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2023 (6) TMI 1037 - HC - Income TaxClaim of interest on refund of "penalty amount and interest paid thereon" - Revision of revision of order u/s 264 - rejecting application of Petitioner to grant interest on refund under the provisions of Sections 244/244A - HELD THAT:- Madras High Court in Needle Industries Pvt. Ltd., [1998 (6) TMI 84 - MADRAS HIGH COURT] has held that the expression “amount” in the earlier part of Section 244 (1A) of the Act would refer to not only the tax but also the interest, and the expression “amount” is a neutral expression and it cannot be limited to the tax paid in pursuance of the order of assessment. The clear intention of the Parliament is that the right to interest will compensate the assessee for the excess payment during the intervening period when the assessee did not have the benefit of use of such money paid in whatsoever character. Madras High Court further held that in the context of Section 244(1A) of the Act, the expression “tax” would include interest also and the definition of tax under Section 2(43) meaning “income tax” cannot be applied in the context of Section 244(1A) - Court also held that consequently, the interest paid in pursuance of the order of Assessment has to be regarded as forming part of income tax or an adjunct to income tax and the result would be that Assessee is entitled to interest on the interest refunded also. We are in respectful agreement with the view expressed by the Madras High Court in Needle Industries Pvt. Ltd [1998 (6) TMI 84 - MADRAS HIGH COURT] This has been followed by the Gujarat High Court in Gujarat State Warehousing Corporation (supra) and later Delhi High Court followed Gujarat State Warehousing Corporation [2001 (8) TMI 24 - GUJARAT HIGH COURT] in the Modipon Ltd. [2004 (4) TMI 38 - DELHI HIGH COURT]. We should also add that Section 240 of the Act makes no distinction between refund of tax or penalty paid and refund on other amount collected. The case of Respondent is totally off target because Petitioner is not claiming interest on interest which is due to Petitioner but what Petitioner has claimed is interest on amount which is paid by Petitioner as interest under Section 220(2) of the Act which forms part of refund due to Petitioner. The A.O. had wrongly demanded the amount of the interest under Section 220(2) of the Act. Petitioner had paid interest on outstanding amount of penalty. On deletion of penalty, Petitioner became entitled to refund of amount of penalty paid by Petitioner as well as the interest thereon paid under Section 220(2) of the Act. The amount of interest paid by Petitioner under Section 220(2) of the Act, in our view, thus became part of refund envisaged under Section 240 of the Act. Therefore, Petitioner is entitled to interest on the said amount under the provisions of Section 244(1A). Impugned order passed u/s 264 after going through the same and examining the question of the legality thereof, to quash, cancel and set aside the same.
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