2024 (8) TMI 925 - AT - Income Tax

Tribunal Directs AO to Reinstate Interest on Refund; Rectification Order Deemed Unjustified Due to Inapplicable Amendments.

The Tribunal allowed the appeal of the assessee, directing the AO to reinstate the interest on the refund under section 244A of the Act that was ... Interest on refund u/s 244A - AO was of the opinion that interest u/s 244A should not be granted to the assessee for the period from April, 2006 to January, 2008 as interest is not payable to the assessee if there is any delay for the reasons attributable to the assessee - rectification u/s 154 - HELD THAT:- It is not in dispute that the assessee filed its return of income on 08/01/2008 when the due date was 30/09/2006. The returned income was Nil but the payment received from Standard Charterd Bank were considered as payments for royalty and fees for technical services. These additions were deleted by the Tribunal and while giving effect to this order of the Tribunal, interest u/s 244A of the Act was granted to the assessee. Subsequently, assuming jurisdiction u/s 154 AO was of the opinion that a mistake has crept on record while giving effect to the order of the Tribunal, by which erroneously excess interest on refund u/s 244A of the Act was granted to the assessee for the 22 months period from April, 2006 to January, 2008. The proposed amendment is to take effect from 01/06/2016 whereas the return of income has been filed by the assessee on 08/01/2008. Even otherwise, the payer Standard Chartered Bank has deducted tax at source on the impugned payments which was in the credit of the revenue from the date of deduction of the tax at source, irrespective of the date of filing of the return of income, which means that the revenue was benefitting with the tax payment when there was no liability of the assessee. The assessee claimed the refund of tax after filing the return of income and because of the appeal effect, the refund was granted with interest subsequently. We are of the considered view that such mistake cannot be rectified u/s 154 of the Act as held by the Co-ordinate Bench in the cases mentioned elsewhere. Issues:1. Whether interest on refund u/s 244A of the Act should be granted to the assessee for the period in question.Analysis:The appeal was filed against the order of the ld. CIT(A) confirming the withdrawal of interest on refund u/s 244A of the Act. The AO withdrew the interest for the period from April 2006 to January 2008, citing Section 244A(2) of the Act, which states that interest is not payable if there is a delay attributable to the assessee. The assessee contended that the impugned amendment was applicable from June 2016, whereas the return was filed in January 2008. The assessee relied on various cases to support the argument that interest granted earlier cannot be withdrawn under section 154 of the Act. The Revenue argued that since the return was belated, the AO rightly withdrew the interest for the said period.The Tribunal noted that the assessee filed the return in January 2008, with the due date being September 2006. The Tribunal had earlier deleted additions made by the AO, and interest u/s 244A was granted to the assessee. The AO, under section 154, believed that excess interest was granted for the period in question. The Finance Bill 2016 proposed amendments to section 244A, but these were to be effective from June 2016, not applicable to the assessee's case. The Tribunal found that the Revenue had already benefited from tax deductions made by Standard Chartered Bank, even before the return was filed, and the refund was claimed later. The Tribunal held that the mistake could not be rectified under section 154, as established by precedent.In conclusion, the Tribunal directed the AO to allow the interest that was withdrawn through the rectification order under section 154 of the Act. The appeal of the assessee was allowed, emphasizing that the rectification was not justified in this case.