ITAT explains section 244A provisions – Interest on Income Tax Refund

Maruti Suzuki India Ltd Vs CIT (Appeals) (ITAT Delhi)

The Honorable Delhi ITAT recently adjudicated an appeal filed in the case of Maruti Suzuki India Ltd vs Commissioner of Income Tax (Appeals)-IX (ITA No. 2553, 2641/Del/2013) wherein the case before the Tribunal was related to the provisions of section 244A of the Income Tax Act.

Post discussing all the facts and giving due regard to the decisions of the Hon’ble Supreme Court and Hon’ble High Courts, the Delhi Bench of the ITAT summarized its decision as below:

• Where refund becomes due to the assessee on account of giving effect to any appellate orders which results in trigger of section 244A(3), then in such a case, section 244A(3) effectively directs to re-compute the refund determined u/s 143(1) or Sec. 143(3) and to re-determine the quantum of the refund of the amount due afresh. Therefore, on account of this, the re-computation will happen in accordance with the provisions of section 244A(1). The argument of the assessee was that the provisions of section 244A(1) do not apply where refund is computed on account of the provisions of section 244A(3) of the Act. However, the ITAT did not concur with the view of the assessee and stated as discussed above.
• Before 01.06.2016, no interest would be paid if the amount of refund is less than 10% of the taxes determined in case the refund is out of the taxes paid other than self-assessment tax.
• Before 01.06.2016, in the case of refund arising out of self-assessment tax, interest would be calculated on the entire self-assessment tax refunded from the date of payment of S.A. tax.
• After 01.06.2016, no interest would be paid if the amount of refund is less than 10% of the taxes determined whether it is u/s 140, u/s 156, u/s 195, u/s 199, u/s 206 and u/s 207.
• Where refund of “any amount” [244A(1)] due connotes the refund of taxes paid by the assessee.
• Where refund of “any amount” [244A(1)] is due, the assessee is entitled to simple interest. The simple interest would be calculated at the prescribed percentage after determining the refund due and paid along with the principle.
• Even, “a single day” should be considered as a part of the month for the purpose of computation of interest.

FULL TEXT OF THE ITAT JUDGEMENT

The appeals have been filed by the revenue against the orders of the ld. CIT(A)-IX, New Delhi dated 28.02.2013 and 29.11.2013. The assessee has filed cross appeals.

2. In ITA No. 2553/Del/2013, following grounds have been raised by the assessee:

“1.0 That the CIT(Appeals) erred on facts and in law in confirming the action of the Assessing Officer in not granting interest under section 244A of the Income Tax Act, 1961 (‘the Act’) on the amount of refund of Rs.14,59,79,228/-, being the excess of tax liability on the assessed income over the taxes paid under section 143(1) of the Act.

2.0 That the CIT(Appeals) erred on facts and in law in concluding that for giving effect to the provisions of section 244A(3), the limitation as per the proviso to 244A(1)(a) of the Act would apply.

3.0 Without prejudice, that the CIT(A) erred on facts and in law and in the circumstances of the case in not granting interest under section 244A on the amount of refund pertaining to self assessment tax, without appreciating that the bar contained in proviso to clause (a) of section 244A(1) of the Act is not applicable to self assessment tax.”

3. In ITA No. 2641/Del/2013, following grounds have been raised by the revenue:

“1. On the facts and in the circumstances of the case, the ld. CIT (A) has erred in not appreciating the provisions of section 244A(b) of the Income Tax Act which calls for calculating interest for every month or part of the month comprised in the period or periods from the date or dates of payment of tax as the case may be. That is the interest is to be computed for a period of every month taking the date of payment as the starting date and if part of the month remains at the end the same is to be taken as full month.

2. The ld. CIT (A) has not appreciated that rounding off of the month is to be done only once and not twice as the interest is to be given from the date or dates of payment of tax.”

4. In ITA No. 468/Del/2014, following grounds have been raised by the assessee:

“1.0 That the CIT(Appeals) erred on facts and in law in confirming the action of the Assessing Officer in not granting interest under section 244A of the Income Tax Act, 1961 (‘the Act’) on the amount of refund, being the excess of tax liability on the assessed income over the taxes paid under section 143(1) of the Act.

2.0 That the CIT(Appeals) erred on facts and in law in concluding that for giving effect to the provisions of section 244A(3), the limitation as per the proviso to 244A(1)(a) of the Act would apply.”

5. In ITA No. 599/Del/2014, following grounds have been raised by the revenue:

“1. Whether on the facts and circumstances of the case & in law, the ld. CIT (A) erred in directing the AO to allow interest u/s 244A to the assessee for the month in which payments/adjustments were made on the last day of the month?

2. Whether on the facts and circumstances of the case & in law, the ld. CIT (A) erred in holding that few hours of the day constitute part of the month whereas for constituting part of the month at least one day should have been completed?

3. That the order of the ld. CIT (A) is erroneous and is not tenable on facts and in law.”

ITA No. 2553/Del/2013 (Assessee’s Appeal):

The core issue:

6. The assessee claimed refund of Rs.201,37,93,163/-comprising of advance tax, TDS and self assessment tax of Rs.14,59,79,228/- and Rs.186,78,13,935/-, the tax paid on different dates. The AO did not allow interest u/s 244A(1)(a) on the amount of Rs.14.59 crores as the refund was less than 10% of the tax determined u/s 254 r.w.s. 143(3). The ld. CIT (A) confirmed the order of the AO on the grounds that, to give effect to the provisions of Section 244A(3), the assessee had to mandatorily cross the limitations imposed u/s 244A(1)(a).

7. The chronological events of the case are as under:

> The assessee is a public limited company, engaged in the business of manufacture and sale of motor vehicles and spare parts. The assessee had, in respect of the previous year ended 31.03.1999, filed return of income on 28.12.1999 declaring total income of Rs.667,34,03,410/-.

> The return was revised on 30.03.2001 at total income of Rs.667,41,40,340/-.

> Assessment under section 143(3) followed by order u/s 154 of the Act, the total income of the assessee was determined at Rs. 1606.34 crores.

> In pursuance to the directions of the ITAT, the Assessing Officer passed order under section 143(3) r.w.s. 254 of the Act on 23.03.2006 giving effect to the order of the ITAT, determining the income of the assessee at Rs. 1424.43 crores.

> The assessee again preferred appeal against the consequential order before the CIT(A) and thereafter, before ITAT. The ITAT, vide order dated 31.10.2008, allowed substantial relief.

> After giving effect to the order of the ITAT in the second round, the Assessing Officer determined the total income at Rs.625.70 crores, on which the income tax liability was calculated at Rs.218,99,69,889/- (excluding interest under section 234C of the Act).

> As against the aforesaid tax liability of Rs.218.99 crores, the assessee had paid taxes aggregating to Rs.233,59,49,119/- by way of advance tax, tax deducted at source (TDS) and self assessment tax, thereby resulting in income tax refund of Rs.14,59,79,228/- out of the same.

> Apart, from the aforesaid prepaid taxes, the assessee had paid Rs.186,78,13,935/- on various dates in compliance of demands being raised by the Revenue, pursuant to the earlier assessment order(s)/orders giving effect to appellate orders at various stages as under: