Refund of Tax recovered/collected is a ‘Debt’ till Actual Payment: Delhi HC asks Dept to pay Interest to Punjab & Sind Bank [Read Order]

Refund - Tax r - Debt - Actual Payment - Delhi HC - Dept - Interest - Punjab & Sind Bank - taxscan

The division bench of the High Court of Delhi has held that the refund of tax recovered or collected is a “debt” till actual payment and asks the department to pay interest to Punjab & Sind Bank.

During the assessment proceedings of the assessee, Punjab and Sind Bank the income was assessed at Rs.73,17,35,961/- and made a demand for payment of interest under Section 234D (2) and Section 220(2) of the Income Tax Act, 1961. On subsequent re-computation of the income passed under Sections 154/250/143(3) of the Act, the income of the assessee was assessed at Rs.40,88,00,550/- after setting-off brought forward losses for AY 1996-1997. Consequently, as a result of the reduction of taxable income, the respondent herein was entitled to a refund of the sum deposited and interest under Section 234D and Section 220 (2) of the Act.

Aggrieved by non-grant of ‘interest’ on refund under Sections 234D and 220(2) of the Act the assessee filed an appeal before the Commissioner of Income Tax (Appeals). The CIT(A) dismissed the appeal by relying upon the judgment of the Supreme Court in the case of Commissioner of Income Tax, Gujarat vs. Gujarat Fluoro Chemicals. Hence, the assessee approached the ITAT, which allowed the appeal placing reliance on the judgment of the Division Bench of High Court in the case of Preeti N Aggarwala v. Chief Commissioner of Income Tax & Anr and held that the assessee is entitled to interest under Section 244A(1)(b) of the Act on the sum refunded to the assessee on re-computation, as a result of the reduction of its taxable income.

The aggrieved revenue filed appeal before the High Court. The counsel for the assessee by relying upon the judgment of High Court in Preeti N Aggarwala and the Supreme Court decision in M/s Universal Cables Ltd. v. Commissioner of Income-Tax, Jabalpur contended that the Revenue is liable to pay interest on any amount recovered or collected during the assessment proceedings and which is subsequently found liable to be refunded to the assessee.

The Coram of Mr. Justice Manmohan and Ms. Justice Manmeet Pritam Singh Arora “we do not find any infirmity in the order passed by the ITAT and we do not find any substantial question of law in the present appeal and the same is accordingly dismissed”.

Mr. Kunal Sharma and Mr. Sumit Lalchandani appeared on behalf of the revenue and respondent respectively.

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