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Facts
The assessee filed its return of income and later received a refund. Due to an inordinate delay in payment of interest on this refund, the assessee sought compensation. The CIT(A) denied this compensation, allowing only the statutory interest under Section 244A of the Act.
Held
The Tribunal held that Section 244A of the Income Tax Act provides for statutory interest on refunds but does not offer any provision for compensation for delayed payment of such interest. The relied-upon case laws were found to be not applicable to the present facts.
Key Issues
Whether the assessee is entitled to compensation for the inordinate delay in the payment of interest on refund, in addition to the statutory interest provided under Section 244A of the Income Tax Act.
Sections Cited
143(1), 154, 244A
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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI JAGADISH
आदेश / O R D E R PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2011-12 arises out of the order of Learned Commissioner of Income Tax (NFAC), Delhi [hereinafter “CIT(A)”] dated 30.07.2024.
The assessee has raised the grounds of appeal
as under: “The grounds of appeal stated hereunder are independent of, and without prejudice to one another:
1. General 1.1 On the facts and the circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) is erroneous and bad in law.
ITA No.2383/Chny/2024 :- 2 -:
2. Not allowing compensation for delayed payment of interest. 2.1 The CIT(A) has erred in dismissing the appeal for allowing compensation for the inordinate delay in payment of interest on refund. The compensation calculated up to June 2023 amounts to Rs.11,40,257. The compensation will be Rs. 17,25,451 calculated up to 31-08-2024. The Appellant prays that directions be given to grant all such relief arising from the rounds of appeal mentioned supra as also all consequential relief thereto. The Appellant craves leave to add, alter, amend and/or withdraw any of the above grounds appeal and to submit such statements, documents and papers as may be considered necessary either at or before the hearing of this appeal as per law.”
The effective ground of appeal in this appeal of assessee is against the order of Ld. CIT(A) in dismissing the appeal of assessee for allowing compensation for the inordinate delay in payment of interest on refund .
The assessee filed return of income declaring income of Rs.19,76,366/-. The return of income was processed u/s. 143(1) of the Act on 15.03.2016. The assessee filed rectification petition and the rectification order was passed u/s. 154 of the Act on 12.03.2019 determining the refund of Rs. 22,28,910/-. The assessee filed another rectification petition and the rectification order u/s 154 of the Act was passed on 30.05.2023, granting further refund of Rs.7,82,960/-. The assessee filed appeal against the order passed u/s 154 of the Act before Ld. CIT(A) for not granting interest on refund u/s. 244A of the :- 3 -:
Act and compensation for inordinate delay in paying the interest on refund. The Ld. CIT(A) allowed the interest u/s. 244A of the Act but denied the compensation for delayed payment of interest. The Ld. CIT(A) has denied the compensation for delayed payment of interest as under:
“6.2 Decision 6.2.1 As held in the earlier ground of appeal, the appellant is eligible for grant of interest u/s. 244A(aa) of the I.T. Act in respect of the balance amount refundable to the appellant from the date of payment of tax to the date of grant of refund. However, in my considered opinion there is no provision under the Income Tax Act for allowing compensation for delay in payment of interest on refund. In view of the provision u/s. 244A of the I.T. Act inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 01.04.1989, the appellant shall be entitled to receive simple interest on the amount refundable and there is no provision for allowing compensation for delay in payment of interest on refund. This ground of appeal raised by the appellant is therefore dismissed.” Now, the assessee is in appeal against the order of Ld. CIT(A) denying the compensation for delayed payment of interest.
The Ld. Authorized Representative (A.R) of the assessee before us has submitted that there is inordinate delay in issuing the refund, therefore assessee is entitled to compensation for inordinate delay in paying interest and relied on the following case laws:
a. Commissioner Of Income-Tax v. H. E. G. Ltd. [2010] 324 ITR 331 (SC) [2010] -Para 3.1 of Written Statement (WS) and Annexure - 9 in pages 51-53. b. Sandvik Asia Ltd. V. CIT [2006] 280 ITR 643 (SC) Para 4.2 of WS and Annexure-10 in pages 55-80.
:- 4 -: c. Commissioner Of Income-Tax V. Gujarat Fluoro Chemicals [2013] 358 ITR 291 (SC) Para 4.3 of WS and Annexure-11 in pages 81-83. d. Motor and General Finance Ltd. v. CIT [2010] 320 ITR 88 (Delhi) - Para 4.4 of WS and Annexure-12 in pages 84-94. e. Commissioner Of Income-Tax V. Upasana Finance Ltd. [2021] 435 ITR 172 (Mad) - Para 4.5 of WS and Annexure-13 in pages 95-98. f. Umang Agrawal vs Commissioner Of Income Tax (Allahabad High Court ) - Para 4.6 of WS and Annexure-14 in pages 99- 104.
On the other hand, the Ld. Departmental Representative (DR) has argued that there is no provision in the income tax Act to provide compensation and supported the order of Ld. CIT(A).
We have heard the rival submissions, and perused the materials available on record. The assessee has claimed compensation for inordinate delay in payment of interest on refund. The Ld. CIT(A) has dismissed the appeal holding that Section 244A of the Act entitles assessee to receive simple interest on the refund due, but does not provide for compensation for any delay in payment of such interest.
The Ld. AR has relied on various case laws. However, we find that none of these case laws are relevant to present case. In the case of CIT vs. H.E.G. Ltd, the Hon’ble Supreme Court has only answered the meaning of the words “refund of any amount becomes due to the assessee” in Section 244A of the Act. The case of Sandvik vs. CIT is :- 5 -: relating to A.Y.1977-78 to 19-82-83 prior to insertion of section 244A of the Act for granting interest on refunds, when there was no provision for granting interest for delayed payment of refund. In the case of CIT vs. Gujarat Fluoro Chemicals [2013] 358 ITR 291 (SC) Hon’ble Supreme Court in para 8 has observed as under: “8. Further it is brought to our notice of 1988 (w.e.f. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. We clarify 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.”
Therefore, it has been clarified by Hon’ble Supreme Court that only interest provided under the Act can be claimed by an assessee, and no compensation for any delay in payment of interest is permissible. We accordingly, find no infirmity in the order of Ld.CIT(A). Therefore, the appeal filed by the assessee is dismissed.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced on 07th April, 2025.