2023 (4) TMI 89 - AT - Income Tax

Tribunal overturns ACIT's order, grants interest on refund to assessee under Section 244A

SBI Capital Markets Limited Versus Asst. Commissioner of Income Tax LTU Circle-1, Mumbai

The Tribunal set aside the order passed by the Assistant Commissioner of Income Tax under Section 154, allowing the appeal of the assessee. It affirmed ... Claiming interest u/s 244A on the excess tax deposited by the assessee under self-assessment in the impugned assessment year - AO withdrawing the benefit of interest u/s 244A allowed to the assessee u/s 154 - Scope of amended provisions of section 244A inter alia inserting clause (aa) - HELD THAT:- Amendment by the Finance Act, 2016 was effective from 01/06/2016. In the instant case, the assessment order u/s 143(3) of the Act was passed on 10/03/2015 and the rectification order u/s 154 of the Act granting interest u/s 244A of the Act was passed on 12/05/2015, that is much prior to the amendment. Hence, the amended provisions would have no application. From the reading of the provisions of section 244A as were applicable to the AY under appeal it is unambiguous that minimum limit of 10% of refund would not be applicable on payment of interest on refund. Thus, in facts of the case, the relevant provisions of section 244A of the Act as were applicable to the assessee we find that the AO has erred in withdrawing the benefit of interest u/s 244A allowed to the assessee vide order u/s 154 of the Act. The impugned order is set aside and appeal of the assessee is allowed. Issues Involved:1. Validity of the order passed under Section 154 of the Income Tax Act, 1961.2. Entitlement to interest on refund under Section 244A of the Income Tax Act, 1961.Summary:Issue 1: Validity of the Order Passed Under Section 154The assessee challenged the order of the Assistant Commissioner of Income Tax (ACIT) passed under Section 154 dated 09-March-2017, arguing that it involved a debatable point of law. The assessee contended that the order should be quashed as it was bad in law and requested a refund including interest under Section 244A of the Income Tax Act, 1961.The Tribunal noted that the original assessment order under Section 143(3) was passed on 10/03/2015, and a rectification petition under Section 154 was allowed on 12/05/2015, granting the assessee TDS credit and interest under Section 244A. However, the ACIT issued a notice under Section 154/155 on 28/10/2016 to rectify the order and withdraw the interest granted under Section 244A, stating that the refund was less than 10% of the tax computed under regular assessment.The Tribunal found that the provisions of Section 244A were amended by the Finance Act, 2016, effective from 01/06/2016, which imposed a condition that interest would not be allowed if the refund arising out of TDS/TCS, advance tax, and self-assessment tax was less than 10% of the tax liability. However, this amendment was not applicable to the assessee's case as the assessment and rectification orders were passed before the amendment date.Issue 2: Entitlement to Interest on Refund Under Section 244AThe assessee argued that the refund determined in the rectification order dated 12/05/2015 arose out of self-assessment tax paid under Section 140A, and not TDS. The assessee cited the decision of the Hon'ble Jurisdictional High Court in the case of Stock Holding Corporation of India Limited vs. N.C. Tiwari CIT, which held that tax paid on self-assessment falls under Section 244A(1)(b), and interest is payable on the refund of excess self-assessment tax.The Tribunal examined the provisions of Section 244A as they were applicable before the amendment and various judicial decisions. It concluded that the minimum limit of 10% for refunds did not apply to interest on self-assessment tax refunds under Section 244A(1)(b). Therefore, the ACIT erred in withdrawing the interest allowed to the assessee in the rectification order dated 12/05/2015.Conclusion:The Tribunal set aside the impugned order and allowed the appeal of the assessee, affirming that the assessee was entitled to interest on the refund under Section 244A as per the provisions applicable at the time. The order was pronounced in the open court on March 21, 2023.