1982 (11) TMI 62 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to interest under section 244(1A) of the Income-tax Act, 1961.
2. Jurisdiction of the appellate authority to entertain the claim for interest.
3. Date from which interest should be calculated.

Issue-wise Detailed Analysis:

1. Entitlement to Interest under Section 244(1A):

The primary issue was whether the assessee was entitled to interest on the refund under section 244(1A) of the Income-tax Act, 1961, following a rectification order under section 154. The Income-tax Officer (ITO) initially refused to grant interest, asserting that such interest was only applicable for orders passed on appeal or revision, not on rectification orders. However, the Tribunal found that section 244(1A) indeed applies to orders under section 154, as these are considered "other proceedings" under the Act. Therefore, the assessee was eligible for interest on the refund of tax paid in excess, as the tax paid on behalf of the assessee is treated as tax paid by the assessee.

2. Jurisdiction of the Appellate Authority:

The Tribunal examined whether the appellate authority had jurisdiction to entertain the claim for interest. The Tribunal noted that if the interest under section 244(1A) is mandatory and should have been awarded along with the refund, the omission to grant such interest constitutes wrongful withholding of the correct refund. This makes the order appealable, as it affects the "amount of tax determined." Consequently, the Tribunal held that the appellate authority had jurisdiction to entertain the appeal concerning the interest on the refund.

3. Date from which Interest Should be Calculated:

The Tribunal deliberated on whether interest should be calculated from the date of tax deduction at source or from the date of adjustment (i.e., the date of the assessment order). While acknowledging that tax paid on behalf of the assessee is treated as tax paid by the assessee, the Tribunal concluded that interest should not start from the date of tax deduction at source. Instead, interest should be calculated from the date of the assessment order, as this is when the tax paid on behalf of the assessee is treated as paid by the assessee through adjustment. The Tribunal reasoned that there is no provision for interest on excess tax deducted at source before the assessment.

Conclusion:

The Tribunal directed that the assessee is entitled to interest on the refund from the date of the original assessment order until the date the refund is granted. The appeal was partly allowed, granting the assessee interest from the date of the original assessment till the date of refund, thereby resolving the issues of entitlement, jurisdiction, and the appropriate date for calculating interest.