ITAT Grants Interest on Self-Assessment Tax Refund, Rules Adjustment of Tax Liability Affects Character of Tax Payment [Read Order]
This shift made the refund eligible for interest under Section 244A(1)(b) of the Income Tax Act, rather than Section 244A(1)(aa), which imposes restrictions on interest claims
![ITAT Grants Interest on Self-Assessment Tax Refund, Rules Adjustment of Tax Liability Affects Character of Tax Payment [Read Order]](https://www.taxscan.in/wp-content/uploads/2024/10/ITAT-ITAT-Ahmedabad-Self-Assessment-Tax-Refund-Tax-Liability-Tax-Payment-character-of-tax-payment-taxscan.jpg "ITAT Grants Interest on Self-Assessment Tax Refund, Rules Adjustment of Tax Liability Affects Character of Tax Payment [Read Order]")
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) granted interest on a refund of self-assessment tax .The tribunal ruled that once self-assessment tax is adjusted against a tax demand from an assessment order, it loses its original character and becomes tax paid under assessment. Nirma Limited, the appellant-assessee, appealed against the order of the Commissioner of Income...
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) granted interest on a refund of self-assessment tax .The tribunal ruled that once self-assessment tax is adjusted against a tax demand from an assessment order, it loses its original character and becomes tax paid under assessment.
Nirma Limited, the appellant-assessee, appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] concerning the assessment for the Assessment Year ( AY ) 2013-14. The dispute focused on the appellant-assessee’s entitlement to interest on a refund of self-assessment tax under Section 244A of the Act.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The assessee contended that the self-assessment tax paid had been adjusted against a tax demand resulting from an assessment order issued on January 17, 2017. This adjustment, it argued, caused the self-assessment tax to lose its original character, thereby making it eligible for interest under Section 244A(1)(b) rather than Section 244A(1)(aa), which imposed restrictions on interest claims.
The CIT(A) had ruled that the amendments to Section 244A (1)(aa), effective from June 1, 2016, did not apply to the assessee’s case, leading to the disallowance of the interest claim.
In its review, the tribunal referenced the ITAT Delhi Bench's ruling in AWP Assistance (I) Pvt. Ltd. vs. DCIT, emphasizing that once self-assessment tax was adjusted against assessed tax, it assumed the character of tax paid under assessment. It also highlighted judicial precedents affirming that interest on refunds, including self-assessment tax, was justified as compensation for unlawful tax retention.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The appellate tribunal clarified that under Section 244A(1), two categories of tax payments existed: those governed by specific provisions and all other cases. The latter did not carry the same limitations regarding interest entitlement. As the self-assessment tax fell under Section 244A(1)(b), it was determined that the restrictions of Section 244A(1)(aa) did not apply.
Ultimately, the bench ruled that the appellant-assessee was entitled to interest on the refund of ₹27.37 lakhs of self-assessment tax for the period from January 2017 to October 2017.
The two member bench comprising Suchitra R.Kamble ( Judicial Member ) and Annapurna Gupta ( Accountant Member ) allowed the appeal and directed the AO to compute the eligible interest accordingly.
To Read the full text of the Order CLICK HERE
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