In a recent ruling, the Delhi High Court held that interest can be allowed on Refund of interest Waived by the Department under section 220(2A) of the Income Tax Act.
The bench was hearing a bunch of writ petitions wherein the petitioners raised a question that whether the expression ‘in any other case’ occurring in Section 244A (1) (b) of the Income Tax Act would include the amount of refund which constitutes the interest that has been waived by the Income Tax Department under Section 220 (2A) of the Act?
In the instant case, the assessments of the Petitioners for several years were held up on account of the proceedings before the Special Court. Thereafter, the properties of the petitioners were attached by the IT Department and adjusted the same towards tax and interest arrears. In the year 2008, the petitioners made an application to the CCIT u/s 220(2A) for waiver of interest. In 2015, the CIT allowed their applications seeking waiver of interest which took a delay of almost seven years. On getting refund, the petitioners moved another application for grant of interest on the refund amount. The applications were rejected by the authorities.
The bench observed that “the Petitioners cannot be held responsible for such delay. Obviously there was a loss suffered by the assessees as the amounts waived, and therefore refundable, were substantial.”
The division bench comprising of Justice S.Muralidhar and Justice Chander Sekhar observed that Section 244 A of the Act is applicable in the present case. In its opinion, the term ‘any other case‟ provided under clause (b) means to be a case other than refund of taxes or penalties. “Clause (b) stipulates that “in any other case” the interest payable shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date “or, as the case may be” dates of payment of the “tax or penalty” to the date on which the refund is granted.”
“This has to be read with the expression “refund of any amount that becomes due” occurring in Section 244 A (1) of the Act. When the entire sub-section (1) of Section 244 A of the Act is read as a whole, the legislative intent does not appear to be to limit the expression “any amount becomes due” occurring in Section 244A (1) or the expression “in any other case” occurring in Section 244A (1) (b) only to tax and penalty as is sought to be contended by the Department. The words “as the case may be” refers to the period for which the interest will become payable and that the period is said to be dates of payment of tax or penalty to the date on which the refund is granted. This does not mean that the amount other than tax or penalty cannot be included in the expression “in any other case”. It is only reflective of the periods for which such interest would become payable. In fact the disjunctive “or” between the words “period” and “periods” indicates that ‘in any other case’ interest would be calculated for every month or part of a month comprised in the period or periods from the date o which the refund is granted.”
It was therefore, held that the sum found refundable to the Petitioners as a result of the waiver of interest order passed by the CCIT is a definite sum that was wrongly deducted from the Petitioners as interest. Payment of interest on that sum by the Revenue cannot be characterised as payment of ‘interest on interest’.
Read the full text of the Order below.
