2024 (11) TMI 1607 - HC - Income Tax

Refund interest on self-assessment tax follows where the payment is later found not exigible and is returned.

Interest under Section 244A(1)(b) was payable on a self-assessment tax payment made under Section 140A when the amount was later found not exigible and ... Interest on refund u/s 244A(1)(b) - Refund of self-assessment tax paid in anticipation of liability - Adhoc remittance - HELD THAT: - The Court noted that there was no dispute regarding the assessee's entitlement to refund of the amount paid in anticipation of the Department taking a similar stand in subsequent assessment years. After the appellate proceedings culminated in orders giving effect to the Tribunal's decision, the payment stood adjusted and the excess became refundable. In these circumstances, the amount paid could not be treated as a mere parking of funds; it was a tax payment which, on becoming refundable, attracted interest u/s 244A(1)(b) from the date of payment. The Court therefore agreed with the Writ Court that the assessee was entitled to such interest. [Paras 13, 14, 15] Final Conclusion: The writ appeal was dismissed. The Court upheld the order directing grant of interest on the refunded amount, holding that the remittance made in anticipation of tax liability attracted interest under section 244A(1)(b) once it became refundable. Issues: (i) Whether interest under Section 244A(1)(b) of the Income-tax Act, 1961 was payable on the amount remitted by the assessee as self-assessment tax in anticipation of tax liability and later adjusted towards advance tax/refund.Analysis: The amount was paid on 28.06.1996 under Section 140A of the Income-tax Act, 1961 in anticipation of possible tax, interest, and penalty consequences. The refund proceedings and the assessments giving effect to the appellate orders showed that the amount was not ultimately liable to tax and was adjusted against subsequent liabilities. In that situation, the statutory scheme of Section 244A(1)(b) governed the grant of interest on refund in any other case, and the fact that the claim for interest was made later did not defeat the entitlement. The interest claim was therefore supported by the refunded character of the payment and by the statutory mandate governing refund interest.Conclusion: Interest under Section 244A(1)(b) was payable on the refunded amount, and the assessee's claim was rightly accepted.Final Conclusion: The challenge to the grant of refund interest failed, and the assessee's entitlement to statutory interest on the returned amount stood affirmed.Ratio Decidendi: Where a tax payment made under Section 140A is ultimately refunded as not being exigible, interest under Section 244A(1)(b) follows as a statutory consequence, and a delayed claim for such interest does not by itself extinguish the entitlement.