2022 (12) TMI 1083 - AT - Income Tax

ITAT orders AO to calculate interest on refund under section 244A in favor of assessee

The ITAT allowed the appeal, directing the AO to calculate the interest payable to the assessee on the refund granted under section 244A by adjusting the ... Calculation of exact amount of interest payable to the assessee on the amount of refund granted under section 244A - HELD THAT:- The amount of refund granted to the assessee, first, has to be adjusted against the interest payable to the assessee in the given facts and circumstances. We are also conscious to the fact that the AO has made a reference in his order to the judgment of Gujarat Flouro chemicals [2012 (8) TMI 740 - SUPREME COURT] in the case on hand before us, the facts are altogether distinguishable from the facts of the case which were there before the Hon’ble Supreme Court as discussed above. In our humble understanding, we find that there was no question before the Hon’ble Supreme Court whether the amount of refund granted by the Revenue first has to be adjusted against the interest or the principal. Accordingly, no benefit can be derived by the revenue based on the judgment of Hon’ble Supreme Court cited above. As such, the issue on hand is identical to the controversy which was there before the Mumbai tribunal in [2016 (8) TMI 688 - ITAT MUMBAI] and the same has been resolved. The relevant extract of the order of the ITAT has already been reproduced somewhere in the preceding paragraph. In view of the above and after considering the facts in totality, we set aside the finding of the learned CIT (A) and direct the AO to allow the amount of interest to the assessee in the light of the aforesaid discussion and as per the provisions of law. Hence, the ground of appeal of the assessee is allowed. Issues involved:1. Calculation of interest payable to the assessee on the amount of refund granted under section 244A of the Income Tax Act, 1961.Detailed Analysis:Issue 1: Calculation of interest payable under section 244AThe appellant contested that the AO erred in not calculating the exact interest payable on the refund granted under section 244A. The appellant argued that the interest refund should have been adjusted before the tax refund. The AO and CIT (A) relied on judicial precedents like the Gujarat Flouro Chemicals case and Nima Specific Family Trust case to deny additional interest on interest. The CIT (A) dismissed the appeal, upholding the AO's decision to allow a refund of Rs. 4,32,331 only. The appellant, dissatisfied, appealed to the ITAT.The ITAT reviewed the case where the assessee, a HUF, had paid advance tax but was later assessed at nil income, leading to a refund. The dispute arose over the allocation of the refund between principal and interest. The appellant argued that the interest should be calculated on the remaining principal after adjusting the initial refund against interest payable. The revenue contended that the adjustment was correct. The ITAT analyzed the calculations and legal principles, including the Mumbai tribunal's ruling in Union Bank of India vs. ACIT. The ITAT emphasized the principle of equity and fairness in deciding that the refund should first be adjusted against interest payable to the assessee.The ITAT distinguished the case from the Gujarat Flouro Chemicals judgment cited by the AO, emphasizing that the issue of interest adjustment was not addressed in that case. The ITAT directed the AO to recompute the interest under section 244A by adjusting the refund against interest first, in line with the Mumbai tribunal's decision. The ITAT allowed the appeal, granting the assessee the interest amount based on the principles of justice and law.In conclusion, the ITAT allowed the appeal, directing the AO to calculate the interest payable to the assessee on the refund granted under section 244A by adjusting the refund against interest first, in accordance with the principles of equity and law.