November 2022
Refund — Interest on refund — Interest paid by the assessee u/s 234D(2) and section 220(2) — Reduction in income on recomputation — Interest claimed by assessee does not tantamount to “interest on interest” — Substantive right of assessee and obligation of department to grant interest.
By K. B. Bhujle, Advocate
Principal CIT vs. Punjab and Sind Bank
[2022] 447 ITR 289 (Del.)
A.Y.: 2001-02
Date of order: 4th August, 2022
Sections: 220(2), 234D(2), 244A(1)(b) of ITA, 1961
55. Refund — Interest on refund — Interest paid by the assessee u/s 234D(2) and section 220(2) — Reduction in income on recomputation — Interest claimed by assessee does not tantamount to “interest on interest” — Substantive right of assessee and obligation of department to grant interest.For A.Y.2001-02, the assessee had paid the demand of interest u/s 234D(2) and section 220(2) of the Income- tax Act, 1961. Upon subsequent recomputation of the income on rectification, the taxable income was reduced. Consequently, the assessee was entitled to a refund of sum deposited as interest u/s 234D(2) and u/s 220(2). The claim was rejected by the AO.
The Commissioner (Appeals) held that the claim of “interest” by the assessee for the refund amounted to “interest on interest” which was beyond the scope of section 244A and dismissed the appeal. The Tribunal held that the assessee was entitled to interest u/s 244A(1)(b) on the sum refunded to the assessee on recomputation as a result of the reduction in its income.
On appeal by the Department, the Delhi High Court upheld the decision of the Tribunal and held as under:
i) The assessee had been found entitled to refund of amount deposited by it upon recomputation by the Department and
