Case Law Details
Court: Mumbai Income-tax Appellate Tribunal
Citation: ADIT Vs. Reliance Info comm Ltd. [2010-T11-84-ITAT-MUM-INTL]
Brief:- In a recent ruling, the Mumbai Income-tax Appellate Tribunal (“the Tribunal”) in the case of ADIT Vs. Reliance Info comm Ltd. [2010-T11-84-ITAT-MUM-INTL] has held that the assessee would be entitled to interest on the refund under the provisions of clause (b) of section 244A(1) of the Income Tax Act, 1961 (“Act”) if the refund became due under an order passed in any appeal or any other proceeding, as referred to in section 240 of the Act.
The assessee has withheld tax while making a payment to a non-resident under section 195 the Act according to the determination of tax by the Assessing Officer’s (“the AO”) order under section 195(2) of the Act. On appeal, the Commissioner of Income-tax (“CIT(A)”) held that there was no liability to deduct tax at source. When the assessee was consequently granted refund of the tax withheld, the tax officer did not pay any interest on the refund of the tax. The CIT(A) upheld the assessee’s claim for such interest The Tribunal held that interest under section 244A of the Act is payable on refund due to the assessee pursuant to the order of CIT(A).
Facts
The relevant facts of the case are as follows:
• The assessee made an application to the AO for the determination of tax deductible on amount to be remitted to a non-resident.
• The AO held that the amount would be liable to tax, and accordingly passed an order under section 195(2) of the Act.
• The assessee deducted tax on remittance pursuant to the AO’s order and also appealed against the AO’s order to the CIT(A) who held that the amount remitted was not liable to tax.
• While giving effect to the order of the CIT(A), the AO did not grant interest under section 244A of the Act. on the ground that the refund had not arisen to the assessee under the Act.
• However, the CIT(A) held that the assessee would be entitled to interest on refund under section 244A of the Act.
• Before the Tribunal, the assessee relied on various decisions including the decision in the case of Tata Chemicals Ltd. Vs. DCIT [2007] 16 SOT 481 (Mumbai) wherein it was held that the AO must grant the refund due, along with interest on the refund in terms of section 244A of the Act once the order had been passed in appeal or under any other proceedings, as mentioned in section 240 of the Act.
Issue :-Whether the assessee was entitled to interest under section 244A of the Act on the amount of refund of the tax deducted and paid according to the order under section 195(2) of the Act
Tribunal Ruling
• The Tribunal relied on the Mumbai Tribunal’s earlier decision in the case of Tata Chemicals Ltd. (above) wherein it was held that:
– Circular No. 790 dated 20 April, 2000 which stated that refund of amount paid in terms of the provisions of section195 of the Act, would not be eligible for interest under section 244A of the Act (above) covered cases where tax was deposited by the person voluntarily, without any demand made by the tax authorities under the Act. In the instant case, the assessee had paid taxes pursuant to the order passed by the AO under section 195(2) of the Act;
– the refund became due to the assessee in terms of the provisions of section 240 of the Act and,
– the provisions of the Act relating to refund prevail over any circular issued by the Central Board of Direct Taxes (“CBDT”).
• The Tribunal also relied on the decision in the case of Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643 (SC)wherein it was held that the assessee would be compensated by way of interest under section 244A of the Act where it had paid an excess amount of tax.
• The Tribunal accordingly held that the assessee was entitled to interest under section 244A of the Act on the amount of refund due.
Conclusion:- The Tribunal has reiterated the position that the interest would be granted to the assessee on refund of tax withheld under section 195(2) of the Act regardless of the fact whether it is a case of excess tax withholding or wrong tax withholding.
