2018 (2) TMI 350 - AT - Income Tax

Tribunal Rules in Favor of Assessee for Interest Calculation under Section 244A

The Tribunal held that the assessee was entitled to interest under Section 244A for June 2010 up to the date of the refund voucher, rejecting the ... Allowability of interest u/s 244A - CIT(A) upheld the action of the AO in not allowing interest u/s 244A for the month of June, 2010 even when the approval for refund was issued on 04.06.2010 - Held that:- Where the assessee has paid the taxes and such taxes have been refunded, the assessee is to be paid interest at the prescribed rate for every month or part of a month comprising the period from the date of payment of the tax to the date on which the refund is granted. If such period is a fraction of a month, the same shall be deemed to be a full month and the interest shall be calculated for the entire month accordingly. Therefore, in order to ascertain for how many months the assessee would be entitled to receive interest, the number of months comprised in the period shall have to be determined and the term ‘month’ has to be given the ordinary sense of the term i.e. 30 days of period and not the British calendar month as defined under section 3(35) of the General Clauses Act. The date of payment of tax demand has been stated by the ld AR as 29.02.2008, 4.02.2008 and 3.02.2009. The date on which the refund is granted is the date of the refund voucher/order which is signed and issued on 9.6.2010. The AO shall verify the date of payment of taxes and taking the date of grant of refund as 9.6.2010, determine the number of months for which the interest is payable at the prescribed rate of interest in light of above discussions and the interest so determined is directed to be paid to the assessee. Issues Involved:1. Entitlement to interest under Section 244A for the month of June 2010.2. Interpretation of the term 'month' for calculating interest under Section 244A.3. Validity of administrative approval overriding statutory provisions.Detailed Analysis:1. Entitlement to Interest under Section 244A for June 2010:The primary issue was whether the assessee was entitled to interest under Section 244A of the Income Tax Act for the month of June 2010. The assessee argued that interest should be calculated up to the date on which the refund was granted, which was 09.06.2010. The Assessing Officer (AO) allowed interest only up to May 2010 based on an administrative approval dated 04.06.2010. The CIT(A) upheld the AO's decision, referencing the Rajasthan High Court's decision in Rajasthan State Electricity Board vs. CIT & Ors. However, the Tribunal found that the law mandates interest calculation up to the date of the refund voucher, which in this case was 09.06.2010. Therefore, the assessee was entitled to interest for June 2010 as well.2. Interpretation of the Term 'Month' for Calculating Interest under Section 244A:The Tribunal examined the interpretation of the term 'month' under Section 244A and Rule 119A. The assessee contended that any fraction of a month should be considered a full month for interest calculation. The Tribunal referred to the Rajasthan High Court's decision, which clarified that interest should be calculated for every month or part of a month from the 1st of April of the assessment year to the date the refund is granted. The Tribunal also referenced the Gujarat High Court's decision in Arvind Mills Ltd., which emphasized that the term 'month' should be understood in its ordinary sense, i.e., a period of 30 days, rather than a British calendar month. Thus, the Tribunal concluded that the interest should be calculated for the entire month if the period includes a fraction of a month.3. Validity of Administrative Approval Overriding Statutory Provisions:The assessee argued that administrative approval could not override statutory provisions. The Tribunal agreed, stating that the provisions of law must be followed, and administrative approvals cannot circumvent them. The Tribunal emphasized that the law is specific in its mandate, and the AO should have allowed interest for the month of June 2010 as per the statutory provisions, irrespective of the administrative approval.Conclusion:The Tribunal set aside the order of the CIT(A) and directed the AO to verify the date of payment of taxes and determine the number of months for which interest is payable, including June 2010. The interest should be calculated at the prescribed rate for the entire period, considering any fraction of a month as a full month. The appeal of the assessee was disposed of with these directions.Order Pronounced:The order was pronounced in the open Court on 05/02/2018.