Interest u/s 244A of Income Tax Not Automatically Payable on Court-Ordered Refunds Unless Specifically Directed or Demand is Final: Calcutta HC [Read Order]
Calcutta High Court held that interest under Section 244A of the Income Tax Act is not automatically payable on court-ordered refunds unless specifically directed or the tax demand becomes final
In a recent ruling, the Calcutta High Court held that interest under Section 244A of the Income Tax Act is not automatically payable on refunds ordered by the court unless the court specifically directs so or the underlying tax demand becomes final.
Danieli India Limited, the petitioner, filed writ petitions seeking a direction upon the Income Tax Department to pay interest under Section 244A on the amounts refunded to it pursuant to an earlier order dated 1 September 2023.
In that earlier order, a Coordinate Bench of the High Court had directed the department to refund amounts that were recovered in excess of 20% of the disputed tax demands for the assessment years 2011-12, 2012-13, and 2013-14 from the petitioner’s refunds relating to the assessment years 2010-11 and 2017-18.
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The excess recovery was held to be arbitrary as the appeals against the disputed assessments were still pending before the Commissioner of Income Tax (Appeals).
The petitioner’s counsel argued that under Section 244A of the Income Tax Act, the assessee is entitled to interest on any amount refunded by the department and that the refund made in compliance with the court’s order should also carry interest as a matter of right.
The department’s counsel opposed the claim and submitted that the earlier order of the High Court only directed refund of the excess recovery and did not direct payment of interest. It was further argued that since the appeals against the assessment orders were still pending before the appellate authority, the issue of interest could arise only after the final determination of the tax liability.
The single-judge bench comprising Justice Raja Basu Chowdhury observed that the Coordinate Bench in its order dated 1 September 2023 had directed only the refund of the excess amount and had not issued any direction regarding interest.
The court explained that the entitlement to interest under Section 244A would depend on the final outcome of the appeals pending before the Commissioner (Appeals). The court pointed out that at this stage, when the appeals have not yet been decided, granting interest would be premature.
The court disposed of the writ petitions, holding that the petitioner may claim interest if it ultimately succeeds in the pending appeals and that all consequential benefits would follow at that stage
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