Part of my refund is self-assessment tax I paid under s.140A. The officer says no interest is payable on that. Is he right?
No. The Calcutta High Court held that s.244A(1)(b) is a residuary clause that covers a refund of excess self-assessment tax paid under s.140A, and that interest runs from the date the tax was paid to the date the refund is granted — a starting point since narrowed by s.244A(1)(aa) for periods from 1 June 2016. The Explanation to clause (b) does not stand in the way, because it operates only where the tax was paid pursuant to a notice of demand under s.156.
Decided by the High Court (Girish Chandra Gupta J and Asha Arora J) on 2016-02-02, reported as ITA No. 526 of 2004 (Calcutta High Court). It bears on section 244A, section 244A(1)(b), section 140A, section 154, section 156 of the Income Tax Act 1961, in Refunds, Interest & Condonation, How Tax Law Is Read and Assessment & Scrutiny matters.
This is a genuinely contested field and the entry is worth having for the conflict as much as the holding. The Delhi High Court in CIT v. Engineers India Ltd. had taken the opposite view; the Calcutta High Court read that judgment, said it did not commend itself, and held that it had misapplied Gujarat Fluoro Chemicals and had not accounted for the nature of tax paid under s.140A. The Bombay High Court in Stockholding Corporation of India v. N.C. Tewari had gone the assessee's way. So the answer for a period before June 2016 depends on where you are. The second use of this judgment is procedural: the interest had originally been allowed and was withdrawn by rectification under s.154, and the Tribunal held the point was at least debatable and so outside the rectification power — a ground the High Court upheld. That answers a very common notice.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee paid self-assessment tax under s.140A for assessment years 1992-93 and 1993-94. Assessments were completed under s.143(3) with certain additions. The Commissioner (Appeals) granted relief, which produced refunds, and interest under s.244A was initially allowed on those refunds. The Assessing Officer then issued a notice under s.154 and withdrew the interest, on the view that s.244A(1)(b) covers only tax paid pursuant to a notice of demand under s.156 and not tax paid on self-assessment. The Commissioner (Appeals) reversed the withdrawal, relying on the decision in MMTC. The Tribunal upheld the Commissioner (Appeals), both on the merits and on the footing that the issue was at least debatable and so beyond the scope of rectification. The Revenue appealed on four questions: whether interest under s.244A was rightly granted on a refund arising from excess payment of self-assessment tax having regard to s.244A(1)(b) and its Explanation; whether that Explanation bars interest on such a refund; whether the Act contemplates interest on such a refund at all; and whether the Tribunal was justified in granting relief on the ground that the issue was debatable.
The appeal was dismissed, with each party bearing its own costs. Questions I, III and IV were answered in the affirmative and question II in the negative. Interest is payable under s.244A(1)(b) on a refund of excess self-assessment tax from the date of payment of such tax to the date on which the refund is granted, and the Assessing Officer was directed to compute and pay it within a reasonable time.
The Court construed s.244A(1)(b) as residual in nature: it provides for interest on a refund in every case not falling within clause (a), and tax paid on self-assessment under s.140A falls within it. The Explanation to clause (b), which defines the date of payment of tax or penalty by reference to a notice of demand under s.156, was held to take effect only where the payment was in fact made pursuant to such a notice; where no notice of demand was issued the Explanation does not cut down the clause. The Court drew heavily on Union of India v. Tata Chemicals Ltd., where the Supreme Court held that when an amount retained by the State is refunded it should carry interest as a matter of course, the obligation to refund money received and retained without right carrying with it the right to interest. It also relied on CBDT Circular No. 549 dated 31 October 1989, which explained that s.244A was enacted to remove the inequity of the Government retaining money without paying interest on it, and on Stockholding Corporation of India v. N.C. Tewari, which had held that interest accrues from the date the payment of tax is made up to the date the refund is granted. The Revenue's reliance on the Delhi High Court's contrary decision in CIT v. Engineers India Ltd. was rejected: the Court held that the dissenting note struck there did not commend itself, that the Delhi Bench had misapplied Gujarat Fluoro Chemicals, and that it had failed to account for the character of tax paid under s.140A as tax on assessed income.
Hence according to mandate of section 244A(1)(b) interest is payable on refund of excess self assessment tax from the date of payment of such tax to the date when the refund is granted.
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Handle my notice → Ask a CA on WhatsAppNo. The Calcutta High Court held that s.244A(1)(b) is a residuary clause that covers a refund of excess self-assessment tax paid under s.140A, and that interest runs from the date the tax was paid to the date the refund is granted — a starting point since narrowed by s.244A(1)(aa) for periods from 1 June 2016. The Explanation to clause (b) does not stand in the way, because it operates only where the tax was paid pursuant to a notice of demand under s.156. This was decided by the High Court (Girish Chandra Gupta J and Asha Arora J) and bears on section 244A, section 244A(1)(b), section 140A, section 154, section 156 of the Income Tax Act 1961. It is reported as ITA No. 526 of 2004 (Calcutta High Court). This is a genuinely contested field and the entry is worth having for the conflict as much as the holding. The Delhi High Court in CIT v. Engineers India Ltd. had taken the opposite view; the Calcutta High Court read that judgment, said it did not commend itself, and held that it had misapplied Gujarat Fluoro Chemicals and had not accounted for the nature of tax paid under s.140A. The Bombay High Court in Stockholding Corporation of India v. N.C. Tewari had gone the assessee's way. So the answer for a period before June 2016 depends on where you are. The second use of this judgment is procedural: the interest had originally been allowed and was withdrawn by rectification under s.154, and the Tribunal held the point was at least debatable and so outside the rectification power — a ground the High Court upheld. That answers a very common notice. If it applies to you, the first step is this: Split the refund into its components — advance tax and TDS on one side, self-assessment tax under s.140A on the other — because the clause under which interest is claimed differs and the officer's computation usually silently drops the s.140A component.
The assessee paid self-assessment tax under s.140A for assessment years 1992-93 and 1993-94. Assessments were completed under s.143(3) with certain additions. The Commissioner (Appeals) granted relief, which produced refunds, and interest under s.244A was initially allowed on those refunds. The Assessing Officer then issued a notice under s.154 and withdrew the interest, on the view that s.244A(1)(b) covers only tax paid pursuant to a notice of demand under s.156 and not tax paid on self-assessment. The Commissioner (Appeals) reversed the withdrawal, relying on the decision in MMTC. The Tribunal upheld the Commissioner (Appeals), both on the merits and on the footing that the issue was at least debatable and so beyond the scope of rectification. The Revenue appealed on four questions: whether interest under s.244A was rightly granted on a refund arising from excess payment of self-assessment tax having regard to s.244A(1)(b) and its Explanation; whether that Explanation bars interest on such a refund; whether the Act contemplates interest on such a refund at all; and whether the Tribunal was justified in granting relief on the ground that the issue was debatable. The matter was decided on 2016-02-02 by the High Court (Girish Chandra Gupta J and Asha Arora J). On those facts the High Court held as follows. The appeal was dismissed, with each party bearing its own costs. Questions I, III and IV were answered in the affirmative and question II in the negative. Interest is payable under s.244A(1)(b) on a refund of excess self-assessment tax from the date of payment of such tax to the date on which the refund is granted, and the Assessing Officer was directed to compute and pay it within a reasonable time.
The Court construed s.244A(1)(b) as residual in nature: it provides for interest on a refund in every case not falling within clause (a), and tax paid on self-assessment under s.140A falls within it. The Explanation to clause (b), which defines the date of payment of tax or penalty by reference to a notice of demand under s.156, was held to take effect only where the payment was in fact made pursuant to such a notice; where no notice of demand was issued the Explanation does not cut down the clause. The Court drew heavily on Union of India v. Tata Chemicals Ltd., where the Supreme Court held that when an amount retained by the State is refunded it should carry interest as a matter of course, the obligation to refund money received and retained without right carrying with it the right to interest. It also relied on CBDT Circular No. 549 dated 31 October 1989, which explained that s.244A was enacted to remove the inequity of the Government retaining money without paying interest on it, and on Stockholding Corporation of India v. N.C. Tewari, which had held that interest accrues from the date the payment of tax is made up to the date the refund is granted. The Revenue's reliance on the Delhi High Court's contrary decision in CIT v. Engineers India Ltd. was rejected: the Court held that the dissenting note struck there did not commend itself, that the Delhi Bench had misapplied Gujarat Fluoro Chemicals, and that it had failed to account for the character of tax paid under s.140A as tax on assessed income. In the words reproduced by the source cited on this page: "Hence according to mandate of section 244A(1)(b) interest is payable on refund of excess self assessment tax from the date of payment of such tax to the date when the refund is granted." The decision followed or applied Union of India v. Tata Chemicals Ltd., (2014) 6 SCC 335 — applied; Stockholding Corporation of India v. N.C. Tewari, (2015) 373 ITR 282 (Bom.) — followed; CIT v. Engineers India Ltd., [2015] 373 ITR 377 (Delhi) — dissented from; CBDT Circular No. 549 dated 31 October 1989 — relied on.
It was decided by the High Court on 2016-02-02 and is reported as ITA No. 526 of 2004 (Calcutta High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 244A, section 244A(1)(b), section 140A, section 154, section 156, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was dismissed, with each party bearing its own costs. Questions I, III and IV were answered in the affirmative and question II in the negative. Interest is payable under s.244A(1)(b) on a refund of excess self-assessment tax from the date of payment of such tax to the date on which the refund is granted, and the Assessing Officer was directed to compute and pay it within a reasonable time. It arises in Refunds, Interest & Condonation, How Tax Law Is Read and Assessment & Scrutiny matters, on section 244A, section 244A(1)(b), section 140A, section 154, section 156 of the Income Tax Act 1961, and was decided by Girish Chandra Gupta J and Asha Arora J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where the tax was not paid against a notice of demand under s.156, take the point that the Explanation to s.244A(1)(b) has no application at all. If the interest was originally allowed and later withdrawn under s.154, run the rectification ground in the alternative: on the state of the authorities the issue is debatable and therefore not a mistake apparent from the record. Check the period. For interest attributable to 1 June 2016 onwards, s.244A(1)(aa) governs a refund out of s.140A tax and runs interest from the later of the date the return was furnished and the date the tax was paid — not from the date of payment. Use this judgment's 'date of payment' rule only for earlier periods. Outside Calcutta and Bombay, expect the Revenue to rely on Engineers India; be ready to meet it on the two grounds this Court gave — that it misapplied Gujarat Fluoro Chemicals and that self-assessment tax is tax on assessed income.
High Courts differ on this point. The conflict is on the face of this judgment: the Calcutta High Court expressly declined to follow the Delhi High Court in CIT v. Engineers India Ltd., [2015] 373 ITR 377, and followed the Bombay High Court in Stockholding Corporation of India v. N.C. Tewari, (2015) 373 ITR 282. Neither of those two judgments was read for this entry, so their precise holdings are taken from this judgment's account of them. Whether the Supreme Court has since resolved the conflict was not checked, and no search of the Supreme Court's records for a special leave petition was made. Separately, note the statutory change: s.244A(1)(aa) was inserted by the Finance Act 2016 with effect from 1 June 2016 and deals expressly with a refund out of tax paid under s.140A. Clause (aa) has been read: it calculates interest on a refund out of tax paid under s.140A at one-half per cent per month from the date of furnishing of the return of income or the date of payment of the tax, whichever is later, to the date the refund is granted. That displaces this judgment's 'date of payment' starting point for any period governed by clause (aa), wherever the tax was paid before the return was furnished. The entitlement to interest on a s.140A refund, which is what this judgment establishes, survives — clause (aa) enacts it. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read from the indiankanoon print text. The retrieved text is not consistently paragraph-numbered, so the quotation is placed by reference to the discussion rather than a paragraph number. The judgment cites Union of India v. Tata Chemicals Ltd. as (2014) 6 SCC 335 and CBDT Circular No. 549 dated 31 October 1989; both are reproduced as printed. The judgment records Stockholding Corporation of India v. N.C. Tewari as (2015) 373 ITR 282 (Bom.) and Engineers India Ltd. as [2015] 373 ITR 377 (Delhi); neither of those two judgments was read for this entry. The sentence recording disagreement with Engineers India reads in the retrieved text as ending with a colon and a dash before the reasons, and is reproduced accordingly and not used as the key quote. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed, with each party bearing its own costs. Questions I, III and IV were answered in the affirmative and question II in the negative. Interest is payable under s.244A(1)(b) on a refund of excess self-assessment tax from the date of payment of such tax to the date on which the refund is granted, and the Assessing Officer was directed to compute and pay it within a reasonable time.
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