DCIT, CIR 3(4), MUMBAI, MUMBAI vs. UNION BANK OF INDIA, MUMBAI

PER SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER: These two appeals are filed by the Revenue against the different orders of the learned Commissioner of Income Tax (Appeals)-NFAC, Delhi, [“Ld. CIT(A)”] dated 27.02.2026 for the assessment years 2003-04 and 2004-05.

“1) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in holding that refund shall first be adjusted against interest payable and balance, if any, shall be adjusted towards tax refundable relying upon the decision of Hon’ble Tribunal in the assessee’s own case ignoring the fact that department had not accepted the aforesaid decision and Revenue’s appeals are pending with the Hon’ble High Court for adjudication on the identical issue. 2) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is right in holding that the principal component of the refund issued earlier has to be ignored for the purpose of calculating interest u/s 244A of the Income tax Act, 1961, payable to the assessee, ignoring the fact that the working of interest u/s 244A in such manner amounts to interest on interest which is not permissible as per law.” 3. The Ld. Counsel for the assessee, at the outset, submitted that the issue as to whether, while calculating the interest u/s 244A of the Act, the refund shall first be adjusted against interest payable and the balance, if any, shall be adjusted towards tax refundable, has been decided in the assessee’s own case by the Tribunal in ITA No. 7589/Mum/2014, dated 11.08.2026 for the assessment year 2008-09 and the said decision was followed by the learned CIT(A). The Ld. Counsel referring to paragraph 3.10 of the decision of the Tribunal for the assessment year 2008-09, submitted that the Tribunal has directed the Assessing Officer to recompute the amount of interest u/s 244A by first adjusting the amount of refund already granted towards the interest component and the balance left, if any, should be adjusted towards the tax component, by referring to various decisions, including the decision of the Hon’ble Supreme Court in the case of Union of India vs. Tata Chemicals Ltd., 363 ITR 658 (SC).

“7.2. The impugned order, the Grounds of Appeal, the written submissions filed by the appellant and the judicial precedents relied upon have been considered. The issue involved in the present appeal relates to the method of adjustment of part refunds granted earlier and the consequential computation of interest under section 244A of the Act. From the record, it is observed that while giving effect to the order of the Hon'ble ITAT, the Assessing Officer computed the interest u/s 244A and determined the refund due. However, while adjusting the part refunds already granted to the appellant, the Assessing Officer segregated the refund into tax component and interest component and reduced the same separately from the refund originally determined. As a result of such segregation and adjustment, interest was granted only on the balance tax component and not on the entire amount remaining due, thereby leading to short grant of interest. 7.3. The appellant has contended that once interest u/s 244A is computed and forms part of the refund due, the aggregate amount constitutes a composite refund payable by the Revenue. Any part refund granted thereafter should first be adjusted against the interest component and thereafter against the principal tax component, following the same principle as embodied in section 140A of the Act. It is submitted that the method adopted by the Assessing Officer is contrary to the scheme of the Act and settled judicial position. 7.4. The issue involved in the present appeal pertains to the manner of computation of interest under section 244A of the Act and the adjustment of part refunds granted earlier. This issue stands covered by the decision of the Hon'ble ITAT, Mumbai in the appellant's own case for A.Y. 2008-09 in ITA No. 7589/Mum/2014 dated 11/08/2016. In view of the above, and respectfully following the directions contained in the order of the Hon'ble ITAT in the appellant's own case (supra), the Assessing Officer is directed to recompute the interest payable under section 244A of the Act strictly in accordance with the methodology and principles laid down therein. The appellant has further submitted, vide submission dated 21/02/2026, that appeals filed by the Revenue on the similar issue for the other AYs. 1988-89, 2001-02 and 2005-06 are stated to be pending before the Hon'ble High Court. However, in the absence of any contrary decision brought on record, the order of the Hon'ble ITAT in the appellant's own case continues to hold the field. 7.5. The Assessing Officer shall verify the relevant figures, recompute the interest accordingly and grant consequential relief, if any, in accordance with law after due verification in accordance with the ratio laid down by the Hon'ble ITAT in the own case for A.Y.. 2008-09 in ITA No. 7589/Mum/2014 dated 11/08/2016. Accordingly, the Grounds of Appeal Nos. 1.1 and 1.2 are allowed.” 5. On careful perusal of the order of the learned CIT(A), we do not find any infirmity in the order passed by the learned CIT(A) in giving such directions. Thus, we sustained the order of the learned CIT(A) for assessment years 2003-04 and 2004- 05. The Grounds raised by the Revenue for assessment years 2003-04 and 2004-05 are rejected.

Order pronounced in the open court on 09/09/2026

Sd/- Sd/- PRABHASH SHANKAR CHALLA NAGENDRA PRASAD ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 09/09/2026 Prabhat Copy to: DCIT, CIR 3(4), MUMBAI, ROOM NO.559, 5TH FLOOR, AAYAKAR 1 BHAVAN, M K ROAD, CHURCHGATE,p MUMBAI-400020, MAHARASHTRA UNION BANK OF INDIA, UNION BANK BHAVAN 6 FLOOR 239, 2 VIDHAN BHAVAN MARG, NARIMAN POINT,, MUMBAI-400021, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE