Friday, September 26, 2014

HC follows SC’s ruling in Sandvik’s case; directs revenue to pay compensation if payment of interest was delayed

If tax, interest, penalty, etc., had been collected in excess and these were withheld beyond permissible period, Revenue had to compensate for same.


a)The assessee was eligible for refund along with interest. It claimed payment of compensation as interest on the interest for the period of delay from date of assessment till date of payment.

b)Its claim for interest was rejected by Dy. CIT on the ground that there was no provision in the Income-tax Act (‘the Act’) to grant interest on interest.

The High Court held in favour of assessee as under:

1)On perusal of the judgment of the Supreme Court in Sandvik Asia Ltd. v. CIT [2006] 150 Taxman 591, the issue involved in this case was not more res integra. The Apex Court held that under the Act, the Revenue was entitled to collect only tax, interest, penalty, etc., within the four corners. For any other amount which had been collected in excess and withheld beyond the period permissible under the statute, the taxpayer was to be compensated for the deprivation of the said amount.

2)In that context, the Apex Court had considered the meaning that was required to be given to the word compensation extensively and finally the department was directed to pay interest within a period of one month from the date of receipt of copy of the order.

3)Thus, following the judgment of the Apex Court (supra), the writ petition was to be allowed and revenue was to be directed to pay the simple interest at the rate of 9 per cent p.a. to the petitioner within a period of two months from the date of receipt of copy of this order. - SIRPUR PAPER MILLS LTD. V. JOINT COMMISSIONER OF INCOME-TAX, HYDERABAD [2014] 49 142 (Andhra Pradesh)