INCOME TAX ACT, 1961

Section 244A

Refund - Interest under section 244A - Method of computation - Interest on refunds originally determined minus tax portion of refund already granted allowed by revenue

AO following the direction of CIT(A) considered the grant of interest under section 244A in the giving effect to the CIT(A)'s order on 27-3-2015. In the said order, the AO took the figure of refund originally determined at Rs 2,00,87,14,868 and calculated the interest for the period 1-4-1995 to 4-7-1997 under section 244A at Rs 56,24,40,163. As against the refund actually determined by the AO, only partial refund was actually granted to the assessee to the tune of Rs 1,48,78,12,496 comprising of tax portion of Rs 1,20,06,40,310 and interest portion of Rs 28,71,72,186. The AO while calculating the interest on refunds for the periods subsequent to 4-7-1997 , calculated interest on the refund originally determined at Rs 200.87 crores minus the tax portion of the refund already granted to the assessee at Rs 120.06 crores as stated here in above. This was being objected by the assessee.Held: AO had calculated interest under section 244A for the period 1-4-1995 to 4-7-1997 on the refund determined at Rs 2,00,87,14,868 and arrived at the interest figure of Rs 56,24,40,163. Hence, at this stage, the assessee was entitled for entire refund of Rs 2,57,11,55,031. As against this figure, only a sum of Rs 1,48,78,12,496 was actually granted to the assessee. Hence at this stage, a sum of Rs 108,33,42,535 (257 11,55 031-148,78,12 496) becomes due to the assessee by the revenue. Hence this sum of Rs 108.33 crores automatically partakes the character of principal/tax portion of amounts payable by the revenue to the assessee on which interest was eligible. There was no need to segregate the refunds granted into tax portion and interest portion and subsequently reduce the tax portion of the refund alone from the refund originally determined for calculation of interest under section 244A for the period subsequent to 4-7-1997. This action of the AO, was against the spirit of the provisions of the scheme of taxation. Full amount of refund as determined by the AO was not actually granted to the assessee, thereby making the assessee eligible for further interest for the future periods. Tribunal was inclined to accept the plea of the assessee. Hence, assessee would be entitled for interest on the unpaid refunds. In accordance with the principle laid out in the decision of Mumbai Tribunal in the case of Union Bank of India. AO was, therefore, directed to compute the interest on refund accordingly under section 244A as per the plea of the assessee.

Followed:India Trade Promotion Organisation v. CIT (2014) 361 ITR 646 (Del) : 2014 TaxPub(DT) 1661 (Del-HC) and UBI v. Asstt. CIT (2016) 72 Taxmann.com 348 (Mum) : 2016 TaxPub(DT) 3921 (Mum-Trib), dt. 11-8-2016.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 1995-96

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