2011 (11) TMI 846 - AT - Income Tax

Summary

Issues involved: Appeal filed by Revenue against order of ld. CIT(A) regarding grant of interest u/s 244A to assessee.

Issue 1: Grant of interest u/s 244A

The sole issue in the appeal was whether the ld. CIT(A) erred in directing the Assessing Officer to grant interest u/s 244A to the assessee. The Revenue contended that interest on interest is not allowable under sec. 244A as it speaks of simple interest only, citing the Supreme Court decision in M/s. Sandvik Asia Ltd Vs CIT (280 ITR 643) where interest on interest was granted as compensation for inordinate delay.

Judgment:

The ld. CIT(A) ordered in favor of the appellant, directing the AO to allow interest u/s 244A on any refund amount due to the assessee, including interest. The decision was based on the provisions of S. 244A and the Supreme Court ruling in Sandvik Asia Ltd case. The ld. CIT(A) found the AO's order lacking in granting interest u/s 244A and upheld the appellant's entitlement to simple interest as per law.

The Hon'ble Delhi High Court further clarified that when excess tax is refunded along with interest as per sec. 244A, no further payment is required. However, if interest is not refunded with the excess tax, the withholding of interest becomes unjustified, and interest on interest becomes payable as compensation to the assessee. The Court emphasized that the refundable amount should include interest to avoid unjust retention by the tax authorities.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the ld. CIT(A)'s order to verify and allow interest as per law. The decision was in line with the legal provisions and previous judicial interpretations.