2022 (10) TMI 1107 - AT - Income Tax

Delay in claiming subsidy affects interest calculation; Tribunal directs interest payment from ground raised to CIT(A) decision.

The Tribunal held that the delay in claiming the TUFS subsidy as a capital receipt was attributable to the assessee. Consequently, the period from the ... Interest u/s 244A on refund of taxes in respect of TUFS Subsidy - whether the proceedings resulting in refund are delayed for reasons attributable to the assessee and the period of such delay which shall be excluded from the period ? - claim of the Revenue is that the delay is attributable to the assessee as the assessee has not raised any such claim either in the return of income or during the course of assessment proceedings and the same has been claimed by way of additional ground of appeal before the CIT(A) by virtue of which the claim of the assessee has been allowed by the CIT(A) and refund of taxes have become due to the assessee and therefore, the assessee is only eligible for interest from the date of passing of the order of the ld CIT(A) i.e, 18/01/2019 to the date of issue of refund i.e, 13/08/2019 which has already been granted by the AO, and the period starting from the first day of assessment year i.e, 01/04/2011 to 18/01/2019 has rightly been excluded by the AO while computing interest in terms of provision of Section 244A(2) HELD HAT:- The assessee has filed an appeal before the CIT(A) on 26.03.2014 and during the course of appellate proceedings, the assessee took an additional ground of appeal for the first time before the Ld. CIT(A) vide its letter dated 04.10.2016 stating that TUFS subsidy which has been received by the assessee from the Ministry of Textiles is exempt from tax and should be reduced from the assessed income. CIT(A) vide order admitted the additional ground of appeal and held that the TUFS subsidy received by the assessee company from the Ministry of Textiles, Government of India be treated as capital receipt and directed the AO to reduce the amount of TUFS subsidy received during the year from total assessed income. Therefore, the assessee shall be eligible for interest on the refund amount with effect from 04/10/2016 (and not from 01/04/2011) till the date of grant of refund. We make it clear that for the prior period to 04/10/2016, it shall not be eligible for interest as the delay is attributable to the assessee. The time period taking by the ld CIT(A) in disposing off the appeal cannot be attributed to the assessee and the said period cannot be excluded. Admittedly, the assessee has already been allowed interest from the date of passing of the order of the ld CIT(A) i.e, 18/01/2019 to the date of issue of refund i.e, 13/08/2019. Therefore, the assessee shall be eligible for interest for remaining period starting 04/10/2016 to 18/01/2019 and accordingly, the AO is directed to allow the interest for the said period and the order of the ld CIT(A) thus stand modified. The appeal of the Revenue is partly allowed in light of aforesaid directions. Issues Involved:1. Entitlement to interest under Section 244A on refund due to TUFS subsidy treated as capital receipt.2. Attribution of delay in refund to the assessee.3. Applicability of Section 244A(2) in excluding the period for interest calculation.Issue-wise Detailed Analysis:1. Entitlement to Interest under Section 244A:The primary issue was whether the assessee is entitled to interest under Section 244A on the refund arising from the TUFS subsidy, which was treated as a capital receipt for the first time at the appellate level. The Tribunal noted that the TUFS subsidy was claimed as exempt during the appellate proceedings and not during the initial return filing or assessment proceedings. The Ld. CIT(A) had directed that the TUFS subsidy received from the Ministry of Textiles be treated as a capital receipt, which was upheld by the Tribunal in a previous order.2. Attribution of Delay in Refund to the Assessee:The Revenue argued that the delay in issuing the refund was attributable to the assessee because the claim regarding the TUFS subsidy was not made in the original return or during assessment proceedings but was introduced as an additional ground during the appeal. The AO had allowed interest on the refund only from the date of the CIT(A)'s order to the date of the actual refund, excluding the period from the start of the assessment year to the CIT(A)'s order, attributing this delay to the assessee.3. Applicability of Section 244A(2):The Tribunal discussed whether the delay in proceedings resulting in the refund was attributable to the assessee under Section 244A(2). The Tribunal referred to various High Court decisions, including the Hon'ble Gauhati High Court in CIT vs. Assam Roofing Ltd. and the Hon'ble Punjab & Haryana High Court in National Horticulture Board vs. Union of India, which supported the view that if the delay is attributable to the assessee, the period should be excluded from interest calculation. However, the Tribunal also considered decisions from other High Courts that favored the assessee, such as the Hon'ble Gujarat High Court in Ajanta Manufacturing Ltd. vs. DCIT and the Hon'ble Bombay High Court in CIT vs. Melstar Information Technology Ltd., which held that the mere act of making a claim at a later stage does not constitute a delay attributable to the assessee.Conclusion:The Tribunal, bound by the jurisdictional High Court's decision, followed the Hon'ble Punjab & Haryana High Court's ruling in National Horticulture Board vs. Union of India. It concluded that the delay in claiming the TUFS subsidy as a capital receipt was attributable to the assessee and thus excluded the period from the start of the assessment year to the date the additional ground was raised before the CIT(A) from the interest calculation. Consequently, the assessee was entitled to interest from the date the additional ground was raised (04/10/2016) to the date of the CIT(A)'s order (18/01/2019), and the AO was directed to allow interest for this period. The appeal of the Revenue was partly allowed in light of these directions.