2022 (3) TMI 137 - AT - Income Tax

High Court remits interest entitlement issue under Income Tax Act back to Tribunal for fresh consideration

The High Court remitted the issue back to the Tribunal for fresh consideration regarding the entitlement to interest under Section 244A of the Income Tax ... Interest under section 244A - refund of “any amount” arises to the appellant out of advance/TDS/tax paid - HELD THAT:- As per section 244A of the Act, the assessee is entitled for interest on refund due from a particular period and except this, the assessee is not entitled for interest on interest, in case there is delay in refund payable to the assessee. This provision has been explained by the Hon'ble Supreme Court in the case of CIT Vs. Gujarat Flouro Chemicals [2013 (10) TMI 117 - SUPREME COURT] after considering its earlier judgement in the case of M/s.Sandwik Asia Ltd. vs. CIT [2006 (1) TMI 55 - SUPREME COURT] has very categorically held that the assessee is entitled only for interest provided under the Act for specified period, but not interest on interest while granting refund to the assessee u/s.244A.. Therefore, we are of the considered view that there is no merit in arguments taken by the counsel for the assessee that assessee is entitled for interest on interest while granting refund due to the assessee. Thus we are of the considered view that the assessee is not entitled for interest on interest u/s.244A of the Act, while granting refund due. The learned CIT(A), after considering relevant facts has rightly held that the assessee is not entitled for interest on interest u/s.244A of the Act. Hence, we are inclined to uphold findings of the learned CIT(A) and dismiss appeal filed by the assessee. Issues Involved:1. Entitlement to interest under Section 244A of the Income Tax Act.2. Computation method of interest under Section 244A.3. Admission of additional grounds and petition under Rule 27 of ITAT Rules.Detailed Analysis:1. Entitlement to Interest under Section 244A:The primary issue revolves around whether the assessee is entitled to the differential claim of interest under Section 244A of the Income Tax Act. The assessee argued that the interest should be calculated from the 1st day of April of the Assessment Year or the date of payment to the date on which the refund is actually granted, amounting to Rs. 16,84,867. The Commissioner of Income Tax (Appeals) and the Tribunal, however, granted only Rs. 11,46,600. The assessee relied on the Supreme Court's decision in Sandwik Asia Limited (280 ITR 643). The Tribunal held that the assessee is not entitled to interest on interest unless there is an inordinate delay in granting the refund, as per the decision of the Hon’ble High Court of Madras in M/s. Wheels India Ltd. The Tribunal dismissed the appeal, and the matter was further appealed to the Hon’ble High Court of Madras, which remitted the issue back to the Tribunal for fresh consideration.2. Computation Method of Interest under Section 244A:The assessee filed additional grounds arguing that refunds should first be adjusted against the interest in the amount refundable by the department, and only the balance amount should be adjusted against the tax to be refunded. The assessee cited Section 140A, where self-assessment tax is first adjusted against the interest payable by the assessee, and the balance is adjusted against the tax payable. The Tribunal, however, did not accept this analogy for computing interest under Section 244A, stating that the law does not provide a specific manner for such computation. The Tribunal emphasized that the provisions of Section 140A cannot be imported into Section 244A for this purpose.3. Admission of Additional Grounds and Petition under Rule 27 of ITAT Rules:The assessee filed a petition for admission of additional grounds and a petition under Rule 27 of ITAT Rules, 1963. The Tribunal rejected the petition for additional grounds, stating that the question of law raised before the Hon’ble High Court was limited to whether the appellant is entitled to interest on interest under Section 244A. The Tribunal also rejected the petition under Rule 27, clarifying that it is only applicable for respondents in an appeal to support the order appealed against on any grounds decided against them. Since the assessee was the petitioner, the Rule 27 petition was not applicable.Conclusion:The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals), concluding that the assessee is not entitled to interest on interest under Section 244A while granting a refund. The Tribunal dismissed the appeal filed by the assessee, stating that the law is clear that only the interest provided under the statute may be claimed by the assessee from the revenue, and no other interest on such statutory interest is permissible. The Tribunal also noted that its earlier decision in the assessee's own case for the assessment year 1989-90, which directed the manner of computing interest, exceeded its authority and scope of the issue before the Hon’ble High Court.