1980 (11) TMI 91 - AT - Income Tax

Tribunal grants interest on refund from 1977, affirms right to appeal against non-grant of interest

CARBORUNDUM COMPANY. Versus INCOME TAX OFFICER.

The Tribunal allowed the appeals in part, directing the ITO to grant interest on the refund as per the directions provided. The Tribunal clarified that ... - Issues Involved:1. Entitlement to interest on refund due to the assessee.2. Applicability of Sections 240, 241, and 244 of the IT Act, 1961.3. Calculation of the refund period and interest.4. Appealability of the non-grant of interest.Detailed Analysis:Entitlement to Interest on Refund Due to the Assessee:The primary issue in these appeals is the decision of the CIT (A) declining to award interest on the amounts of refund due to the assessee. The Tribunal highlighted that under Section 244 of the IT Act, 1961, if a refund is due to the assessee and the ITO does not grant it within three months, the Central Government shall pay interest at 12% per annum on the amount of refund. The Tribunal found that the assessee was entitled to a refund as a result of the Tribunal's orders, and since the refund was not granted within the stipulated period, the assessee was entitled to interest.Applicability of Sections 240, 241, and 244 of the IT Act, 1961:Section 240 provides for the refund of the amount due to the assessee as a result of any appellate decision without the assessee having to make any claim. Section 241 allows withholding of the refund under certain circumstances with the previous approval of the Commissioner. Section 244 mandates the payment of interest if the refund is not granted within three months from the end of the month in which the order is passed. The Tribunal emphasized that the operation of these sections is automatic, and the responsibility is cast upon the ITO to act accordingly.Calculation of the Refund Period and Interest:The Tribunal noted that the refund due to the assessee arose from the orders of the Tribunal dated 31st October 1975, which directed the recomputation of income after allowing certain expenditures. However, the significant refund became due only after the Supreme Court's decision on 11th April 1977, which reversed the Madras High Court's decision and accepted the view expressed by the Tribunal. Therefore, the period for calculating interest on the refund should start from July 1977, three months after the Supreme Court's judgment. The Tribunal rejected the argument that interest should be allowed from the date of the Tribunal's order in 1975, as that order did not result in a refund due to the pending Supreme Court decision.Appealability of the Non-Grant of Interest:The Tribunal addressed the argument that the question of granting interest on the refund could not be the subject matter of an appeal. It was contended that if no order had been passed by the IAC refusing or granting interest, there would be no appealable order. The Tribunal disagreed, stating that Sections 240 and 244 clearly impose a responsibility on the Revenue to grant refunds and interest suo moto. If the Revenue fails to discharge this obligation, the assessee has a cause of action and can file an appeal. The Tribunal held that the CIT (A) rightly entertained the appeal, and the Tribunal also had jurisdiction to hear the appeal arising from the CIT (A)'s order.Conclusion:The Tribunal allowed the appeals in part, directing the ITO to grant interest on the refund as per the directions provided. The Tribunal clarified that the interest should be calculated from July 1977, following the Supreme Court's judgment, and not from the date of the Tribunal's order in 1975. The Tribunal also affirmed the right of the assessee to appeal against the non-grant of interest, distinguishing the present case from the precedent cited by the Departmental Representative.