CEAT entitled to Interest on Income Tax Refund of Rs. 5.24 Cr as refund more than tax determined on Regular Assessment: Bombay HC [Read Order]

The Bombay High Court held that CEAT entitled to interest on income tax refund of Rs. 5.24 crores as refund is more than tax determined on regular assessment.

The appeal was filed under Section 260A of the Income Tax Act, 1961 impugning an order dated 5^th December 2002 passed by the Income Tax Appellate Tribunal, Mumbai Bench ( ITAT ) dismissing appellant’s appeal and refusing grant of interest under Section 244A(1)(a) of the Income Tax Act on the refund admissible to appellant.

The ITAT refused to grant interest on the ground that the refund arising on regular assessment after allowing TDS and advance tax is less than 10% of the tax as determined on regular assessment. 

The Commissioner of Income Tax (Appeals) [CIT(A)] disposed the appeal. The Assessing Officer on 31^st May 1993 passed an order giving effect (OGE) to the CIT(A)’s order computing income of appellant at Rs.35,93,17,870/-, i.e., even below the originally returned income of Rs.43,64,37,800/- and determining tax thereon at Rs.18,99,09,619/-.

The counsel for the respondent submitted that out of the refund Advance Tax/TDS component is only Rs.1,45,14,457/- and that being less than Rs.1.89 Crores being 10% of the tax liability, whether pre or post CIT(A) order, i.e., Rs.24,35,95,193/- or Rs.18,99,09,619/-, it will be hit by the proviso.

A Division Bench of Justices Dr Neela Gokhale and KR Shriram observed that “ The Apex Court has clearly explained the purpose of the amended law and has held in paragraph 30 that “refund becomes due when tax deducted at source, advance tax paid, self assessment tax paid and tax paid on regular assessment exceeds tax chargeable for the year as a result of an order passed in appeal or other proceedings under the Act. When refund is of any advance tax (including tax deducted/collected at source), interest is payable for the period starting from the first day of the assessment year to the date of grant of refund”.”

“In the circumstances, the questions of law as framed on 29^th July 2004 have to be answered in favour of assessee, i.e., appellant. Appellant would be entitled to interest under Section 244A of the Income Tax Act of Rs.2,37,22,886/-“ the Court noted.

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