This does not mean that the amount other than tax or penalty cannot be included in the expression “in any other case”. Rule 119A prescribes the Procedure to be followed in calculating interest under the provisions of the Act. Where an assessee has furnished his return of income and total taxes paid is more than the tax liability of the assessee and the assessee claim the excess taxes paid as a refund and the same is found due to him, the income tax law provides for payment of, interest on the amount of income-tax refund, to the assessee. Where such advice is given, it should be clearly explained to them that they are responsible for the entries made in any form and that they cannot be allowed to plead that they were made under official instructions. 1. 3,60,000 is appearing in Form 26AS for AY 2019-20 and the income offered to tax is Rs. , ITAT Mumbai had an occasion to decide the method of computation of refund amount including interest u/s 244A when the refund was earlier granted. Works case (supra) and read it as taking the same view. assessee is entitled to receive interest on amounts paid either by way of self-assessment tax, The aforesaid Explanation instead of clarifying the meaning of ‘, The Explanation under clause (b) of Section 244 A (1) of the Act serves to clarify the expression “the dates of payment of the tax or penalty.” It is not intended to and in fact does not whittle down the ambit of Section 244 A (1) (b) of the Act. 244A comes into effect from 1st April, 1989, whereas s. 243 is available upto or prior to 1st April, 1989. As already explained in para 10.11 ante, the meaning of this expression is that even where the delay is for part of a month, interest @ 1.5% will be charged. Interest payable by the Department @ 1.5% per month for 6 months and 10 days (1-4-1989 to 10-10-1989). No. 36,000/- on advance rent of Rs. Stock Advisor launched in February of 2002. 7620/Mum/2016 decided on 24 April, 2019 almost all the important judgements on the issue of interest on refund of self assessment tax is discussed. [Section 244A(1)(b)]. While most tax filers do end with a refund each year, those who land in the opposite scenario and don't pay their tax bills on time will owe interest to the IRS. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. As usual, the IRS will pay 5% annual interest, compounded daily through June 30. It is further noted that section 244A(1B) covers all types of refund of TDS whether deposited u/s 195 or under any other section. Section 244A: All about Interest on Income-tax Refund: An assessee is entitled to receive interest on the amount of income tax refund which he has claimed in the income-tax return. Accordingly, we are of the view that the method adopted by the AO suffered from grave error as the same has resulted the reduction of interest payable to the assessee because the principal amount is reduced by interest component already granted and then future interest is computed. Hence, the entire amount of interest is taxable under the Income Tax Act. Vs. DCIT (2017) 391 ITR 33 (Guj.-HC). : Interest is to be paid for the full month even where the delay is for part of a month. Finally, the case was decided in favour of the assessee in the following words-, “21. In the past, the IRS paid me interest on refunds even if I filed a year late. No. Refunds for paper returns take twice as long under normal circumstances, and this year, they're taking even longer -- but that could actually result in a higher payout for you when you factor in the interest you'll be eligible to collect. The facts were that in revision proceedings, the assessee took a stand that in the return, there was an erroneous declaration of an amount of income chargeable to the tax. in the hands of the assessee under the head ‘Income from other sources’. Therefore, on both the aforestated grounds, we are of the view that the assessee was entitled to interest for 57 months on Rs. 2. In this context, the term ‘month’ in our opinion, must be given the ordinary sense of the term i.e. The assessment order u/s 143(3) was passed on 20.12.2019. The Tribunal was, therefore, correct in allowing the interest to the assessee. Refund is granted the moment the concerned officer has signed the order regarding payment of the interest under section 244A of the Income-tax Act. (a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; (b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. the Revenue. Thus the interest component in the refund already granted should be excluded while the same is to be reduced from the refund due to the assessee for the purposes of section 244A for future interest on the balance refund due amount. Increase or reduction of interest under certain circumstances: Where, as a result of an order under sub-section (3) of section 115WE or section 115WF or section 115WG or sub-section (3) of section 143 or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly. In another recent case decided by the Bombay High Court on similar facts in the case of CIT vs. Melstar Information Technologies Ltd in Income Tax Appeal No. There may be a situation where refund with interest was granted to the assessee under section 143(1) after processing the return. It becomes an integral part of Rs. Clause (b) deals with 'any other case‟ - which has to be a case other than the refund of taxes or penalties. Refund of self-assessment tax paid u/s 140A: Interest is payable @ 0.5% p.m. or part thereof from the, On this issue, Hon’ble Supreme Court in the case of, Engineers India Ltd. vs. CIT reported in (2017) 397 ITR 16, observed that where the Delhi High Court in the case of, CIT vs. CIT/CIT and not by the Assessing Officer. In other words, HEG Ltd. seems to suggest that there would be dues on bar, refund and delayed interest. When interest under section 244A on the income tax refund is not payable, Interest on Refund of any other tax and Penalty. three Judge Bench decision in Gujarat Fluoro Chemicals (supra) where the Supreme Court categorically held that the only amount which an assessee aggrieved by delayed payment can legitimately claim under the statute is interest and that "no other interest on such statutory interest" is payable. It happens many times that tax is deducted in one year but the credit of TDS u/s 199 of the Act is given in another assessment year. In our view, awarding cost of Rs. 1,120 including interest of Rs. 2,40,000. : Interest is to be paid for full month even where the delay is for part of a month. Act after excluding the period of delay attributable to the assessee in terms of sub-section 2 of section 244A of the Income Tax Act, 1961″, 32. In the interest of fairness and equity, section 244A is amended to provide that an assessee shall be eligible to interest on refund of self-assessment tax for the period beginning from the date of payment of tax or filing of return, whichever is later, to the date on which the refund is granted. However, a three Judge Bench decision in Gujarat Fluoro Chemicals (supra), it was categorically held that the only amount which an assessee aggrieved by delayed payment can legitimately claim under the statute is interest and that "no other interest on such statutory interest" is payable. (b) tax is paid, where refund arises on account of giving effect to an order under section 250 or section 254 or section 260 or section 262, to the date on which the refund is granted. Therefore, it is clear that the circular issued in connection with s. 243 of the IT Act equally applies to s. 244A. The principal amount of Rs. Interest under section 244A(1) was allowed from the 1st day of the assessment year. Interest payments may be received separately from the refund,” the IRS said in a brief statement. The facts of the case are that the order u/s 143(3)/250/254 was passed by the Assessing Officer on 12.04.2010 and refund amounting to Rs. Section 200A was made effective from 01.04.2010. 20-D (XXII-22) Dated 20.08.1968, Circular No. If such period is a fraction of a month, the same shall be deemed to be a full month and the interest shall be calculated for the entire month accordingly. (e) Sec. It should be noted that this case was decided on 6th September, 2010 but was not mentioned in the earlier decisions. 01.04.1989 and were made applicable from Assessment Year 1989-90. 25,69,83,890/- was determined and the same was issued to the assessee vide refund voucher dated 09.06.2010. Both reduce your tax bill, but in different ways. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Accordingly, the entire interest received is subject to tax in the first instance. (Emphasis added). CIT Vs State Bank of India in ITA No. and held that in its opinion the assessee was entitled to interest on delayed payment of interest and upheld the assessee’s contentions as follows : "10. A similar proposition has been laid down by ITAT Mumbai in the case of, Tolani Education Foundation vs ACIT in ITA Nos. is interpreted to mean the date of assessment order, there may be a situation where refund may be determined in an assessment order but cheque is not issued for considerable period of time in which event Government enjoys the benefit of possessing assessee’s money without paying interest whereas assessee is deprived of its money and also compensatory interest for the period of delay i.e. In this case, the interest shall be determined in the following manner-, Tax amount on which interest was payable under section 244A(1), Balance amount of tax on which interest is payable, (from 01.04.2017 to 30.03.2020 = 36 months @ 0.5% p.m. comes to 18%). In a subsequent decision, Lucknow Bench of the Tribunal in case of, Indo Gulf Corporation Ltd. vs. DCIT reported in 141 TTJ 0862/61 DTR 203. wherein the decision of Hon’ble Rajasthan High Court in case of Rajasthan State Electricity Board (supra) has been followed. 6508, 6509 & 6510/Mum/2013 (ITAT Mumbai) and in ITA No. If your refund is issued between July 1 and Sept. 30, you'll earn 3% interest, compounded daily. [, Preeti Aggarwala vs. CIT [W.P. In other words, if the issue of the refund order is delayed for any period attributable to the assessee, then the assessee shall not be entitled to interest for such period. By law, the interest rate on both overpayment and underpayment of tax is adjusted quarterly. Therefore, in the given facts and circumstances of the present case, the AO did not work in accordance with the provisions of law. The Board have issued instructions from time to time in regard to the attitude which the Officers of the Department should adopt in dealing with assessees in matters affecting their interest and convenience. The interest amount as claimed by the Petitioners on the amount refunded to them will now be paid by the Department to the Petitioners within four weeks from today in terms of Section 244A(1)(b) of the Act from the date of recovery till the date of payment.”, The applicability of section 244A(1)(b) in this case was discussed in the following words-. However, in this case, the assessee claimed the exemption after CBDT accepted the assessee’s application for grant of exemption u/s 10(23C)(vi). These provisions, apart from being complicated, left certain gaps for which interest was not paid by the department to the assessee for money remaining with the Government. As CIT(A) affirmed the order of the AO on this issue, assessee filed further appeal before the Tribunal, contending inter alia that under s. 244A of the IT Act, 1961, interest has to be calculated upto the date of refund voucher. Hence, in computing the interest payable to the assessee on the amount of refund of tax/TDS, the ‘period of computing interest’ ends on this date - date on which the refund is granted. The Courts were of the opinion that there is nothing repugnant in Section 271(1)(a) of the Act so as to reject the applicability thereof. Finally, following the decision of the Hon’ble Supreme Court in the Tata Chemicals case (supra), CBDT issued a Circular No. In our view, the plea of the assessee deserves favourable consideration. Vs. CIT in R.C. The rate of interest has been increased from the earlier 15% per annum to 1.5% per month or part of a month comprised in the period of delay in the grant to refund. 6 The applicable quarterly interest rate is charged for each quarter, so taxpayers will still pay a higher percentage on first and second quarter 2020 balances. One should be very careful in filing the claim of refund in time otherwise the assessee may lose the interest for the period for which the delay is attributable to assessee. As already explained in para 10.11 ante, the meaning of this expression is that even where the delay is for part of a month, interest @ 1.5% will be charged. It should be noted that this case was decided on 6th September, 2010 but was not mentioned in the earlier decisions. 2/2007 dated 28-03-2007. its Instruction No. The intimation dated 29.03.1994 calculated the interest payable on the refund @ 12 per cent on Rs. Clause (b) stipulates that “in any other case” the interest payable shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date “or, as the case may be” dates of payment of the “tax or penalty” to the date on which the refund is granted. As already explained in para 10.11. the meaning of this expression is that even where the delay is for part of a month, interest @ 1.5% will be charged. ) For the third quarter of 2020, the interest rate is 3% on tax balances due to the IRS. The interest payments, averaging about $18, will be made to individual taxpayers who filed a 2019 return by this year's July 15 deadline and … The question of refunding the excess tax with interest came up for consideration before the assessing officer. Payment of interest on that sum by the Revenue cannot be characterised as payment of 'interest on interest'. Ltd. (2006) 100 ITD 131 (Mum)/ (2006) 284 ITR 73, interest on income tax refund would be assessable in the year in which it is granted u/s 143(1)(a). No. If you were entitled to a 2019 tax refund, you may be in store for some good news: individual federal income tax refunds issued after April 15 will be paid with interest. However, the decision of National Horticulture Board (supra) is followed in the case of CIT vs. Assam Roofing Ltd. (2011) 330 ITR 87 (Gau.-HC). 27th Oct., 1994 by which the assessment order dt. As already pointed out earlier, the provisions of the new section 244A shall apply to the assessment 1989-90 and subsequent assessment years, while the provisions of sections 214, 243 and 244, which have been replaced by the provisions of new sections 244A, shall cease to apply to the assessment year 1989-90 and onwards. This article discusses the relevant provisions of the Income Tax Act, 1961 (“Act”) with relevant Judicial Decisions/landmark Case Laws on Interest u/s 244A. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should :—. If such requirement is satisfied, to the extent of the period of delay so attributable to the assessee, he would be disentitled to claim interest on refund. A tax credit valued at $1,000, for instance, lowers your tax bill by $1,000. It is of no matter that the interest that is waived is discretionary in nature, for the moment that discretion is exercised, a concomitant right springs into being in favour of the assessee. M. Jaffer Saheb (Decd.) If the calculation spans both quarters, you'll get a blended rate. the year in which the refund is actually received. the year in which the refund is actually received. This principle is also clarified for section 220(2) in the said Circular as “The use of the expression ", " in the sub-section means that even where the delay is for part of a month, say even 1 day, interest shall be charged at 1.5%”, Examples to illustrate the calculation of interest under section 244A, and in example 1, a part of a month is taken as a full month. However, ITAT Mumbai in the case of DCIT vs. State Bank of India in ITA No. No. You would then enter the total from Schedule B on line 10b of your Form 1040. 244A(2) of the Act the AO could not do so as it was outside of his jurisdiction and the question of exclusion of any period for the purpose of grant of interest u/s 244A(1) of the Act was necessarily and mandatorily to be decided either by the Chief Commissioner of Income Tax or Commissioner of Income Tax. Further, what is clear from sub-section (2) is that, if the officer feels that delay in refund for any period is attributable to the assessee, the matter should be referred to the Commissioner or Chief Commissioner or any other notified person for deciding the issue and ordering exclusion of such periods for the purpose of granting interest to the assessee under section 244a(1) of the Act. The reason for the decision is reproduced below-, The ITAT relied upon the decision of the Supreme Court in. The reason for the decision is reproduced below-, “8. (Relevant Extracts Relevant for Section 244A). Further, whether such interest on refund amount is assessable on a year to year basis from the date of accrual till the date of receipt of refund or it is wholly taxable in the year of receipt is a matter of grave concern. The Explanation under clause (b) of Section 244 A (1) of the Act serves to clarify the expression “the dates of payment of the tax or penalty.” It is not intended to and in fact does not whittle down the ambit of Section 244 A (1) (b) of the Act.”. *Notes : Since the tax has been correctly paid and the return has been filed in time neither any tax or interest is due from the assessee nor any refund is due to him. Further, what is clear from sub-section (2) is that, if the officer feels that delay in refund for any period is attributable to the assessee, the matter should be referred to the Commissioner or Chief Commissioner or any other notified person for deciding the issue and ordering exclusion of such periods for the purpose of granting interest to the assessee under section 244a(1) of the Act. And at a time when so many Americans are desperate for money, that interest may really come in handy, especially if you're looking at a sizable refund. The return was processed under section 143(1)(a) of the Act on 29.03.1994 wherein the income returned by the assessee was accepted. (b) if the refund is out of any tax, other than advance tax or tax deducted at source, or penalty, interest shall be payable for the period starting from the date of payment of such tax or penalty and ending on the date of the grant of the refund. In the facts of that case, this Court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest.”, “Further it is brought to our notice that the Legislature by the Act No. 3,42,471/-. (ii) Sub-section (2) provides that for the purpose of computing the period of delay under sub-section (1), any period of delay attributable to the assessee shall be excluded. Para 31 and Para 32 of the Judgment in the above-mentioned case is reiterated in the Instruction of 2013 which read as follows-, “31. Their Lordships have held that refund being consequential to the order of the learned CIT(A), dt. If there is delay beyond the period of three months, IT Act provided for payment of interest to the assessee by the Central Government. Hence, in the order of assessment, the amount of refund increased and so the interest shall be payable on the increased amount of refund. In the present case, as stated above, there are two components of the tax paid by the assessee for which the assessee was granted refund, namely TDS of Rs. If that deadline is missed, then interest for an overdue refund will date back to the filing deadline, the date a return is received, or the date a payment is made -- whichever is latest. Read Also: Refund of TDS to Deductors/Buyers. When you finally get the amount that you overpaid on your 2019 taxes, Uncle Sam will tack on a bit on interest to make up for your wait. An issue came up for consideration before the Hon’ble Supreme Court in the case of, K. Lakshmanya & Co. v. Commissioner of Income Tax  399 ITR 657 (SC). The expression "proceeding" referred to in sub-section (2) of section 244A, more reasonably, would mean any proceeding as a result of which refund has become due. 905/JP/2017 decided on 05/02/2018 The ITAT Jaipur, directed the AO to grant the refund upto the date on which the refund voucher is signed. 3. Similar views were also taken in the case of, CIT vs. Birla Corporation Limited in ITA No.526 of 2004, DCIT v. Savita Oil Technologies Ltd. in ITA. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. Rule 119A prescribes the Procedure to be followed in calculating interest under the provisions of the Act. , remanded appeal back to High Court for fresh decision by a Larger Bench. 20th Aug., 1968. , which is extracted below for immediate reference: Under the terms of s. 243, interest is payable by the Government where the refund is not granted within three months from the date on which the total income is determined and the interest where payable is to be calculated at the specified rate, from the date immediately following the expiry of the three months aforesaid to the date of the order granting the refund. 244A(2) of the Act the AO could not do so as it was outside of his jurisdiction and the question of exclusion of any period for the purpose of grant of interest u/s 244A(1) of the Act was necessarily and mandatorily to be decided either by the Chief Commissioner of Income Tax or Commissioner of Income Tax. CIT (2006) 200 CTR (Ker) 653 : (2006) 282 ITR 647 (Ker). (b) Sec. Note: One should be very careful in filing the claim of refund in time otherwise the assessee may lose the interest for the period for which the delay is attributable to assessee. In case the refund was not granted within three months from the end of the month in which the regular assessment was completed, section 243 provided for further payment of interest under section 244 interest was payable to the assessee for delay in payment of refund as a result of an order passed in appeal, etc., from the date following after the expiry of three months from the end of the month in which such order was passed to the date on which refund was granted. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. 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