Court Grants Partial Waiver of Interest on Capital Gains Tax

The court partially granted the waiver of interest on capital gains tax, reducing the interest rate to 6% per annum and directing the Income Tax Department to issue a revised demand. The Official Assignee was instructed to pay the revised amount and release any surplus to the Applicant. The application for the refund of excess tax remittance was dismissed, with no costs awarded.

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Issues Involved:
1. Waiver of interest on capital gains tax.
2. Immediate release of fixed deposit funds held by the Official Assignee.
3. Refund of excess tax remittance.

Issue-wise Detailed Analysis:

1. Waiver of Interest on Capital Gains Tax:
The ex-insolvent sought a waiver of interest on capital gains tax amounting to Rs.1,37,03,299/- for the assessment year 2011-2012, with the total interest demand being Rs.2,42,27,764/-. The court considered the jurisdiction to grant waiver under Section 7 of the Presidency Towns Insolvency Act, 1909, as affirmed by a Division Bench. The Applicant argued that the estate was under the Official Assignee's control when the tax liability accrued, and she had taken all reasonable measures to ensure timely tax payment, including informing the Official Assignee in January 2007 and filing Application No.433 of 2009. The Official Assignee contended that they were not a representative assessee under the I-T Act and highlighted procedural delays and ambiguities, including the late issuance of a PAN in 2019. The Income Tax Department maintained that interest was justified due to delayed tax remittance and cited relevant case law to support their claim. The court found merit in the Applicant's efforts but acknowledged the Income Tax Department's reasonable basis for interest, though it noted errors in the interest computation period. The court directed the Department to recalculate interest at 6% per annum from the date of sale (29.07.2011) to the tax remittance date (29.03.2016), excluding compound interest, penalties, and interest for non-payment of advance tax.

2. Immediate Release of Fixed Deposit Funds Held by the Official Assignee:
The court noted that 20% of the sale proceeds were deposited in an interest-bearing account as per the order in Application No.433 of 2009. The Official Assignee had remitted the principal tax liability on various dates between 2016 and 2018. The court directed the Income Tax Department to issue a revised interest demand and instructed the Official Assignee to pay the revised amount within 30 days. Any surplus after discharging the liability was to be paid to the Applicant/ex-insolvent.

3. Refund of Excess Tax Remittance:
The Applicant sought a refund of Rs.4,00,000/- for excess tax remittance in March 2018. The court dismissed this application, noting that the assessment orders were not challenged and the tax liability was settled. Therefore, the refund request was not entertained.

Conclusion:
The court partially granted the waiver of interest by reducing the interest rate to 6% per annum and directed the Income Tax Department to issue a revised demand. The Official Assignee was ordered to pay the revised amount and release any surplus to the Applicant. The application for refund of excess tax remittance was dismissed. No costs were awarded.

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