Refund – Self-assessment tax – Interest – Sections 140A, 244A(1)(a),(b) and 264 – A. Y. 1994-95 – Excess amount paid as tax on self-assessment – Interest payable from date of payment to date of refund of the amount

Stock Holding Corporation of India Ltd vs. CIT; 373 ITR 282 (Bom):

For the A. Y. 1994-95, the Assessing Officer did not pay interest u/s. 244A in respect of the excess amount paid by the petitioner as self assessment tax. The petitioner’s application u/s. 264 of the Income-tax Act, 1961 was rejected by the Commissioner.

The Bombay High Court allowed the writ petition filed by the petitioner and held as under:

“i) The requirement to pay interest arises whenever an amount is refunded to the assessee as it is a kind of compensation for use and retention of money collected by the Revenue.

ii) Circular No. 549 dated 31/10/1989, makes it clear that if refund is out of any tax other than out of advance tax or tax deducted at source, interest shall be payable from the date of payment of tax till the date of grant of refund. The circular even remotely did not suggest that interest is not payable by the Department on self-assessment tax.

iii) The tax paid on self-assessment would fall u/s. 244A(1)(b). The provisions of section 244A(1)(b) very clearly mandate that the Revenue would pay interest on the amount refunded for the period commencing from the date payment of tax is made to the Revenue up to the date when refund is granted by the Revenue. Thus, the submission that the interest is payable not from the date of payment but from the date of demand notice u/s. 156 could not be accepted as otherwise the legislation would have so provided in section 244A(1)(b), rather than having provided from the date of payment of the tax. Therefore, the interest was payable u/s. 244A(1)(b) on the refund of excess amount paid as tax on self-assessment u/s. 140A.”