TaxTMI 
TaxTMI 
2026 (9) TMI 582
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....he delay as contended by the Ld. Departmental Representatives ("Ld. DRs" for short). Delay is condoned. 3. Though these appeals were heard on different dates, argued by different counsels, as the facts are identical in all these appeals, we hereby pass a consolidated order by taking ITA No. 5707/M/2025 pertaining to A.Y. 2003-04 as the lead case. 4. The solitary issues in all these appeals filed by the Revenue are that the Ld. CIT(A) has erred in adjusting the refund amount first against interest payable u/s 244A of the Act instead of adjusting the same first towards the tax component, where there is no express provision in the statute stating so. 5. Briefly stated, the facts are that the assessee is a public sector bank engaged in the business of banking and other related financial activities and had filed its return of income for the year under consideration dated 28.11.2003 declaring total income at "Rs. Nil" under the normal provisions and book profit u/s 115JB of the Act at Rs. 94.53 crores. The assessee's case was selected for scrutiny and assessment was completed u/s 143(3) of the Act vide assessment order dated 16.03.2005 where the Learned Assessing Officer ("the L....
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....enging the order of the Ld. AO on the ground that the Ld. AO erred in adjusting the refund against the principal component and not against the interest due. The Ld. CIT(A) vide order dated 10.03.2025 allowed the appeal filed by the assessee on the ground that the Tribunal in assessee's own case directed the Ld. AO to adjust the interest against refund first before adjusting the tax component by relying on the assessee's own case which in turn had relied on the decision of the Hon'ble Delhi High Court in the case of India Trade Promotion Organisation vs. CIT (361 ITR 649)and the assessee's own case in ITA No. 1646/M/2017 and in the case of Union Bank of India in ITA No. 571/M/2013 along with various other cases. 7. The Revenue is in appeal before us challenging the order of the Ld. CIT(A) on the ground that the refund ought to be adjusted first on the tax component and not on the interest component. The Learned Departmental Representative ('Ld. DR' for short) contended that the provisions of section 244A of the Act do not expressly state that the interest has to be adjusted first out of the refund due before adjusting the tax component which would result in the revenue paying fur....
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....same is paid to the assessee in full. We are conscious of the fact that there are no express provisions which enumerates as to which component has to be adjusted first towards the refund due, whether the tax component or the resultant interest component. The provision relevant to interest on refunds is governed by section 244A of the Act which provides for simple interest to the assessee payable by the Revenue towards any refund amount due to the assessee which is to be calculated in the manner specified by the Act. The relevant provision is cited herein under for ease of reference: "244A. ^92 (1) ^93[Where refund ^94 of any amount becomes due to the assessee ^94 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 :- ^95[(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-half per cent for every month or part of a....
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....beginning from the date following the date of expiry of the time allowed under sub-section (5) of section 153 to the date on which the refund is granted:] ^3[Provided that where proceedings for assessment or reassessment are pending in respect of an assessee, in computing the period for determining the additional interest payable to such assessee under this sub-section, the period beginning from the date on which such refund is withheld by the Assessing Officer in accordance with and subject to provisions of sub-section (2) of section 245 and ending ^4[with the date up to which such refund is withheld], shall be excluded.] ^5[(1B) Where refund of any amount becomes due to the deductor in respect of any amount paid to the credit of the Central Government under Chapter XVII-B, such deductor shall be entitled to receive, in addition to the said amount, simple interest thereon calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date on which- (a) claim for refund is made in the prescribed form; or (b) tax is paid, where refund arises on account of giving effect to an order under section 250....
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....uantum of the refund determined by such order. It is clear that the legislature in its wisdom has introduced the said provision for facilitating the Revenue to pay interest on the refund due to the assessee in order to mitigate the hardship caused to the assessee in case of excess payment of the tax component. This, no doubt, is to ensure that the Revenue refunds the amount due to the assessee at the earliest, failing which interest is to be charged on the same till it is refunded to the assessee. This is nothing but a liability casted upon the Revenue to comply with refunding the amount, if any, becomes due to the assessee, within the stipulated time. It is also a settled proposition of law that the determination of interest towards any amount refundable to the assessee was dealt with by the Hon'ble Apex Court and the Hon'ble High Courts in a liberal manner taking into consideration the interest of the assessee coupled with the liability on the Revenue to adhere to the timeline for refund of the amount due. The Hon'ble High Court of Delhi in the case of India Trade Promotion Organisation (supra) relied upon by the respective Ld. ARs for the assessee has interpreted, the words "any....
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....ue to the erroneous view that had been taken by the officials of the respondents. Interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. The High Court has failed to appreciate that while charging interest from the assessees, the Department first adjusts the amount paid towards interest so that the principle amount of tax payable remain outstanding and they are entitled to charge interest till the entire outstanding is paid. But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. Hence as per the stand that the Department takes they are liable to pay interest only up to the date of refund of tax while they take the benefit of assessees funds by delaying the payment of interest on refunds without incurring any further liability to pay interest. This stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to the lakhs and lakhs of assessees. Very large number of assessees are adversely affected inasmuch as the Income-tax Department can now, simply refuse....