal's observations and the judgment of the Hon'ble High Court of Bombay, allowing the set off of interest received on income tax refund against interest paid to the income tax department.

---