Thursday, March 5, 2015

Assessee not entitled to interest on refund of excess self-assessment tax paid by it, rules Delhi HC

Refund of excess self-assessment paid by assessee was not eligible for interest as the provisions of Section 244A would not apply thereto.

The issue that arose for consideration of the High Court is as under:

“Whether the Tribunal was rightin holding that the assessee would be entitled to interest under Section 244A in respect of excess self-assessment tax paid by it?”

The High Court held in favour of revenue as under:

1)Clause (a) of Section 244A(1) provides that where refund of any amount becomes due to the assessee, he shallbe entitled to receive simple interest thereonwhere the refund is out of any tax paid under section 115WJ or collected at source under section 206C or paid by way of advance tax or treated as paid under section 199.

2)The provisions contained in Sections115WJ or 199 or 206C or Section 207 have no connection with the liability to pay self-assessment tax. Therefore, clause (a) of sub-section (1) of Section 244A would not apply to refund arising out of excess self-assessment tax paid by assessee.

3)Clause (b) of Section 244A(1) was also not applicable in the instant case asit provides that the amount paid by the assessee (from which refund was to be made) must have been deposited pursuant to demand notice issued by the assessing authority.

4)There cannot be a general rule that whenever a refund of income tax is to be paid, the Revenue must necessarily pay interest on the refunded amount.

5)If the excess amount was paid due to erroneous assessment by the Revenue, the reimbursement would be accompanied by payment of interest at the statutorily prescribed rate.Conversely, if the assessee was to be blamed for the miscalculation, the Revenue does not owe any interest even if the excess payment of tax was liable to be refunded.

6)There being no allegation that such excess deposit was pursuant to demand by the Revenue, the claim for interest on excess payment voluntarily made could not be sustained.Therefore, theorder of ITAT directing the AO to pay interest to the assessee on the refunded amount was to be set aside. - CIT vs Engineers India Ltd. - [2015] 55 1
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