AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (9) TMI 797
X X X X Extracts X X X X
X X X X Extracts X X X X
....der u/s. 143(3) rws 250 dated 06/06/2011 and said refund is entitled to interest u/s. 244A(1). 3. The Ld CIT(A) ought to have appreciated that a refund arising on account of order of CIT(A) is also squarely covered by the expression "Where refund of any amount becomes due to the assessee under this Act", as appearing in sec 244A(1) and hence entailed interest under said provision. The distinction sought to be made by Ld CIT(A) is artificial and unwarranted. 4. The Ld CIT(A) erred in stating that the provisions of 244A(3) are not applicable without appreciating the fact that the said provisions are applicable as the refund was increased consequent on the order of CIT (A). 5. Without prejudice to above, the Ld CIT(A) ought not to have justified the stand of AO in not letting the matter viz 'determining the period to be excluded from the period for which interest is payable' be decided by CIT as required in sub sec 2 to sec 244A. The reasoning by Ld CIT(A) that as no interest was payable at the first instance, the question of reference to CIT would not arise is incorrect and unwarranted. 6. The Ld CIT(A) ought to have appreciated that the unilateral withholding of interest by AO o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nferred in the said section and hence the order passed thereof is liable to be struck down. 7. Without prejudice to the above, interest is compensation for money lying with the department and as these amounts were with the department interest ought to have been granted. Your Appellant craves leave to add amend and or vary grounds of Appeal before or during the course of hearing. Assessee,bank filed its return of income on 31.10.2001 declaring total income of Rs. 14, 66,97, 81,957/. The AO competed the assessment on 13.2.04 u/s. 133 of the Act determing the income of assessee at Rs. 26,35,49,42,360/ 2. Effective ground of appeal is about not granting of interest u/s.244A of the Act. The brief facts of the case are that the assessee had offered "interest accrued but not due on securities" as interest income on accrual basis in its return of income and had paid taxes accordingly,that later on it was claimed that the portion of interest income which had not become due to the bank as on 31.03.2001 should not be taxed during the year under consideration,that a note in that regard was inserted to the Return of Income,that the assessee had paid tax on accrual basis. The AO while passing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as taxable income in its return of income and had paid taxes accordingly,that the AO accepted the fact and thus there was no refund of any amount due on that account on passing order u/s 143(1) and order u/s 143 (3) of the Act,that the refund became due for the first time because of FAA's order,that there was no increase or reduction in the refund of amount due,that the assessee was entitled to claim refund u/s.244A of the Act. He relied upon the judgment of Assam Roofing Ltd. (330 ITR 87) and dismissed the appeal filed by the assessee. 4. During the course of hearing before us,Authorised Representative(AR)stated that the AO had ignored the specific direction issued by CIT,that the stand taken by the AO was contrary to the decisions of south India Bank Ltd. (340 ITR 574), ACC Ltd. (2012TIOL120ITATMum) and Union Bank of India (ITA/No.2522/Mum/2011). With regard to decision,relied upon the FAA i.e. Assam Roofing Ltd.(supra) the AR stated that the above mentioned decision was distinguishable, in that case assessee had voluntarily paid tax on subsidy, that the assessee had made the claim in the return itself by way of notes, that it did not pay any tax,that it did not admit that the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... account of "interest accrued but not due on securities", that the CIT in his order u/s.264 of the Act held that the claim of the assessee appeared to be genuine prima facie,that the assessee filed an application before the AO in that regard,that the AO disposed off the 154application holding that even if the assessee got relief from the appellate authority,it could not get 244A interest,that delay was on part of the assessee for making claim,that the claim was not made in the return of income.Referring to the provisions of 244A(2) of Act,he held that the department would have paid refund while processing of return u/s.143(1),that refund became due for the first time because of FAA's order, that the FAA upheld the order of the AO,that he referred to the provisions of section 244A(3)of the Act. 5.1. Before proceeding further we would like to discuss the brief hisorty,background and the principles governing the grant of refund and interest. Chapter XIX of the Act,contains various provisions relating to refund of the amount of tax paid by an assessee.Section 244A of the Act has specifically been made effective from the AY.198990. It is only from that AY.that the right, to get interes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing of the provisions shows that the assessees are entitled to receive interest on the amount of refund at the rates prescribed in clauses(a)and (b)of subsection( 1)of section 244A. The rationale underlying this provision is to compensate the assessees in lieu of the deprivation of their property right by virtue of unlawful collection of tax. In other words,the Act has provided that when the amount is refunded it should carry interest as a matter of course and that if the payment of tax made by an assessee is in excess and the has to refund the excess tax to the depositor,interest is required to be paid on such refund. ii.Section 244A of the Act,would spring into action only in the event of refund of excess amount of tax,penalty,tax collected at source or paid as advance tax,or treated as paid u/s.199 of the Act. The liability of the Revenue to pay interest under section 244A is only towards the excess amount of tax or penalty,demanded and collected by it in discharge of the liability of an assessee. iii. Interest payment is a statutory obligation and nondiscretionary in nature to the assessee. The language employed in section 244A of the Act is clear and plain. It grants a subst....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it is stipulated where the amount paid by an assessee under selfassessment falls short of the aggregate amount of tax and interest aforesaid, the amount paid shall first be adjusted towards the interest payable and the balance,if any,shall be adjusted towards the tax payable. This interpretation follows the same principle,when the Revenue defaults and makes part payment of the amount refundable. The interpretation also ensures that the AO/Revenue refunds the entire amount,which is due and payable, including interest payable under section 244A. It discourages part payment. There is no other provision under the Act under which an AO/Revenue can be made liable to pay interest when part payment is made and the entire amount, which is refundable is not paid to the assessee.Otherwise,the AO/Revenue can refund the principal amount and not pay the interest component under section 244A for an unlimited period with impunity and without any sanction,which would amount to allowing a premium on noncompliance with the law. When a refund order is issued, it should include the interest payable on the amount which is refunded. If the refund does not include interest due and payable on the amount re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ased amount,as the case may be. xii. If an assessee files returns in time,then,the assessee would be entitled to interest under section 244A(1) of the Act for the entire period, i.e.,from the first day of the AY.till the date of granting refund. However,when a return is filed with delay,the return cannot be acted upon until the delay is condoned by the statutory authority. As and when the delay was condoned, the entire period of delay from the date of filing returns till the date of condonation of delay has to be treated as attributable to the assessee while determining the eligible interest in terms of section 244A(2)of the Act. In other words,if an assessee is responsible for the delay in the finalisation of the proceedings on the basis of which he becomes entitled to the refund, then the period of delay is to be excluded from the total period for which interest becomes payable. xiii. There is nothing in the plain language of subsections (1) and (2) of section 244A from which it can be inferred that the assessee can be deprived of interest in respect of the period during which the application for refund remains pending before the competent authority. The right to receive intere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he CIT. In his order dated 05.08.2011 the CIT2, Mumbai, has mentioned that while giving effect to the orders of the FAA, the AO granted interest of Rs. 109,31,31,821/and Rs. 23,91,12,942/respectively for the AY.200102 & 200203, u/s.244A of the Act,that the assessee filed a petition stating that there has been short grant of interest u/s. 244A for both the AY.s.,that it was entitled for an amount of Rs. 377,97,43,141/as interest and Rs. 179,79,07,533/respectivley for AY.200102 and 200203. Before him,The assessee filed detailed working of the above interest for both the AY.s. He called for a report from the AO. In his reply dated 15.7.2011,the AO stated that interest u/s. 244A had been correctly computed and the assessee has not claimed interest on due basis, for AY.s.200102 and 200203. On going through the report of the AO,the computation of interest u/s. 244A and also the facts mentioned by the assessee in the grievance petition,he held that the AO had not considered some of the important aspects while computing the interest u/s. 244A,that one of the ground on which interest u/s. 244A was not granted,was that the amount of refund was less than 10% of the tax determined,that as per ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e facts that could distinguish the facts of the case as compared to the facts of earlier AY.s.i.e. AY.s.up to 199001. Without considering the relevant facts he should not rejected the claim made by the assessee. As far as the order of the FAA is concerned we would like to mention that he had referred to the provisions of sub section 3 of the section 244A of the Act and had relied upon the case of Assam Roofing (supra). Here,we would like to discuss the matter of South Indian Bank Limited(supra). In that case the assessee did not make any claim for deduction of provision for bad debts in its original return but before completion of the assessment the assessee made a claim of deduction of provision for bad debts on 10.01.2001,which was rejected by the AO for failure to establish the claim. The FAA allowed the claim and remanded the matter to the AO.Refund was granted to the assessee while issuing the revised order based on the order in appeal. He denied interest on the refund on the ground that it was attributable to an additional claim of deduction of provision for bad debt which was allowed by the FAA. However, the FAA held that the assessee was entitled to interest under section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....od thereof as claimed by the Revenue. 6. Sub-section (2) of section 244A provides that the assessee shall not be entitled to interest for the period of delay in issuing the proceedings leading to the refund that is attributable to the assessee. In other words, if the issue of the refund order is delayed for any period attributable to the assessee, then the assessee shall not be entitled to interest for such period. This is of course an exception to clauses (a) and (b) of section 244A(1) of the Act. In other words, if the issue of the proceedings, that is, refund order, is delayed for any period attributable to the assessee, then the assessee is not entitled to interest for such period. Further, what is clear from sub-section (2) is that, if the officer feels that delay in refund for any period is attributable to the assessee, the matter should be referred to the Commissioner or Chief Commissioner or any other notified person for deciding the issue and ordering exclusion of such periods for the purpose of granting interest to the assessee under section 244A(1) of the Act. In this case, there was no decision by the Commissioner or Chief Commissioner on this issue and so much so, we ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch was considered and rejected by the Assessing Officer. However, in appeal the claim was allowed and based on the Commissioner of Income-tax (Appeals) order the Assessing Officer granted refund. We do not find any material to hold that the delay in establishing the claim with documents that led to refund is attributable to the assessee and so much so this is not a case covered by sub-section (2) of the Act. We, therefore, hold that belated claim of deduction made on January 10, 2001, by the assessee will not justify denial of interest otherwise eligible under section 244A(1)(a) from April 1, 1999, to January 10, 2001. We, therefore, uphold the order of the Tribunal declaring the assessee's eligibility to get interest from April 1, 1999, till the date of refund. 8. We notice a lacunae in the statute in the above provision because the situation that arose in this case is not contemplated therein. The Department could contend that if all claims of deduction were made in the original return and higher amount of refund was claimed in such return, the officer could have granted refund under section 143(1) of the Act itself thereby avoiding interest on refund in regular assessment for l....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that belated claims of deduction by the assessee will not justify denial of interest on refund arising out of such claims otherwise eligible under section 234A(1). However it was also the submission that the Assessing Officer has not followed the provisions of section 244A(2) and declined interest under section 244A(2) without referring the matter to CCIT or CIT and therefore, the Assessing Officer's action cannot be justified following the principles laid down by the ITAT in the cases of OCIT vs. Videocon International Ltd 6 SOT 227 (Mum) 2006-TIOL-90- ITAT-MUM) and Artist Tree Pvt. Ltd vs. Income Tax Officer (2005) 93 ITO 603 (Mum). It was also submitted that giving effect to the orders of the ITAT are proceedings equivalent to Sec.154 as has been considered by the Hon'ble Bombay High Court in the case of Empire Industries Ltd vs. CIT (1992) 93 ITR 295 (Bom). Further issue is such that two views are possible, the Assessing Officer's action in denying the interest under section 244A in consequential proceedings is not correct. 4.3. The learned Departmental Representative however, submitted that the decision of the assessee's in making the claim belatedly has resulted in refunds ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....supra) held against revenue and in favor of assessee. No jurisdictional High Court judgment was brought to our notice. Therefore, the view favourable to assessee is to be followed. However, we are of the view that provisions of Sec 244A(3) are applicable on the facts of this case. AO has no obligation to re determine the period for which interest was to be granted once interest was granted in earlier proceeding. He has to enhance or decrease on the quantum only. In view of this, we direct the Assessing Officer to increase or reduce the interest under section 244A(1) r.w.s. 244A(3) and rework the interest accordingly. 4.6 Since the Assessing Officer also has not referred the matter to the Chief Commissioner or CIT where any question arises as to the period to be excluded, the action of the Assessing Officer in excluding certain period is also not acceptable. Respectfully following the principles laid down by the ITAT in the case of DCIT vs. Videocon International Ltd (2006)6 SOT 247 (Mum) assessee (2006-TIOL-90-ITAT-MUM) and Artist Tree Pvt Ltd vs. Income Tax Officer (2005) 93ITD 603 (Mum), Assessing Officer's action cannot be justified on this reason also. However, as provisions o....