Grant of interest on Refunds under section 244A of the Income-tax Act simultaneously with issue of Refund. - Income Tax - Instruction No. 02/2007

INSTRUCTION NO. 2/2007 Dated : March 28, 2007 Subject: Grant of interest on Refunds under section 244A of the Income-tax Act simultaneously with issue of Refund. In terms of section 244A of the Income-tax Act, 1961 (Act), an assessee is entitled to receive interest calculated in the manner provided in the said section on the amount of refund due under the Act. The interest is to be granted simultaneously with the refund and there should normally be no reason to grant refund without adding the entitled interest. In the case of Sandvik Asia Ltd. v. CIT and others (280 ITR 643), the Honourable Supreme Court, inter alia, adversely commented upon the delay in grant of interest on refund and awarded compensation to the assessee for the said delay by the Department. While taking this view, the Supreme Court referred to the judgment of the Gujarat High Court in the case of D.J. Works v. Dy. CIT (195 ITR 227) wherein the High Court had held that though there is no specific provision for payment of interest on interest, but if interest on the refund is wrongfully retained, interest on the interest would be payable. The Court further held that even assuming that there was no provision in the Act for payment of compensation, on general principles, compensation was payable to the assessee for the delayed payment of interest. The Court also recommended that action be initiated against the officers responsible for the delay. 2. It is necessary to remind all assessing officers that while granting refund to the assesses, care should be taken to ensure that any interest payable under section 244A on the amount of refund due should be granted simultaneously with the grant of refund and there should, in no case, be any omission or delay in the grant of such interest. Failure to do so will be viewed adversely and the officer concerned will be held personally accountable, inviting appropriate action. 3. These instructions may be brought to the notice of all officers working in your region for strict compliance. The Range officers should be directed to carry out periodic test checks of cases within their jurisdiction to ensure that provisions of section 244A are scrupulously implemented. 4. These instructions should also be brought to the notice of the officers responsible for conducting internal audit and adherence to these should be checked by the auditing parties.