2016 (12) TMI 1867 - AT - Income Tax

Tax Appeals Challenge Interest Computations under IT Act Sections

The appeals were filed against the CIT(A)'s order for the assessment years 1984-85 to 1988-89, focusing on the computation of interest payable to the ... Computation interest payable to it u/s 214, 244 & 244A - HELD THAT:- Since the relevant assessment under consideration is assessment year 1984-85, we do not find any infirmity in the order of CIT(A) for directing the AO to compute interest u/s.214 and 244 and not u/s.244A of the IT Act. Accordingly, we confirm the action of the CIT(A) in this regard. Grievance of the assessee in the A.Y.1984-85 pertains to applicability of provisions of Section 214(1A) for allowing interest on refunds - AO declined interest u/s.214(1A) on the plea that amendment was brought w.e.f. A.Y 1985-86, therefore, no interest was to be allowed in the A.Y.1984-85. CIT(A) confirmed the order of AO and assessee is in further appeal before us - HELD THAT:- Issue is squarely covered by the decision of Hon’ble Bombay High Court in the case of Ultramarine & Pigments Ltd [2005 (12) TMI 69 - BOMBAY HIGH COURT] wherein the Hon’ble High Court held that even though sub-section 1A was introduced in Section 214 by Taxation Law (Amendment)Act, 1984 w.e.f.1.4.1985, the same would be applicable to all the pending cases. Taxation Laws (Amendment) Act, 1984 is procedural in nature and, therefore, it will apply to all the pending actions. This being so, sub-section (1A) which was introduced in section 214 will apply to the petitioner’s case, for the assessment year 1982-83. Respectfully following the above decisions of Hon’ble Bombay High Court, we do not find any merit in the order of the lower authorities for declining the claim of interest u/s.214(1A) for the assessment year 1984-85 under consideration. Rate of interest payable as per the provisions of Section 214/244 - We have considered rival contentions and found that the CIT(A) had held that even though the provisions of section 214/244 were applicable the rate of interest given in 244A has to be considered for grant of interest on refund. Since the provisions of section 214/244 has not been repealed, therefore, the rate of interest as given in the said sections i.e., Section 214/244 in the respective years should only be applied. In view of the above, we direct the AO to allow interest u/s.214/244, as per the rate prevailing in the respective assessment years. In the assessment year 1984-85, 1985-86 and 1987-88, the assessee has not given full credit for the TDS/DITR while computing net tax payable/refundable and interest thereon. In the interest of justice, we restore this ground back to the file of the AO to verify the same and for deciding the issue afresh as per law. We direct accordingly Issues:- Appeal against the order of CIT(A) for assessment years 1984-85 to 1988-89.- Computation of interest payable to the assessee under sections 214, 244 & 244A of the IT Act.- Applicability of provisions of Section 214(1A) for allowing interest on refunds.- Rate of interest payable as per the provisions of Section 214/244.Analysis:1. The appeals were filed against the CIT(A)'s order for the assessment years 1984-85 to 1988-89. The facts revolved around the ITAT's order and subsequent refund granted to the assessee, followed by a notice for rectification of interest payable on the refunds. The AO passed orders under section 154, raising demands on account of excess payments made to the assessee.2. The primary contention of the assessee in the assessment year 1984-85 was regarding the granting of interest under section 244(1A) on the refund. The argument was that the correct amount of interest was not granted, and interest was not paid on the interest due to the assessee. The issues raised by the assessee pertained to the withdrawal of interest payable by passing rectification orders under section 154, challenging the legality of these orders, and the computation of interest under sections 214, 244, and 244A of the IT Act.3. The CIT(A) confirmed the AO's action, leading to further appeal by the assessee. The dispute in the assessment year 1984-85 centered around the applicability of Section 214(1A) for allowing interest on refunds. The AO denied interest under Section 214(1A) citing the amendment effective from AY 1985-86. However, the ITAT relied on the decision of the Hon'ble Bombay High Court, stating that the amendment applied to pending cases, thus allowing interest for the assessment year 1984-85.4. Another common grievance was the rate of interest payable under Section 214/244. The ITAT held that despite the applicability of Section 214/244, the rate of interest specified in Section 244A should be considered for granting interest on refunds. As Section 214/244 had not been repealed, the rate of interest prevailing in those sections for the respective years should be applied. Consequently, the AO was directed to allow interest under Section 214/244 as per the prevailing rates in the respective assessment years.5. Additionally, discrepancies in giving full credit for TDS/DITR while computing net tax payable/refundable and interest thereon were noted in the assessment years 1984-85, 1985-86, and 1987-88. The ITAT remanded this issue back to the AO for verification and a fresh decision in accordance with the law. Ultimately, the appeals of the assessee were allowed in part based on the above determinations.This detailed analysis encompasses the various issues raised in the legal judgment, providing a comprehensive understanding of the ITAT Mumbai's decision and the rationale behind each aspect of the judgment.