Refund issued will first be adjusted against interest and then against principal amount

Nirma Limited Vs ACIT (ITAT Ahmedabad)

ITAT Ahmedabad held that the amount of refund issued to the assessee will be first adjusted against the interest then, after that against the principal amount.

Facts- The assessee for the year under consideration filed the return of income declaring total income at Rs. nil and further claimed refund of Tax Deducted at Source (TDS) and advance tax paid for Rs. 1,39,77,665/- only. However, the assessment was framed by the Assessing Officer (AO) under section 143(3) of the Income Tax Act dated 30-03-1999 determining total income at Rs. 16,43,11,720/- only.

Consequentially, the AO in giving effect order dated 15-01-2009 determined the amount of refund at Rs. 75,00,281/- without granting interest u/s. 244A of the Act. The assessee filed a rectification application date 11-02-2009 to grant interest u/s. 244A of the Income Tax Act which travelled up to Tribunal and the Tribunal vide order dated 27-03-2015 directed the AO to dispose of the rectification application as per law. AO in the effect giving order granted interest of Rs. 22,12,583/- on the amount of refund for the period March 2004 to January 2009. The amount of refund for Rs. 22,12,583/- being interest u/s. 244A was adjusted against demand of A.Y. 2011-12 as on 04-05-2016.

Thus, the assessee made a claim for additional compensation of interest u/s. 244A of the Act for the period February 2009 to May 2016.

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