Petitioners entitled to interest on TDS refund from date of TDS deposit under Section 244A; delayed return excused

The HC allowed the petitions, holding petitioners entitled to interest on the refund of compensation for agricultural land from the date of TDS deposit until refund under section 244A. The court found the late filing of the return was condoned and the delay could not be attributed to petitioners because the deductor failed to issue Form 16A as required, and TDS was deducted under the incorrect section (194C instead of 194A). The respondent was directed to compute and pay interest within 12 weeks.

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Issues: Whether petitioners, whose belated returns and refund claims for AY 2013-14 were admitted by condonation under section 119(2)(b) of the Income-tax Act, 1961, are entitled to interest on the refunded TDS (deducted from interest payable under section 28 of the Land Acquisition Act) where the delay was not attributable to the petitioners but due to the deductor's failure to issue Form 16A and incorrect TDS reporting.

Analysis: The Court examined the statutory scheme governing condonation (section 119(2)(b)), entitlement to interest on refunds (section 244A), and the specific provision excluding TDS on interest for acquisition of agricultural land (section 194LA). Instruction No.7/2013 (following Delhi High Court directions) requires interest under section 244A not be denied where the assessee is not at fault. Circular/Instruction No.9/2015 disallows interest on certain belated supplementary refund claims but its para 6(ii) applies to supplementary claims after assessment and does not operate to deny interest where refund arose from unlawfully collected TDS and delay was caused by the deductor's lapses. The Apex Court's reasoning in Tata Chemicals and related authorities establishes that money collected and retained without right attracts interest. The factual finding that the deductor failed to issue mandatory Form 16A and misreported TDS supports that the delay in filing was not attributable to the petitioners and therefore the exclusion in section 244A(2) does not apply against them for the relevant assessment year.

Conclusion: Petitioners are entitled to interest on the refunded TDS from the date of deposit of TDS until the date of refund under section 244A of the Income-tax Act, 1961; the respondent is directed to grant such interest within 12 weeks.

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