By TIOL News Service

CHANDIGARH, NOV 17, 2017: THE ISSUE BEFORE THE TRIBUNAL IS - Whether any Assessee is entitled for compensation from Revenue Department for inordinate delay in payment of interest on the delayed refund of excess TDS paid by him, from the date of withholding till the date of payment. YES is the answer.

Facts of the case:

The Assessee company is engaged in the business of carriage of goods and has been assessed to tax. For the A.Y under consideration, certain refunds arising out of excess TDS were issued to the assessee from time to time. However, the interest u/s 244A was not paid in respect of certain refunds. The assesses therefore filed an application u/s 154/155 with the AO requesting that the interest should be allowed u/s 244A to the assessee on the refunds issued. However, the same was denied to assessee stating that the proceedings were delayed for the reason attributable to the assessee and the interest for entire period was not payable to the assessee. The assessee, however, submitted that under the provisions of section 244A(2), it had been provided that where any question arises as to period to be excluded, it should be decided by the Chief CIT and whose decision shall be final. The request for referring the question of period to the Chief CIT was however turned down by the AO. On appeal, the CIT(A) directed the AO to refer the question of delay attributed to assessee to the CIT, Himachal Pradesh, who directed the AO to allow interest to the assessee. The AO thereafter issued refund of Rs. 41,454/- to the assessee allowing interest upto date of issue of original refund order.

The assessee again filed an application u/s 154/155 requesting the AO to allow interest on delayed refund. However, such application of assessee was rejected by the AO. On appeal, the CIT(A) held that section 244A provides for interest on refunds in various contingencies and it was only that interest provided for under the statute which might be claimed by an assessee from the Revenue and no other interest on such statutory interest.

Tribunal held that,

++ a perusal of the judgment of Supreme Court in the case of 'CIT Vs. Gujarat FlluroChemicals' - 2014-TIOL-32-SC-IT, reveals that where the Revenue fails to pay interest on statutory interest and the assessee is made to wait for refund of interest for decades meaning thereby where there is an inordinate or excessive delay, the Court was justified to direct the Revenue to pay compensation for the same. The interest awarded in 'Sandvik Asia Ltd. Vs. CIT' case was in the shape of compensation and not interest on interest. The Supreme Curt has further observed that the provisions of section 244A provides for interest on refunds under various contingencies. The Supreme Court clarified that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue, and no other interest on such statutory interest. Now what has been held by larger Bench of Supreme Court in the case of 'CIT Vs. Gujarat FlluroChemicals' - 2014-TIOL-32-SC-IT is that the assessee is entitled to interest on the refund of any amount which becomes due to assessee under the statute. We find that another Larger Bench of the Supreme Court in the case of 'CIT Vs. H.E.G. Ltd', has answered the question "what is the meaning of the words 'refund of any amount becomes due to the assessee' in section 244A". The Supreme Court held that the interest component will par take the character of 'amount due' u/s 244A. It becomes integral part of the amount due which becomes due and payable and that it cannot be said to be a case of claiming interest on interest;

++ the AR of the assessee has again brought attention of this Tribunal, to the relevant wording in section 244A and has pointed out that the Legislature has not used the words 'refund of excess tax paid' or the 'principle amount of tax paid'; the words used by the legislature are "any amount". The AR has, therefore, stressed that the meaning of the words 'any amount' not only includes within its scope and ambit, the principle amount due but also the interest element which remains unpaid on the date of issue of refund. The AR has submitted that when the Revenue does not pay full amount of refund but part amount is paid, the balance outstanding unpaid amount has both the components i.e. the tax amount as well as interest, which further becomes due to the assessee upon which the assessee is entitled to interest as per section 244A. The AR has further submitted that this type of contingency arises only when the interest is not refunded along with tax refund, out of total refundable due to the assessee and that the outstanding amount thus partakes the character of the remaining amount due upon which the simple interest is payable as per the provisions of section 244A. He has further submitted that even otherwise in the case of assessee the interest component was withheld for a long period and, hence, even in the light of the decision of Supreme Court in the case of 'CIT Vs. Gujarat FlluroChemicals' - 2014-TIOL-32-SC-IT, the assessee is entitled to compensation on the delayed interest amount;

++ we find force in the submissions of the AR of the assessee. The larger Bench of Supreme court in the case of 'CIT Vs. H.E.G. Ltd.', has defined the term 'refund of any amount becomes due to the assessee" and has held that on the date of payment of the refund along with interest, the withheld or the unpaid amount on the said date becomes amount due to the assessee upon which the assessee is entitled to interest u/s 244A from the date of withholding till the date of payment. The Supreme Court in the case of 'CIT Vs. Gujarat FlluroChemicals' = 2014-TIOL-32-SC-IT has also held that in case of inordinate delay in the payment of interest, the Revenue can be directed to pay compensation for the same by way of interest. In the case in hand also, there is an inordinate delay of more than 10 years in payment of balance amount to the assessee, hence, in the light of the decision of Supreme Court in the case of 'CIT Vs. Gujarat FlluroChemicals', the assessee is otherwise entitled for the compensation from the Revenue for inordinate delay in the payment of interest. We accordingly direct the Revenue to pay compensation in the shape of simple interest on the amount due at the rate at which the assessee otherwise would have been entitled to, on the delayed payment of excess tax paid.

(See 2017-TIOL-1598-ITAT-CHD)