Brief Facts of the Case
In the present case, the subject matter of refund is the payment collected by Revenue towards interest. The said payment was made by the assessee consequent to a demand raised upon the assessee by the Revenue. The said demand upon re-computation has since been found to be incorrect and the AO has directed a refund to the assessee. The subject matter of the proceedings is a grant of interest on the refund found due and payable to the assessee. The ITAT has directed payment of interest on the said refund.
High Court’s Observation ;
In its analysis, the learned bench pointed out that the issue in the present proceedings is not about refunding self-assessment tax and interest. Accordingly, the Revenue's contention that any interest awarded on the refund would amount to "interest on interest" is factually incorrect because the refunded amount was deposited by the assessee to pay "interest" to the Revenue.
Further, it was noted that the assessee is seeking interest on the debt owed to it by the Revenue and not "interest on interest" as the Revenue argued. The bench also relied on the judgement of Preeti N. Aggarwala (supra) by the predecessor division bench wherein it was held that the assessee is entitled to interest on the sum found refundable to the assessee, as a result of a waiver of interest. As a consequence of the reduction in taxable income, in the present case, a sum has been found refundable to the assessee.
Furthermore, the court noted that The learned counsel for the Revenue has not disputed that the payment of interest by the respondent under Section 234D and Section 220(2) of the Act was in pursuance of the demand raised by the Revenue, which demands subsequently is incorrect and the money has become due and payable by the Revenue to the assessee.
The court also referenced the Supreme Court's decision in the case of Union of India v. Tata Chemicals Ltd. while rejecting the Revenue's contention that interest can only be paid to assessees under Section 244A of the Act and not to deductors of the tax at the source. The Supreme Court then held in the case of Gujarat Fluoro Chemicals (supra) that only the interest provided by statute can be claimed from the Revenue by an assessee and that no other interest on statutory interest is payable. Therefore, in the present case, the assessee has been found entitled to a refund of money deposited by it following re-calculation by the Revenue, and interest thereon must be paid as per Section 244A(1)(b) of the Act.
In light of the discussion and analysis of facts outlined above, the court found neither an infirmity in the ITAT order nor a substantial question of law in the present appeal and thereby
accordingly dismissed.
CASE TITLE: PRINCIPAL COMMISSIONER OF INCOME TAX-7 vs PUNJAB & SIND BANK
CORAM: HON'BLE MR. JUSTICE MANMOHAN AND HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA
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