Interest on tax refund allowed under Section 244A; delay not attributable to assessee, exclusion under 244A(2) rejected

HC held that the assessee was entitled to interest under Section 244A on refund arising from advance tax payment. The delay in processing the refund could not be attributed to the assessee merely because original advance tax challans were submitted after filing the return, particularly when the returned loss was accepted and refund granted, and the assessment was completed thereafter granting benefit of advance tax. As there was no finding by the AO or appellate authority that any part of the delay was caused by the assessee, exclusion under Section 244A(2) was unjustified, and interest was directed to be paid.

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1. ISSUES PRESENTED AND CONSIDERED

(1) Whether the period from 1 April 2001 to 28 February 2002 could be excluded from interest computation on refund of advance tax under Section 244A(2) on the ground that the assessee submitted original advance tax challans only on 19 February 2002.

(2) Whether the assessee was entitled to refund of tax deducted at source and interest thereon under Section 244A despite non-claim of TDS in the return of income and non-furnishing of TDS certificates along with the return.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (1): Exclusion of period for interest on refund of advance tax under Section 244A(2)

Legal framework

Section 237 provides that where tax paid by or on behalf of a person exceeds the amount properly chargeable for that assessment year, such person is entitled to refund of the excess.

Section 244A provides for payment of simple interest on any amount of refund due to the assessee, in the manner set out in sub-section (1).

Section 244A(2) provides that where the proceeding resulting in refund is delayed for reasons attributable to the assessee, the period of such delay shall be excluded from the period for which interest is payable.

Interpretation and reasoning

The Court held that, on the facts, the proceeding resulting in the refund could not be said to have been delayed for reasons attributable to the assessee.

It was noted that although the assessee submitted the original advance tax challans of Rs. 7,00,00,000/- on 19 February 2002 and not along with the return filed on 31 October 2001, the intimation under Section 143(1)(a) accepting the returned loss and granting refund was issued only on 28 March 2003 and the assessment order under Section 143(3) was passed on 30 March 2004.

The benefit of the advance tax payment was in fact allowed to the assessee in the intimation and assessment.

The Court emphasised that there was no finding either by the Assessing Officer or by the authority under Section 244A(2) that there was delay in the proceeding resulting in the refund, nor any finding as to how such delay, if any, was attributable to the assessee.

The Court followed and agreed with a co-ordinate Bench decision which, on identical facts, had held that such delay in furnishing advance tax challans could not be treated as delay attributable to the assessee for the purposes of Section 244A(2).

Conclusions

The period from 1 April 2001 to 28 February 2002 could not be excluded from interest computation under Section 244A(2), as there was neither a recorded finding of delay in the refund proceeding nor any determination that such delay was attributable to the assessee.

The assessee was held entitled to interest on refund of advance tax of Rs. 7,00,00,000/- under Section 244A for the period 1 April 2001 to 28 February 2002, subject to the department independently computing the quantum of interest payable.

Issue (2): Entitlement to refund of TDS and interest thereon under Section 244A

Interpretation and reasoning

The impugned order had disallowed the claim for refund of TDS and interest thereon on the grounds that no TDS claim was made in the return of income and no TDS certificates were attached with the return, though TDS certificates were subsequently filed.

While setting aside the impugned order under Section 244A(2), the Court, in terms of the relief sought, directed grant of refund of the amount of tax deducted at source along with interest thereon under Section 244A from 1 April 2001 till the date of refund.

The Court clarified that it was not endorsing the correctness of the interest figures computed by the assessee and that the department was at liberty to independently calculate the interest and either pay or give due credit.

Conclusions

The disallowance of TDS refund and interest thereon on the ground of non-claim in the return and non-furnishing of TDS certificates with the return was set aside.

The authority was directed to grant refund of the TDS amount along with interest under Section 244A, with the quantum of interest to be computed by the department in accordance with law.

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