TaxTMI 
TaxTMI 
2017 (1) TMI 1402
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....n part (also refer paraa 3). For example, what is the interest (u/s. 244A) component in the refund of Rs. 60 (say), granted out of a total refund of Rs. 120 (say) comprising tax (of Rs. 100) and interest thereon (up to the date of the refund) at Rs. 20. While the Revenue appropriates, i.e., as claimed, the entire of it against tax, deferring the 'receipt' of the interest component to the last payment of Rs. 20, the assessees seeks its appropriation against entire interest 'due' ( Rs. 20), so that the 'tax' refunded is for the balance Rs. 40 (60 - 20). It, in so contending, draws support from the provision of section 140A, which clearly provides that the payment there-under shall be adjusted first against interest (as u/ss. 234A, 234B, 234C, etc.,) due (up to the date of payment), and only the balance, if any, against the payment of tax liability. Support is also drawn before us from the commercial practice where a part payment of a composite debt, i.e., principal and interest, is first adjusted against interest and only the balance against the principal. Reliance is also placed on the decision by the Tribunal dated 25.11.2016 in the case of CIT (Dy.) v. Wheels India Ltd. (ITA Nos. ....
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....4A. Clearly, one of the two is, or perhaps both are, not in terms of s. 244A and, thus, incorrect. The Apex Court in Gujarat Flouro Chemicals (supra) has clarified that the assessee is entitled to interest strictly in terms of the provision. We may reproduce the relevant part of the section as under: 'Interest on refunds. 244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely:- (a) where the refund is out of any tax collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one per cent for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted: Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 1....
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....g the proportionate principle, i.e., in the same ratio as the total interest (on the total tax refund due) bears to the said tax, would thus satisfy the requirement of the provision. Going by our example, a composite refund of Rs. 60 implies a tax refund of Rs. 50 and interest thereon up to date, at Rs. 10. The balance interest of Rs. 10, i.e., on the balance refund of Rs. 50, shall be granted along with the refund of the said tax. That is, the balance tax refundable of Rs. 50 shall continue to carry interest at the prescribed rate - on simple interest basis, while that refunded stands granted along with full interest thereon. This only is in consonance with s. 244A, which contemplates grant of the two together. This, it may be appreciated, would also render, i.e., in terms of the provision, nugatory, the adverse impact of the delayed payment of tax, saving the assessee the prejudice that may otherwise be caused to it, i.e., by appropriating refund preferentially against tax. The assessee similarly cannot claim interest - which is to be allowed on simple interest basis, and only along with the refund of tax (principal), preferentially. The calculation of either side causes prejudic....
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....riod and another Rs. 3 (i.e., on Rs. 50 @ 6%) for the latter, i.e., at a total of Rs. 23/-, as against Rs. 23.60 claimed by the assessee and Rs. 22.40 by the Revenue. We may reproduce our calculation below, referring to it as 'Option C': (Amount in Rs.) Particulars Amount of Refund Tax Interest u/s. 244A Remarks Refund due 120 100 20 Interest up to the date of refund Refund granted (60) (50) (10) As per s. 244A -principal together with interest to date Balance due for refund 60 50 10 Refund due less granted Interest u/s. 244A 3 -- 3 Interest on the balance tax (principal) due for refund, @ 0.5% p.m. Amount Refundable 63 50 13 Tax refund along with interest thereon to date The difference in interest, it shall be readily seen, is only on account of working interest on the tax refunded on simple interest basis, satisfying further the condition of refund of tax along with the interest thereon to date. It is the non-observance of this clear mandate of s. 244A that causes the distortion in the interest figure. In fact, to the ....
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....Rs. 0.60 in our example, on the accrued interest of Rs. 10 (for one year). Interest, in terms of the provision, is to be allowed on simple interest basis and, two, along with tax being refunded. The assessee's manner of appropriation of interest, thus, violates the admittedly un-violable principle, made explicit in the provision and, further, settled by the Apex Court in Gujarat Flouro Chemicals (supra), i.e., of no interest being allowable on interest, which being statutory interest is to be allowed strictly in terms of the statute. We next consider the decision in CIT v. H.E.G. Ltd. [2010] 324 ITR 331 (SC) (185 Taxman 325) relied upon by the ld. CIT(A) in accepting the assessee's case. In the facts of that case the Revenue allowed refund of TDS of Rs. 47.53 cr. after 57 months without any interest thereon u/s. 244A(1). That what stood refunded was only tax, without any interest, was admitted and not in dispute. It was under these circumstances that the Hon'ble Apex Court held that refund of interest, due and payable to the assessee, shall attract interest u/s. 244A, and that the words 'any amount' in s. 244A(1) does not restrict its application only to tax, and that it wou....