By TIOL News Service

ERNAKULAM, OCT 04, 2016: THE issue is - Whether the interest u/s 244A on the income tax refund granted to the assessee u/s 247 can be denied by the CIT, even if the delay in filing of return was condoned by the High Court, in case it was found that such delay was attributable to the assessee. YES IS THE VERDICT.

Facts of the case:

The assessee, being a primary co-operative society, was assessed to income tax for the A.Y 1997-98. After the mandatory audit u/s 64 of Kerala Co- operative Societies Act, the returns could be filed only on Feb 01, 2000. It was stated that the Society had paid advance tax of Rs.10 lakhs and TDS amounting to Rs.47,957/-. When the return was filed, the taxable income was found to be nil and therefore the assessee became eligible for refund of Rs.10,47,957/- as provided u/s 247. Application for refund was filed before the AO. However, the same was rejected on the ground that the return was filed belatedly. Thereafter, the assessee filed an application u/s 119(2)(b) before the CBDT seeking condonation of delay in filing the returns, which came to be rejected. On appeal, this Court condoned the delay and observed that the assessee was entitled for refund u/s 247. The AO was accordingly directed to process the claim for refund and he passed an order directing refund of Rs.10,47,957/-. However, it was observed that the assessee was not entitled for interest u/s 244A. On appeal, the Tribunal remitted back the matter to the AO to consider the claim u/s 244A(b) r/w Explanation (2). This was challenged before this Court, which was disposed of with an observation that the assessee was entitled to seek revision before the CIT, pursuant to which the assessee filed a revision which came to be rejected.

The High Court held that:

1. This court is of the view that the liability to pay interest on refund arises from the date when claim for refund is made with all necessary particulars. As already indicated, Section 244A(2) imposes a restriction on payment of interest when the procedure for refund is on account of the delay attributed to the assessee. In the case on hand, what is to be looked into is whether the delay in refund was due to a cause attributable to the assessee. The facts involved in the case would disclose that the return for the A.Y 1997-98 was filed only on 01/02/2000 on account of delay in auditing. Return was filed belatedly and thereby it was rejected. Thereafter an application was filed u/s 119(2)(b), seeking for condoning the delay in filing the return, was rejected and ultimately the matter reached this Court wherein this Court had directed the delay to be condoned. There cannot be two ways to look at it.

2. Admittedly, there had been delay on the part of the assessee which had given rise to a situation to condone the same. Delay has been condoned only for the purpose of accepting the return. But it cannot be stated that the delay was not attributable to the assessee. Even if such instances where the delay is condoned, still when it is attributable to the assessee, there is justification on the part of the Commissioner to deny interest u/s 244A(2). Therefore, I do not find any error in the impugned orders passed by which the claim for interest has been rejected.

(See 2016-TIOL-2349-HC-KERALA -IT)