Nirma Ltd. entitles to Additional Compensation for Delay in Issuing Refund u/s 244A of Income Tax Act: ITAT [Read Order]

The Ahemdabad bench of the Income Tax Appellate Tribunal (ITAT) held that the amount of refund granted to the assessee, first, has to be adjusted against the interest payable to the assessee and thus entitled to additional compensation for delay in issuing refund.

The assessee for the year under consideration filed the return of income declaring total income at Rs. nil and further claimed refund of Tax Deducted at Source (TDS) and advance tax paid for Rs. 1,39,77,665/- only. However, the assessment was framed by the Assessing Officer (AO) under section 143(3) of the Income Tax Act dated 30-03-1999 determining total income at Rs. 16,43,11,720/- only.

Consequentially, the AO in giving effect order dated 15-01-2009 determined the amount of refund at Rs. 75,00,281/- without granting interest under Section 244A of the Act. The assessee filed a rectification application date 11-02-2009 to grant interest under Section 244A of the Income Tax Act which travelled up to Tribunal and the Tribunal vide order dated 27-03-2015 directed the AO to dispose of the rectification application as per law.

The AO in the effect giving order granted interest of Rs. 22,12,583/- on the amount of refund for the period March 2004 to January 2009. The amount of refund for Rs. 22,12,583/- being interest under Section 244A was adjusted against demand of A.Y. 2011-12.

Thus, the assessee made a claim for additional compensation of interest under Section 244A of the Act for the period February 2009 to May 2016. But the AO rejected the claim of the assessee for additional compensation as claimed by the assessee

On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] was also pleased to confirm the order of the AO by relying on the order of the Tribunal in case of Hirenbhai Karsanbhai Patel vs. ACIT bearing. Being aggrieved by the order of the CIT(A), the assessee appealed before the tribunal.

After hearing both the parties, the tribunal found that there is no dispute to the fact that the assessee has been granted refund of Rs. 75,00,281/- and interest under Section 244A of the Income Tax Act on the same for Rs. 22,12,583/- for the period of March 2004 to January 2009. The dispute is limited to the extent of additional compensation for interest under section 244A of the Act which was granted on a later date.

It was noted that the refund amount was determined in the month of January 2009 on which assessee was eligible for interest under Section 244A of the Income Tax Act for Rs. 22,12,583/- till January 2009. Therefore, the total amount due to the assessee on account of refund and interest thereon was for Rs. 97,12,864/- (Rs. 75,00,281/- + Rs. 22,12,583/-).

However, refund for Rs. 75,00,281/- was only issued in the month of February 2009 meaning thereby only principal amount of refund was issued to the assessee. Thus, the question arises whether only the refund issued for Rs. 75,00,281/- can be adjusted against the principal amount due or against the interest amount under Section 244A of the Income Tax Act.

The two-member bench consisting of Siddhartha Nautiyal (Judicial member) and Waseem Ahmed (Accountant member) held that the amount of refund granted to the assessee, first, has to be adjusted against the interest payable to the assessee in the given facts and circumstances. Considering the fact that the amount of refund issued to the assessee for Rs. Rs. 75,00,281/- was first to be adjusted against the interest of Rs. 22,12,583/- then refund of principal amount.

Thus, the tribunal set aside the findings of the CIT(A) and held that the assessee is entitled to additional compensation of interest under section 244A of the Act on account of delay in the issue of refund. Thus, the ground of appeal raised by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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