Interest under section 244A to be computed on the gross including principal as well as interest

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA

[Before Shri Pramod Kumar, AM & Shri Mahavir Singh, JM]

Assessment Year: 1996-97 to 1998-99

Joint Commissioner of Income-tax (OSD),

Circle-8, Kolkata.

(Appellant)

Vs.

M/s. ITC Hotels Ltd. (Merged with

 ITC Ltd. (PAN: AAACI5950L)

 (Respondent)

&

I.T.A No. 246/Kol/2012

Assessment Year: 1998-99

Joint Commissioner of Income-tax (OSD),

Circle-8, Kolkata.

(Appellant)

Vs.

M/s. ITC Limited

 (Respondent)

For the Appellant: Shri B. Hazra

For the Respondent: S/Shri B. K. Seal & Kapil Basu

Date of hearing: 25.06.2012

Date of pronouncement: 29.06.2012

ORDER

Per Bench:

All these four appeals by revenue are arising out of order of CIT(A)-VIII, Kolkata in Appeal Nos. 47,46,45/CIT(A)-VIII/Kol/10-11 dated 15.11.2011, 14.11.2011, 15.11.2011 respectively and Appeal No. 50/CIT(A)-VIII/Kol/10-11 dated 14.11.2011. Assessments were framed by DCIT, Cir-8, Kolkata u/s. 254/147/254/154/251/251/154/143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Years 1996-97 to 1998-99 vide his order dated 21.06.2010 and 28.06.2010.

2. Since issues are common and facts are identical, we dispose of all these appeals by this consolidated order and is reproducing below the grounds of appeal from AY 1996-97:

“1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to allow further interest on the interest amount already determined and paid to the assessee u/s. 244A in relation to assessment year 1996-97.

2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that in the instant case the provisions of clause (b) of sub-section (1) of section 244A would apply, whereby interest u/s. 244A is payable only on the amount of tax paid in excess of the tax demand specified in the notice of demand u/s. 156.”

3. Briefly stated facts are that the AO has computed the interest u/s. 244A of the Act on the refundable amount without considering the interest incomes credited earlier in the tax computation statement as per the appeal effect order dated 21.06.2010. In appeal, CIT(A) directed the AO to recalculate the interest u/s. 244A on the total refund due to the assessee inclusive of interest income and further directed to calculate the interest on the final refund amount determined in the computation inclusive of interest till the date of payment. Aggrieved, revenue is in appeals before us.

4. We have heard rival submissions and gone through facts and circumstances of the case. We find that this issue is covered in favour of assessee and against the revenue by the decision of Hon’ble Supreme Court in the case of Sandvik Asia Ltd. Vs. CIT reported in 280 ITR 643 (SC), wherein while dealing with the issue of granting interest on interest, the Apex Court has held as under:

“The High Court has failed to appreciate that while charging interest from the assessees, the Department first adjusts the amount paid towards interest so that the principal amount of tax payable remain outstanding and they are entitled to charge interest till the entire outstanding is paid. But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. Hence, as per the stand that the Department takes they are liable to pay interest only up to the date of refund of tax while they take the benefit of assessees funds by delaying the payment of interest on refunds without incurring any further liability to pay interest,. This stand taken by the respondents is discriminatory in natrure and thereby causing great prejudice to the lakhs and lakhs of assessees.”

In view of the above, we direct the AO to recompute the interest u/s. 244A of the Act on gross amount includes principal as well as interest in view of the above settled case law of Hon’ble Supreme Court in the case of Sandvik Asia Ltd., supra. All the appeals of revenue are dismissed as indicated above.

5. In the result, revenue’s appeals are dismissed.

6. Order pronounced in open court on 29.06.2012

                                                        Sd/-                          Sd/-

                                             (Pramod Kumar)      (Mahavir Singh)

                                           Accountant Member  Judicial Member

Dated: 29th June, 2012

Jd.(Sr.P.S.)

Copy of the order forwarded to:

1. APPELLANT – JCIT(OSD), Circle-8, Kolkata.

2  Respondent – M/s. ITC Ltd./M/s. ITC Hotels Ltd. (Merged with ITC Ltd.), 37, J. L. Nehru Road, Kolkata-71.

3. The CIT (A), Kolkata

4. CIT, Kolkata

5. DR, Kolkata Benches, Kolkata

True Copy

By order,

Asstt. Registrar.