Interest u/s.234D: A.Ys. 1992-93 to 1998-99: No refund u/s.143(1): Interest u/s.234D not leviable.

For the relevant years, the Assessing Officer passed assessment orders u/s.143(3) r.ws 147 of the Incometax Act, 1961 disallowing the benefit under Article 8 of the DTAA between India and USA. The CIT(A) allowed the assessee’s claim and that resulted into refund. The Tribunal set aside the orders of the CIT(A) and restored the orders of the Assessing Officer. While giving effect to the order of the ITAT, the Assessing Officer levied interest u/ss.234A and 234B and also u/s.234D. CIT(A) found that no refund was granted u/s.143(1) and therefore he held that section 234D was not attracted. The CIT(A) also found that section 234D was introduced w.e.f. 1-6-2003 and therefore he held that section 234D is not applicable to the relevant period. Accordingly he set aside the levy of interest u/s.234D of the Act. The Tribunal dismissed the appeal filed by the Revenue.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“(i) In the present case, admittedly refund was not granted to the assessee u/s.143(1) of the Act. In fact, the refund was not granted even under the assessment order u/s.143(3) r.w.s 147 of the Act, but the same was granted pursuant to the orders passed by the CIT(A). Therefore, the decision of the ITAT in holding that in the facts of the present case, section 234D is not applicable cannot be faulted.

(ii) We make it clear that we have upheld the order of the ITAT not on the ground that section 234D has no retrospective operation, but on the ground that section 234D has no application to the facts of the present case, because, in none of these cases, refunds were granted u/s.143(1) of the Act. The question as to whether section 234D applies retrospectively is kept open.”