Assessee entitled to interest on delayed DDT refund under section 244A despite authorities' misinterpretation

The ITAT Mumbai allowed the assessee's appeal regarding denial of interest on delayed DDT refund. The tribunal held that lower authorities misinterpreted section 244A(1) provisions and wrongly applied subsequent sections based on incorrect presumption about section 156 notice. Citing SC precedent in Union of India vs. Tata Chemicals Ltd., the tribunal emphasized that interest payment is a statutory, non-discretionary obligation. The tribunal ruled section 244A grants substantive rights, not merely procedural ones, and set aside the lower authority's order denying interest. The assessee was held entitled to interest on DDT refund from excess tax payment date until actual payment.

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Issues Involved:
1. Non-grant of Interest u/s 244A on Dividend Distribution Tax (DDT) refund.
2. Grant of interest on the principle of fairness and natural justice.

Summary:

Non-grant of Interest u/s 244A on DDT Refund:

The appellant/assessee challenged the order dated 13.09.2023 by the CIT(A), NFAC, which upheld the AO's decision not to grant interest u/s 244A on the DDT refund of Rs. 2,70,86,631/-. The AO had issued the refund without interest, claiming no provision under section 244A for such interest. The CIT(A) dismissed the appeal, holding that the issue of interest on DDT refund is debatable and not a mistake apparent from the record, thus not rectifiable u/s 154.

Grant of Interest on the Principle of Fairness and Natural Justice:

The appellant argued that the interest on DDT refund should be granted based on fairness and natural justice, as the delay was not attributable to the appellant. The CIT(A) and AO both rejected this claim, stating that DDT is an additional tax and not covered under section 244A for interest on refunds.

Judgment:

The ITAT examined the provisions of section 244A and relevant case laws, including the Supreme Court's decision in Union of India v. Tata Chemicals Ltd., which held that interest on refunds is a statutory obligation. The ITAT found that the lower authorities misinterpreted section 244A and wrongly applied the requirement of a demand notice u/s 156, which is not applicable in the case of DDT.

The ITAT concluded that the appellant is entitled to interest on the DDT refund from the date of payment of excess tax until the refund is granted. The appeal was allowed, and the orders of the lower authorities were set aside.

Order:

The appeal filed by the assessee is allowed, and the appellant is entitled to interest on the DDT refund of Rs. 2,70,86,631/- as per section 244A. The decision on ground no. 3 is rendered insignificant and disposed of accordingly. The order was pronounced in the open court on 27.05.2024.

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