2021 (7) TMI 1483 - AT - Income Tax

Computing interest on income-tax refunds under s. 244A: adjust refunds and apply Rule 119A; recalculation upheld.

The dominant issue was the correct method of computing interest on refund under s. 244A, including whether refund adjustments should be made first against ... Refund issued should first be adjusted against the interest payable u/s 244A and the balance amount be adjusted against the tax refundable - HELD THAT:- Tribunal vide its order passed had while disposing off the appeal of the revenue restored the matter to the file of the A.O with a direction to decide the issue qua computing of the interest u/s 244A afresh in light of the judgment of India Trade Promotion Organization [2013 (9) TMI 451 - DELHI HIGH COURT] On a perusal of the order of the CIT(A), we find, that he had by drawing support from the order passed by the Tribunal in the assessee’s own case for A.Y. 2003-04 [2019 (4) TMI 2190 - ITAT MUMBAI] had therein directed the A.O to follow the said decision of the Tribunal and re-compute the interest due u/s 244A of the Act and also calculate the interest as per Rule 119A of the Income Tax Rules, 1962. Decided against revenue. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether, for purposes of computing interest under section 244A, the refund amount already issued is to be adjusted first towards interest payable under section 244A and only the balance towards the tax refundable, so that further interest under section 244A is computed accordingly. (ii) Whether the appellate direction requiring the Assessing Officer to re-compute interest under section 244A (and to calculate it in accordance with Rule 119A) by following the Tribunal's decision in the assessee's own case for another assessment year suffered from any infirmity warranting interference. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i) & (ii) (Grouped): Method of adjustment of refund vis-à-vis section 244A interest, and correctness of direction to re-compute interest under section 244A Legal framework (as discussed in the judgment): The Court addressed computation of interest under section 244A and noted the direction that computation should also be carried out as per Rule 119A of the Income-tax Rules, 1962. The controversy before the Court concerned the manner of giving effect to section 244A where refunds and interest components arise across orders giving effect. Interpretation and reasoning: The Court noted that the relevant issue had earlier been remitted to the Assessing Officer to decide afresh in light of a specified judicial view, and that the appellate authority, while deciding the present appeal, relied upon and followed the Tribunal's decision in the assessee's own case for another year on the same issue. The appellate authority's direction was to follow that Tribunal decision and re-compute interest due under section 244A, also applying Rule 119A for calculation. The Court, after examining this approach, held that since the appellate authority had merely followed the binding/consistent view already taken by the Tribunal in the assessee's own case on the same question, no infirmity arose in the appellate direction. The revenue's objection that such adjustment (interest-first, then tax) would lead to additional interest under section 244A was not accepted as a ground to displace the appellate order, because the appellate order was anchored in the Tribunal's earlier decision that governed the computation methodology to be adopted by the Assessing Officer. Conclusions: The Court upheld the appellate direction requiring the Assessing Officer to re-compute interest under section 244A (with calculation as per Rule 119A) by following the Tribunal's earlier decision in the assessee's own case, and consequently rejected the revenue's challenge to the 'interest-first adjustment' approach embedded in that computation. The revenue's appeal was dismissed.