Section 244A – Refund is to be adjusted against the correct amount of interest payable thereof to be computed as per the directions of the CIT(A) and only the balance amount is to be adjusted against tax paid. Accordingly, unpaid amount is the tax component and therefore the assessee would be entitled for claiming interest on the tax component remaining unpaid. This would not amount to granting interest on interest

10. Grasim Industries Ltd. vs. DCIT and DCIT
vs. Grasim Industries Ltd. C.N. Prasad (J.M.) and M. Balaganesh
(A.M.) ITA Nos.: 473/Mum/2016 and 474/Mum/2016;
1120/Mum/2016; and 1121/Mum/2016 A.Ys.: 2007-08 and 2008-09 Date of order: 11^th November,
2020 Counsel for Assessee / Revenue: Yogesh Thar /  V. Vinodkumar

Section
244A – Refund is to be adjusted against the correct amount of interest payable
thereof to be computed as per the directions of the CIT(A) and only the balance
amount is to be adjusted against tax paid. Accordingly, unpaid amount is the
tax component and therefore the assessee would be entitled for claiming
interest on the tax component remaining unpaid. This would not amount to
granting interest on interest

FACTS

The
only issue to be decided in this set of cross-appeals filed by the assessee and
the Revenue was about calculation of interest u/s 244A. The Tribunal, vide its common order for the A.Ys. 2006-07,
2007-08 and 2008-09 dated 19^th June, 2013, passed an order granting
relief to the assessee with a direction to reduce certain items from the value
of fringe benefits chargeable to tax.

Subsequently,
the A.O on 14^th August, 2013 passed an order giving effect to the
Tribunal’s order for the A.Y. 2006-07 wherein he correctly allowed interest on
advance tax u/s 244A from the first day of the assessment year till the date of
payment of the refund as per law.

However,
the A.O. on 16^th September, 2013 while passing the order giving
effect to the Tribunal’s order for the A.Ys. 2007-08 and 2008-09 did not grant
interest u/s 244A(1)(a) from the first day of the assessment year till the date
of receipt of the Tribunal order (i.e., 23^rd July, 2013) but granted
interest on advance tax only from the date of receipt of the Tribunal order
till the passing of the refund order. In this order dated 6^th
September, 2013, the A.O. did not even grant any interest on self-assessment
tax paid by the assessee u/s 244A(1)(b).

Aggrieved
by the action of the A.O. in granting interest on advance tax from the date of
the Tribunal order till the passing of the refund order, and also by non-grant
of interest on self-assessment tax paid, the assessee preferred an appeal to
the CIT(A) for the A.Ys. 2007-08 and 2008-09. The assessee also took the ground
that the amount of refund received be adjusted first towards the correct amount
of interest and the balance towards tax, and that on the amount of refund of
tax not received, the assessee be granted interest.

The CIT(A), vide his order dated 11^th December, 2016, allowed
interest u/s 244A on advance tax and self-assessment tax paid by the assessee
from the first day of the assessment year and the date of payment of the
self-assessment tax, respectively, for both the years till the date of the
grant of refund. However, the CIT(A) dismissed the assessee’s ground for
allowing interest on the said amount for the period of delay on the alleged
ground that it amounts to compensation by way of interest on interest.

Aggrieved,
the assessee preferred an appeal to the Tribunal seeking correct allowance of
interest u/s 244A.

The
Revenue preferred an appeal challenging the order of the CIT(A) directing the
A.O. to grant interest on self-assessment tax u/s 244A(1)(b) on the ground that
the delay was attributable on the part of the assessee.

HELD

The
Tribunal observed that since the Revenue has not preferred any appeal
challenging the direction of the CIT(A) to grant interest on advance tax from
the first day of the assessment year u/s 244A(1)(a), hence this matter has
attained finality.

The
assessee had raised the ground stating that refund granted to the assessee is
to be first adjusted against the correct amount of interest due on that date
and, thereafter, the left over portion should be adjusted with the balance tax.
The Tribunal found that in the instant case refund was granted to the assessee vide a refund order in October, 2013 and it was
pleaded by the assessee that the said refund is to be adjusted against the
correct amount of interest payable thereof to be computed as per the directions
of the CIT(A) and only the balance amount is to be adjusted against tax paid.
Accordingly, unpaid amount is the tax component and, therefore, the assessee
would be entitled to claim interest on the tax component remaining unpaid. The
Tribunal held that in its considered opinion the same would not tantamount to
interest on interest as alleged by the CIT(A) in his order. The Tribunal
observed that this issue is already settled in favour of the assessee by the
following decisions of this Tribunal:

a.  Union
Bank of India vs. ACIT reported in 162 ITD 142 dated 11^th August,
2016;

b.
Bank
of Baroda vs. DCIT in ITA No.646/Mum/2017 dated 20^th December, 2018.

The
Tribunal directed the A.O. to compute the correct amount of interest allowable
to the assessee as directed by the CIT(A) as on the date of giving effect to
the Tribunal’s order, i.e., 6^th September, 2013. It further held
that the refund granted on 6^th September, 2013 be first appropriated
or adjusted against such correct amount of interest and, consequently, the
shortfall of refund is to be regarded as shortfall of tax and that shortfall
should then be considered for the purpose of computing further interest payable
to the assessee u/s 244A till the date of grant of such refund.

The
grounds raised by the assessee for both the years were allowed.

The Revenue was in appeal against the direction of the
CIT(A) granting interest on self- assessment tax paid u/s  244A(1)(b).The Revenue alleged that interest
on self-assessment tax is not payable as the delay is attributable to the
assessee because the assessee did not claim refund in the return of income. The
Tribunal found merit in the submission made on behalf of the assessee that the
delay was not attributable to the assessee as the assessee while filing its
return for A.Ys. 2007-08 and 2008-09 had indeed made a claim in the return of
income by way of notes to the return of income and had also clarified in the
said note that tax has been paid on certain fringe benefits only out of
abundant caution. The Tribunal held that the notes forming part of the return
should be read together with the return. Hence, it cannot be said that the
assessee never made such a claim of interest in the return of income for the
respective years. The Tribunal held that no delay could be attributable on the
part of the assessee in this regard.

Both the
appeals filed by the assessee were allowed and both the appeals filed by the
Revenue were dismissed.