Refund : S. 119, S. 240 and S. 244A of Income-tax Act, 1961 : A.Ys. 1998-99 and 1999-00 : Refund payable consequent on appeal : Application not necessary : Assessee entitled to interest on refund : Chief Commissioner has no power to deny interest on groun

[S. Thigarajan and ors. v. ACIT, 322 ITR 581 (Kar.)]

In respect of the A.Ys. 1998-99 and 1999-00, the Deputy
Commissioner (TDS) held that the shares allotted to the assessee employees were
perquisites and tax had to be deducted on their value. Therefore, the employer
deducted tax and remitted it to the Department, and issued revised Form No. 16
to the assessee employees for claiming credit for the deduction. This was
followed by the assessee filing revised returns, though beyond the time
stipulated u/s.139. The order of the Deputy Commissioner was reversed by the
Tribunal. The Assistant Commissioner gave effect to the order of the Tribunal
and directed the assesses to claim credit of the TDS by filing Form No. 16, as
the employer was not entitled to the Refund of TDS. The assesses filed revised
return with a request to refund the TDS amount. The assesses also filed
applications to condone the delay in preferring the revised returns. In exercise
of the jurisdiction u/s.119(2)(b) of the Income-tax Act, 1961, the Chief
Commissioner condoned the delay, but declined admissible interest on the ground
that the claims were belated and the petitioners had forgone their claims.

The Karnataka High Court allowed the writ petition filed by
the assessee petitioners held as under :

“(i) The first and the second revised returns along with
the application to condone the delay in filing the same, were rendered
infructuous, by the law declared in the matter of allotment of shares to the
employees, not being a perquisite, attracting TDS. Hence, the question of
exercise of jurisdiction u/s.119(2)(b) of the Act did not arise. The order of
the Chief Commissioner was arbitrary, without jurisdiction and illegal and as
a consequence the orders of the Assistant Commissioner, giving effect to the
orders of the Chief Commissioner were unsustainable. They were liable to be
quashed.

(ii) Where a refund is due to the assessee consequent on an
Appellate Order, an obligation is cast on the Revenue u/s.240, to effect the
refund without the assessee having to claim it. U/s.244A, the Revenue is bound
to pay interest at one-half percent on the amount of refund.

(iii) It is no doubt true that the Revenue had the benefit
of the monies belonging to the petitioners, up to the date of refund, and
there are a catena of decisions of the Apex Court over payment of compounded
interest on refund, which the petitioners are entitled to press into service.
Without, however going into the merits or demerits of the quantum of interest
or compounding either quarterly or half-yearly, the request of interest at 18%
per annum compounded monthly, is kept open for consideration by the first
respondent, to be decided within a period of four weeks from today and effect
payment immediately thereafter.”