In a recent decision, the Kerala High Court ruled that interest is not allowable on refund claims where the assessee filed the returns after due date prescribed by law. The Court while upholding the order impugned, observed that even if the delay is condoned for the purpose of filing return, the revenue can deny interest on the refund amount claimed.
The petitioner, in the instant case, is a Primary co-operative society, has paid advance tax of 10 lakhs and TDS during the relevant assessment year. When he return was filed, it was found that assessee’s taxable income is nil. However, the assessee’s claim for refund was rejected by the Department for the reason that they have filed belated returns. The assessee challenged this order before the High court in which the Court held that they are eligible for refund and directed the Department to take necessary steps for the same. Though the refund claim was accepted by the Department, they refused to allow interest on such refund to the assessee by pointing out that they are not eligible for interest under s. 244A of the Income Tax Act.
The assessee challenged the order contenting that once the delay in filing the return has been condoned, it becomes a valid return and therefore grant of interest is consequential.Though there is a provision under Section 244A(2) of the Income Tax Act that interest could be denied if the delay is attributable to the assessee, once the return is accepted and refund is ordered, such an approach is clearly illegal.
“Going by the judgments relied upon by either side, I am of the view that the liability to pay interest on refund arises from the date when claim for refund is made with all necessary particulars. As already indicated, Section 244A(2) imposes a restriction on payment of interest when the procedure for refund is on account of the delay attributed to the assessee. In the case on hand, what is to be looked into is whether the delay in refund was due to a cause attributable to the assessee. The facts involved in the case would disclose that the return of income for the assessment year 1997-98 was filed only on 01/02/2000 on account of delay in auditing. Return was filed belatedly and thereby it was rejected. Thereafter an application was filed under Section 119(2)(b), seeking for condoning the delay in filing the return, was rejected and ultimately the matter reached this Court wherein this Court had directed the delay to be condoned. There cannot be two ways to look at it. Admittedly, there had been delay on the part of the assessee which had given rise to a situation to condone the same. Delay has been condoned only for the purpose of accepting the return. But it cannot be stated that the delay was not attributable to the assessee. Even if such instances where the delay is condoned, still when it is attributable to the assessee, there is justification on the part of the Commissioner to deny interest under Section 244A(2). Therefore, I do not find any error in the impugned orders passed by which the claim for interest has been rejected.”
Read the full text of the Judgment below.
