2020 (2) TMI 1620 - AT - Income Tax

Proper refund adjustment: Tribunal directs interest first, then tax.

Assistant Commissioner of Income Tax, Large Taxpayer Unit, Chennai Versus M/s. Brakes India Ltd.,

The Tribunal allowed the Revenue's appeal and accepted the assessee's petition under Rule 27 of ITAT Rules. It directed the Assessing Officer to adjust ... Grant of interest u/s 244A - refund granted to the assessee - HELD THAT:- The law is very well settled that the assessee is is not entitled for interest on interest. However, the manner in which any refund, which has been granted partly to the assessee is to be adjusted first towards interest due to the assessee, and remaining portion should be adjusted towards the tax due to the assessee. This adjustment, if made, would be just and fair and would also be in consonance with the provisions of section 140A of the Act, which talks about the manner of adjustment of amounts paid by the assessee to the Income Tax Department. We find lot of force in the Petition under Rule 27 of ITAT Rules filed by the assessee, which deserve to be admitted and the prayer sought for thereon deserves to be accepted as such. We accordingly direct the Ld. A.O.to first adjust the part of the refund granted to the assessee towards interest under Section 244A of the Act due to the assessee and the remaining portion if any, shall be adjusted towards the tax portion due to the assessee. This would be in spirit and in consonance with the provisions of section 140A when taxes are paid by the assessee to the Income Tax Department. The same pattern of Section 140A should be followed by the Income Tax Department while granting refund including interest under Section 244A of the Act. Accordingly, the appeal of Revenue is allowed and Petition under Rule 27 of ITAT Rules preferred by the assessee is allowed. Issues: Grant of interest under Section 244A of the ActAnalysis:The appeal of the Revenue pertains to the grant of interest under Section 244A of the Act. The Tribunal referred to previous cases where orders were set aside and remitted back for reconsideration. The assessment was revised to give effect to the Tribunal's order, resulting in a refund to the assessee. However, a dispute arose regarding the adjustment of the refund and consequential interest under Section 244A. The assessee contended that interest should be calculated on the outstanding tax after adjusting the refund against the interest due. The Tribunal agreed with the assessee's argument and directed the Assessing Officer to adjust the refund first towards interest under Section 244A, followed by any remaining amount towards the tax due. This approach aligns with the provisions of section 140A of the Act, ensuring a fair adjustment process. The Tribunal allowed the appeal of the Revenue and accepted the petition filed by the assessee under Rule 27 of ITAT Rules.In conclusion, the Tribunal's decision clarified the manner in which refunds should be adjusted against interest and tax due to the assessee, emphasizing compliance with the provisions of the Income Tax Act. The ruling provided a structured approach to the adjustment process, ensuring fairness and adherence to legal requirements.