Landmark Cases on Interest and Recovery

Levy of interest under sections 234A, 234B, and 234C of the Income Tax Act is mandatory. Tax statutes are to be interpreted strictly, allowing no room for purposive interpretation.

Interest income is taxable on either an accrual or cash basis, determined by accounting principles. This method was applicable prior to legislative changes that simplified the taxation of interest income.

Interest under section 234B for default in payment of advance tax is not leviable when the entire income is subject to tax deduction at source under section 195, as no advance tax liability arises for the assessee in such circumstances.

The Supreme Court's decision establishes principles or grounds for seeking a waiver of mandatory interest levied under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.

Where a duty is cast on the payer to deduct and pay tax at source under Section 195, the payee-assessee cannot be levied interest under Section 234B for failure to pay advance tax if the payer defaults on its TDS obligation. This principle may also extend to interest under Section 234C.

The absence of a specific limitation period for recovery of duty or tax does not, by itself, render a rule arbitrary or unconstitutional under Article 14, provided authorities act with expedition and adhere to principles of natural justice.

Interest under Section 234B is generally not leviable on non-residents whose income is subject to tax deduction at source under Section 195, provided the non-resident assessee did not induce short or non-deduction of TDS by the payer.

Assessees are entitled to compensation for the inordinate delay by the Income Tax Department in refunding excess tax, which includes interest on the statutory interest due under section 244A for such delayed refunds.

The Department has a moral and legal obligation to refund excess tax collected from taxpayers, along with interest. An assessee is entitled to interest on the amount of taxes refunded, including interest on interest, as per Section 244A of the Income-tax Act.

An assessee is not entitled to interest on interest under section 244A of the Income-tax Act, particularly regarding interest granted on a refund.

An assessee cannot reduce the amount of income-tax that should have been deducted or collected by a payer but was paid directly without deduction, while computing their advance tax liability under Section 209(1)(d). Failure to include such amounts in advance tax computations makes the assessee liable for interest under Section 234B.

A tax refund must first be adjusted towards interest payable under Section 244A, with the balance then appropriated against the principal tax amount. This approach does not lead to interest on interest.

Under Section 244A, the "amount due" for a refund includes both the principal tax and the interest accrued thereon up to the date the refund is granted. If the revenue fails to pay the full amount of refund, it is liable to pay further interest on the outstanding balance of this total refund, which does not constitute "interest on interest".

The right to refund of tax collected without authority of law is enforceable, and taxpayers are entitled to recover overpaid amounts through appropriate legal remedies, including writ petitions.

Interest under Section 234B cannot be levied on a payee-assessee for default in advance tax payment if the tax was liable to be deducted at source by the payer under the Income-tax Act.

Interest on arrears of tax is compensatory in nature, not penal, and is therefore an allowable deduction under the Income-tax Act. This decision reversed a previous Full Bench ruling.

The proviso to section 209(1) of the Income-tax Act, 1961, inserted by the Finance Act, 2012, which clarified the liability of non-residents to pay advance tax, has prospective effect only. Consequently, non-residents are not liable to pay interest under section 234B for assessment years prior to AY 2012-13.

Interest under Section 234A cannot be charged when tax has been paid, even if the return of income is filed belatedly, as such interest is compensatory and not penal in nature and only applies if there is a loss caused to the revenue.

Interest levied under Sections 234A, 234B, and 234C of the Income-tax Act is compensatory in nature, not penal. This interest is automatically imposed upon default in payment of advance tax.

When a refund is due to an assessee under Section 244A, the amount must first be adjusted towards the interest payable on such refund, with the balance then adjusted against the tax amount refundable. This follows the principle of Section 140A(1) and means "any amount" in Section 244A includes accrued interest.

Interest levied under Sections 234A and 234B of the Income Tax Act is a compensatory measure on public revenue withheld by the assessee, intended to offset the loss suffered by the Revenue due to non-payment.

An assessee is not liable to pay advance tax or interest under Section 234B on income that was subject to tax deduction at source by the payer, even if the payer failed to deduct such tax. The provisions relating to payment of tax and payment of interest operate in different areas, implying that the failure of the deductor does not automatically shift advance tax liability to the recipient in such cases.

Interest under Section 234A, being compensatory, is not leviable on self-assessment tax paid before the due date for filing the return of income. It ceases once the tax liability is fully discharged, as there is no basis to levy interest for any subsequent period.

The definition of 'tax' under the Income Tax Act does not include interest, penalties, or fees, as these are considered separate concepts under the law. The case supports the distinction between tax and other levies.

Interest received under section 244A is taxable in the year of receipt, even if the proceedings under section 143(1)(a) are subject to finality later, and any reduction in interest due to subsequent assessment proceedings under section 143(3) does not leave the assessee without remedy.