The department paid my s.244A interest years late. Can I claim interest on that delayed interest?
The Gujarat High Court said no, and answered the question in favour of the Revenue. Applying the Supreme Court's clarification in CIT v. Gujarat Fluoro Chemicals, it held that since Parliament inserted s.244A to provide for interest on refunds, it is only that statutory interest that an assessee may claim from the Revenue, and no other interest on such statutory interest.
Decided by the High Court (K.S. Jhaveri J and G.R. Udhwani J) on 2016-06-21, reported as Tax Appeal No. 674 of 2007 with Tax Appeal No. 675 of 2007 (High Court of Gujarat at Ahmedabad); oral judgment. It bears on section 244A, section 154 of the Income Tax Act 1961, in Refunds, Interest & Condonation, How Tax Law Is Read and Demand, Recovery & Stay matters.
This is the flat answer that assessing officers and Commissioners give, and it is the answer a practitioner must expect. But it is not the whole of the law and this entry should be read against the other side. The Karnataka High Court in CIT v. Syndicate Bank (7 October 2020) reached the opposite practical result on a different analysis: following the three-Judge Bench in CIT v. HEG Ltd., it held that the interest component partakes of the character of the 'amount' due under s.244A, so a refund order that omits the interest due leaves the Revenue liable to pay interest on the shortfall, and said in terms that this does not amount to interest on interest. The question is therefore genuinely contested, and how it is framed decides it: a claim pleaded as 'interest on interest' will meet this judgment, while a claim pleaded as a short refund of the 'amount due' under s.244A engages the other line. Note also that the assessee's counsel here conceded he could point to no contrary decision, so the Court gave no elaborate reasons of its own.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment years 1995-96 and 1996-97 the assessee claimed interest on the interest due and granted to it under s.244A. The Assessing Officer refused the claim in an order under s.154 and the Commissioner (Appeals) upheld that refusal. The Tribunal, by order dated 6 September 2006 in ITA Nos. 2348/Ahd/2004 and 2349/Ahd/2004, dismissed the assessee's appeals and confirmed the Commissioner (Appeals). The matter came to the High Court on the substantial question whether the Tribunal was right in not granting interest on delayed payment of interest. Counsel for the Revenue relied on the Supreme Court's decision in CIT v. Gujarat Fluoro Chemicals (2013) 358 ITR 291 (SC); counsel for the assessee was not in a position to dispute it or to point to any contrary decision.
The question was answered in favour of the Revenue and the tax appeals were dismissed, the Tribunal's order being confirmed. Because Parliament inserted s.244A to provide for interest on refunds in 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 (paras 5 and 6).
The Court took the issue to be no longer res integra in view of CIT v. Gujarat Fluoro Chemicals, which it reproduced. In that decision the Supreme Court had explained that Sandvik Asia had been misquoted and misinterpreted by assessees and by the Revenue alike as directing payment of interest on statutory interest; that what Sandvik Asia decided was whether an assessee made to wait for a refund of interest for decades should be compensated for the prejudice caused by the delay, and that the direction there was to pay compensation and not interest on interest; and that since the Legislature had by Act No. 4 of 1988 with effect from 1 April 1989 inserted s.244A providing for interest on refunds in various contingencies, it is only that statutory interest which may be claimed and no other interest on it. Adopting that clarification, and recording that the assessee could point to no contrary decision, the Court declined to give elaborate reasons of its own and answered the question against the assessee (paras 3 to 6).
it is held by Honble the Supreme Court that the Legislature inserted Section 244A to the Act which provides for interest on refunds under various contingencies and 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.
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Handle my notice → Ask a CA on WhatsAppThe Gujarat High Court said no, and answered the question in favour of the Revenue. Applying the Supreme Court's clarification in CIT v. Gujarat Fluoro Chemicals, it held that since Parliament inserted s.244A to provide for interest on refunds, it is only that statutory interest that an assessee may claim from the Revenue, and no other interest on such statutory interest. This was decided by the High Court (K.S. Jhaveri J and G.R. Udhwani J) and bears on section 244A, section 154 of the Income Tax Act 1961. It is reported as Tax Appeal No. 674 of 2007 with Tax Appeal No. 675 of 2007 (High Court of Gujarat at Ahmedabad); oral judgment. This is the flat answer that assessing officers and Commissioners give, and it is the answer a practitioner must expect. But it is not the whole of the law and this entry should be read against the other side. The Karnataka High Court in CIT v. Syndicate Bank (7 October 2020) reached the opposite practical result on a different analysis: following the three-Judge Bench in CIT v. HEG Ltd., it held that the interest component partakes of the character of the 'amount' due under s.244A, so a refund order that omits the interest due leaves the Revenue liable to pay interest on the shortfall, and said in terms that this does not amount to interest on interest. The question is therefore genuinely contested, and how it is framed decides it: a claim pleaded as 'interest on interest' will meet this judgment, while a claim pleaded as a short refund of the 'amount due' under s.244A engages the other line. Note also that the assessee's counsel here conceded he could point to no contrary decision, so the Court gave no elaborate reasons of its own. If it applies to you, the first step is this: Never plead the claim as 'interest on interest'. Plead that the refund actually granted fell short of the 'amount due' under s.244A because it omitted the interest element, and claim s.244A interest on that shortfall.
For assessment years 1995-96 and 1996-97 the assessee claimed interest on the interest due and granted to it under s.244A. The Assessing Officer refused the claim in an order under s.154 and the Commissioner (Appeals) upheld that refusal. The Tribunal, by order dated 6 September 2006 in ITA Nos. 2348/Ahd/2004 and 2349/Ahd/2004, dismissed the assessee's appeals and confirmed the Commissioner (Appeals). The matter came to the High Court on the substantial question whether the Tribunal was right in not granting interest on delayed payment of interest. Counsel for the Revenue relied on the Supreme Court's decision in CIT v. Gujarat Fluoro Chemicals (2013) 358 ITR 291 (SC); counsel for the assessee was not in a position to dispute it or to point to any contrary decision. The matter was decided on 2016-06-21 by the High Court (K.S. Jhaveri J and G.R. Udhwani J). On those facts the High Court held as follows. The question was answered in favour of the Revenue and the tax appeals were dismissed, the Tribunal's order being confirmed. Because Parliament inserted s.244A to provide for interest on refunds in 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 (paras 5 and 6).
The Court took the issue to be no longer res integra in view of CIT v. Gujarat Fluoro Chemicals, which it reproduced. In that decision the Supreme Court had explained that Sandvik Asia had been misquoted and misinterpreted by assessees and by the Revenue alike as directing payment of interest on statutory interest; that what Sandvik Asia decided was whether an assessee made to wait for a refund of interest for decades should be compensated for the prejudice caused by the delay, and that the direction there was to pay compensation and not interest on interest; and that since the Legislature had by Act No. 4 of 1988 with effect from 1 April 1989 inserted s.244A providing for interest on refunds in various contingencies, it is only that statutory interest which may be claimed and no other interest on it. Adopting that clarification, and recording that the assessee could point to no contrary decision, the Court declined to give elaborate reasons of its own and answered the question against the assessee (paras 3 to 6). In the words reproduced by the source cited on this page: "it is held by Honble the Supreme Court that the Legislature inserted Section 244A to the Act which provides for interest on refunds under various contingencies and 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." The decision followed or applied CIT v. Gujarat Fluoro Chemicals (2013) 358 ITR 291 (SC) — followed; Sandvik Asia Ltd. v. CIT (2006) 280 ITR 643 (SC) — explained through Gujarat Fluoro Chemicals.
It was decided by the High Court on 2016-06-21 and is reported as Tax Appeal No. 674 of 2007 with Tax Appeal No. 675 of 2007 (High Court of Gujarat at Ahmedabad); oral judgment. 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 154, 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 department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The question was answered in favour of the Revenue and the tax appeals were dismissed, the Tribunal's order being confirmed. Because Parliament inserted s.244A to provide for interest on refunds in 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 (paras 5 and 6). It arises in Refunds, Interest & Condonation, How Tax Law Is Read and Demand, Recovery & Stay matters, on section 244A, section 154 of the Income Tax Act 1961, and was decided by K.S. Jhaveri J and G.R. Udhwani 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. Compute the shortfall arithmetically: total amount due (tax plus s.244A interest to the date of the earlier refund) less the amount actually paid, and run s.244A on the difference. Cite CIT v. HEG Ltd. and CIT v. Syndicate Bank on that framing, and be ready for the Revenue to answer with this judgment and with CIT v. Gujarat Fluoro Chemicals. Where the delay is inordinate and the money was withheld without authority of law, consider a writ petition seeking compensation rather than statutory interest — that is what Sandvik Asia was, on the Supreme Court's own later explanation, and it is a different remedy from a s.244A claim. Check whether s.244A(1A) applies instead: where the refund arises out of an appellate order, the additional three per cent is a statutory entitlement and needs no argument about interest on interest.
Validity check could not be completed. Validity check could not be completed. The point is genuinely contested and must be carried as contested, not resolved. The Karnataka High Court in CIT v. Syndicate Bank (I.T.A. No. 582 of 2013, 7 October 2020), read in full on this pass, held that the interest component partakes of the character of the amount due under s.244A and that the Revenue is liable to pay interest on any shortfall in a refund that omitted interest, expressly saying that this does not amount to interest on interest, and it did so following the three-Judge Bench in CIT v. HEG Ltd. (2010) 324 ITR 331 (SC). This is not a conflict the label 'high courts differ' can carry safely, because the two courts are not deciding the same question in the same terms and because the Supreme Court has spoken in both Gujarat Fluoro Chemicals and HEG Ltd.; the honest position is that the outcome depends on how the claim is framed. Neither the Supreme Court judgment in Gujarat Fluoro Chemicals nor that in HEG Ltd. was read directly on this pass. 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.
The cause title on the source page names Gujarat State Fertilisers & Chemicals Ltd as the appellant, but paragraph 1 records that "the revenue has preferred the present Tax Appeals" and paragraph 6 dismisses them while confirming the Tribunal order, which had gone against the assessee. Read together with paragraph 2 (the assessee had appealed to the Tribunal and lost), the substance is that the assessee is the appellant before the High Court and the reference to the revenue in paragraph 1 is a slip; the outcome — the question answered in favour of the revenue and the appeals dismissed — is unambiguous. The judgment reproduces paragraphs 5 to 8 of the Supreme Court's decision in CIT v. Gujarat Fluoro Chemicals (2013) 358 ITR 291 (SC); those paragraph numbers belong to the Supreme Court's judgment, not to this one, which has six numbered paragraphs of its own. The Supreme Court judgment itself was NOT read on this pass; this library already holds a separate entry for it. 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 question was answered in favour of the Revenue and the tax appeals were dismissed, the Tribunal's order being confirmed. Because Parliament inserted s.244A to provide for interest on refunds in 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 (paras 5 and 6).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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