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I-T - Whether if there is inordinate delay in sanctioning refund which includes statutory interest, then Revenue is under obligation to pay compensation and not only interest on interest - YES: HC

By TIOL News Service

AHMEDABAD, JULY 12, 2016: THE issue is - Whether if there is inordinate delay in sanctioning refund which includes statutory interest, then Revenue is under obligation to pay compensation and not only interest on interest. YES is the verdict.

Facts of the case

The assessee claimed interest on interest. AO rejected the claim of the assessee. Against the order of AO, the assessee preferred appeals before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) in some appeals allowed the claim of the assessee against which the revenue preferred appeal before the Tribunal. In some appeals, the Commissioner of Income-tax (Appeals) dismissed the appeals against which the assessee carried the matter in appeals before the Tribunal. The Tribunal after hearing the parties, dismissed the appeals filed by the assessee and allowed the appeals preferred by the revenue.

Held that,

++ in view of the decision of the Apex Court in the case of CIT v. Gujarat Fluoro Chemicals reported in 2013-TIOL-47-SC-IT-LB, we are of the opinion that the Tribunal has rightly rejected the claim of the assessee. SC held that the Legislature inserted section 244A, with effect from April 1, 1989, which provides for interest on refunds under various contingencies. 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. In Sandvik Asia Ltd. v. CIT 2006-TIOL-07-SC-IT , the SC was considering the issue whether an assessee who is made to wait for refund of interest for decates should be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, the court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and, therefore, directed the Revenue to pay compensation therefor, not an interest on interest. In light of the above decision, we are of the view that all these appeals deserve to be dismissed and the issue is required to be decided in favour of the revenue and against the assessee. The appeals are, therefore, dismissed. We answer the question in favour of the revenue and against the assessee.

(See 2016-TIOL-1348-HC-AHM-IT)


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