2019 (11) TMI 1433 - HC - Income Tax

Court upholds ITAT decision on interest for delayed refunds under Income Tax Act

The High Court dismissed the appeal, upholding the ITAT's decision to direct payment of compensation in the form of simple interest on delayed refund ... Interest u/s 244-A - delayed payment of excess tax paid - Monetary limit to maintain appeal - Whether order of the Ld. ITAT for payment of compensation on delayed refund and interest paid is illegal and without jurisdiction since the statutory provisions do not provide for the same? - HELD THAT:- As decided in M/S. HEG. LIMITED [2009 (12) TMI 35 - SUPREME COURT] the interest on the delayed refund becomes part of the principle amount and the delayed interest includes the interest for not refunding the principle amount. Accordingly, it also includes the interest on the delayed refund. Revenue Authorities have been directed vide Notification dated 08.08.2019 to file appeals in income tax cases before the High Court where the monetary limit is less than ₹ 1.00 crore and where it is above the said amount, that shall not be a subject matter of appeal before the High Court. But in the Notification dated 11th July, 2018, there is an exception to the effect that in certain circumstances, an appeal should be contested on merits notwithstanding the fact that the tax effect entailed is less than ₹ 1.00 crore. Monetary limit to prefer an appeal before High Court is less than ₹ 1.00 crore, but if there is a valid question, where an Order, Notification, Instruction or Circular is to be challenged as illegal or ultra vires, an appeal could be filed before the High Court. In the present case, no such exception is available to the appellant. Appeal dismissed. Issues:1. Delayed payment of interest under Section 244-A of the Income Tax Act.2. Jurisdiction of the Income Tax Appellate Tribunal (ITAT) in directing payment of compensation on delayed refund.3. Applicability of statutory provisions in granting interest on delayed payment of excess tax paid.Issue 1: Delayed payment of interest under Section 244-A of the Income Tax Act:The appellant contested the order of the Assessing Officer, claiming interest under Section 244-A of the Act on delayed refunds. The appellant's appeal was initially dismissed by the CIT(A) and later allowed by the ITAT, directing the revenue to pay compensation in the form of simple interest on the delayed payment of excess tax paid. The appellant challenged this decision through a Miscellaneous Application, which was dismissed by the ITAT. The appellant argued that the direction for payment of compensation by the ITAT was contrary to the Supreme Court's judgment in Commissioner of Income Tax vs. Gujarat Fluoro Chemicals, which stated that only interest provided for under the statute could be claimed by the assessee.Issue 2: Jurisdiction of the Income Tax Appellate Tribunal (ITAT) in directing payment of compensation on delayed refund:The ITAT's order directing payment of compensation on delayed refunds was challenged by the Revenue through a Miscellaneous Application. The ITAT dismissed the application, stating it was misconceived and lacked merit. The respondent argued that the ITAT's findings were correct, citing the Supreme Court's judgment in Sandvik Asia Ltd. vs. Commissioner of Income Tax, which allowed for the payment of interest in cases of inordinate delay. The respondent also highlighted the provisions of Section 244-A of the Act, which they claimed included interest on delayed payment of excess tax paid.Issue 3: Applicability of statutory provisions in granting interest on delayed payment of excess tax paid:The Hon'ble Supreme Court's judgment in Commissioner of Income Tax vs. HEG Ltd. clarified that interest on delayed refunds becomes part of the principal amount, including interest for not refunding the principal amount. The Court emphasized that the delayed interest comprises the interest on the delayed refund. Additionally, the Court addressed the monetary limits for filing appeals in income tax cases before the High Court, noting exceptions for challenging the legality of provisions or orders. In this case, no such exception applied to the appellant's appeal.In conclusion, the High Court dismissed the appeal, stating that the interest on delayed refunds is part of the principal amount, as clarified by the Supreme Court. The Court found no merit in the appellant's arguments and upheld the ITAT's decision. The judgment emphasized the importance of statutory provisions and monetary limits for filing appeals, providing clarity on the issues raised in the case.