Case Note & Summary
The appellant, Ceat Limited, filed an appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) dated 5 December 2002. The ITAT had dismissed the appellant's appeal and refused to grant interest under Section 244A(1)(a) on the refund admissible to the appellant for the Assessment Year 1989-1990. The appellant had originally returned an income of Rs.43,64,37,800/- and paid tax of Rs.22,68,62,710/- (including advance tax, TDS, and self-assessment tax). The Assessing Officer made additions and raised a demand, which the appellant paid. On appeal, the Commissioner of Income Tax (Appeals) reduced the income to Rs.35,93,17,870/-, resulting in a refund. The Assessing Officer granted refund but denied interest under Section 244A(1)(a) on the ground that the refund was less than 10% of the tax determined on regular assessment, applying the threshold under Section 244A(1)(b). The ITAT upheld this denial. The High Court held that Section 244A(1)(a) applies to refunds of any amount paid in pursuance of an order of assessment or appellate order, and the 10% threshold under Section 244A(1)(b) applies only to refunds of excess advance tax/TDS. The court allowed the appeal, set aside the ITAT order, and directed the Assessing Officer to grant interest under Section 244A(1)(a) from the date of payment of the amounts until the date of refund.
Headnote
A) Income Tax - Interest on Refund - Section 244A(1)(a) vs Section 244A(1)(b) - The issue was whether interest on refund under Section 244A(1)(a) is subject to the 10% threshold under Section 244A(1)(b). The court held that Section 244A(1)(a) applies to refunds of any amount paid in pursuance of an order of assessment or appellate order, and the 10% threshold under Section 244A(1)(b) applies only to refunds of excess advance tax/TDS. The ITAT erred in applying the threshold to deny interest on the refund arising from the appellate order. (Paras 1-10) B) Income Tax - Refund - Section 244A - The court clarified that the phrase 'any amount' in Section 244A(1)(a) includes amounts paid as self-assessment tax, advance tax, TDS, and demand raised on assessment. The refund in this case arose from the appellate order reducing the income, and interest is payable from the date of payment of such amounts. (Paras 5-10)
Issue of Consideration
Whether the appellant is entitled to interest under Section 244A(1)(a) of the Income Tax Act, 1961 on the refund arising from the appellate order, and whether the ITAT erred in applying the 10% threshold under Section 244A(1)(b) to deny interest.
Final Decision
Appeal allowed. The order of the ITAT dated 5 December 2002 is set aside. The Assessing Officer is directed to grant interest under Section 244A(1)(a) of the Income Tax Act, 1961 on the refund amount from the date of payment of the amounts until the date of refund.
Law Points
- Interest on refund under Section 244A(1)(a) is payable on refunds arising from appellate orders
- not limited by the 10% threshold under Section 244A(1)(b)
- Section 244A(1)(a) applies to refunds of any amount paid in pursuance of an order of assessment or appellate order
- the 10% threshold applies only to refunds under Section 244A(1)(b) for excess advance tax/TDS.
