High Court sets aside orders, remands matter to consider interest adjustment under Section 244A. Only statutory interest for delays. No costs awarded.

The High Court allowed the appeal, setting aside previous orders and remanding the matter to the Commissioner of Income Tax (Appeals) to consider the specific issue of interest adjustment under Section 244A of the Income Tax Act. The Court emphasized that only statutory interest is payable for delays, and compensation is warranted for inordinate delays, not additional interest on statutory interest. The Court left substantial questions of law open, directed no costs to be awarded, and closed the connected miscellaneous petition.

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Issues:
1. Interpretation of interest under Section 244A of the Income Tax Act for a delayed refund.
2. Assessment of inordinate delay in the grant of refunds.

Analysis:
1. The appeal raised substantial questions of law regarding the adjustment of interest under Section 244A of the Income Tax Act for a delayed refund. The appellant contended that interest should be first adjusted against the refundable amount before adjusting the balance against the principal refund. The appellant challenged the order of the Commissioner of Income Tax (Appeals) and the Tribunal, arguing that the adjustment of interest was not done correctly. The Tribunal seemingly misunderstood the appellant's argument, assuming it was contesting the quantum of interest rather than the manner of adjustment. The respondent cited the Supreme Court's decision in Commissioner of Income Tax, Gujarat vs. Gujarat Fluoro Chemicals, emphasizing that only statutory interest is payable for delays, and compensation is only warranted for inordinate delays.

2. The respondent further relied on the decision in Commissioner of Income Tax vs. Brakes India Limited, where it was held that interest under Section 244A is the only payable amount by the revenue, with no additional interest on statutory interest. The appellant clarified that they were not seeking interest on interest but were concerned with the proper adjustment of interest. The High Court noted that the issue of interest adjustment was not explicitly addressed by the Commissioner of Income Tax (Appeals) or the Tribunal. Consequently, the Court allowed the appeal, setting aside the previous orders and remanding the matter to the Commissioner of Income Tax (Appeals) to consider the specific issue of interest adjustment as per the explanation to Section 140A(1) of the Act. The Court left the substantial questions of law open and directed no costs to be awarded, closing the connected miscellaneous petition.

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