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2013 (6) TMI 41 - HC - Income TaxInterest on refund u/s 244A - The case of the Department for denying the claim of the petitioner with regard to the interest is that in view of the Explanation to section 244A, as no amount was paid in excess of the demand notice issued under section 156, interest is not payable. - held that:- An assessee who has paid the tax as demanded in the notice of demand issued under section 156 of the Act, and also challenged the demand in appeal and the appeal is allowed fully or partially the demand stands modified accordingly, to the extent the relief is granted, the amount becomes in excess to the original demand and it is liable to be refunded. The Explanation intends to define "date of payment of tax or penalty" for the purposes of calculation of interest amount. The circumstances when interest will be payable by the Revenue has been given sub-section (1) of section 244A. The Explanation, therefore, cannot be interpreted in a manner which will control, prevail upon sub section (1) of section 244A. It cannot control the substantive provision. The interpretation of the Explanation, as suggested by the Department, runs counter to the scheme of grant of interest on refund. The said interpretation cannot be accepted as there cannot be any situation from where a person will pay tax or penalty over and above or in excess of the demand notice under section 156. Petitioner is entitled to receive interest from the date of actual deposit on the excess amount made in pursuance of the demand notice issued under section 156 of the Income-tax Act to the date of actual refund. The stand of the Department that since the petitioner has not paid in excess of any sum mentioned in the notice of demand issued under section 156, no interest is payable, is rejected. This is a novice stand which has been taken by the Department in the present case. The apex court in the case of Sandvik Asia Ltd. v. CIT [2006 (1) TMI 55 - SUPREME Court] has examined the question of payment of interest upon the interest amount in great depth. In that connection, it has observed that payment of interest for delayed refund is nothing but a compensation for depriving the assessee to utilize the money. Then it was urged that in view of sub-section (2) of section 244A, the delay is attributable to the petitioner and, therefore, the petitioner is not entitled for any interest. The said argument has been stated to be rejected. - It is apposite to note that the delay attributable to the assessee is referable to the late filing of the return, etc., and has nothing to do with regard to the claim of the refund. The said point can be illustrated with the help of example II as given in the Departmental Circular No. 549. It demonstrates that where the return was filed with delay of four months, the interest shall not be payable by the Government for the period of delay attributable to the assessee. Except making a bald statement, it was neither pleaded nor proved with the help of cogent material to show that the delay was attributable to the petitioner. - Interest allowed - Decided in favor of assessee.
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