The view stated to have been taken by some ITOs, that the date of the assessment order is to be taken as the "date of the order granting the refund" is not correct. But some good news just emerged on that front, because the IRS has announced that it will be paying filers interest on tax refunds that are issued after April 15. Hence it can be seen that there is no consensus about the taxability of interest income on the refund amount. In light of section 244A, Rule 119A and the legal proposition so laid down by the Hon’ble Rajasthan High Court in case of Rajasthan State Electricity Board (supra), and Hon’ble Gujarat High Court in case of Arvind Mills (supra), in the instant case, where the assessee has paid the taxes and such taxes have been refunded, the assessee is to be paid interest at the prescribed rate for every month or part of a month comprising the period from the date of payment of the tax to the date on which the refund is granted. In this case, their Lordships held that-, “As we have already noticed, in Sandvik case (supra) this Court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. 3. Therefore, it would be inappropriate for this Court to consider that judgment now as binding authority. In cases, where the return is selected for scrutiny assessment, the refund is in many cases issued after the assessment order u/s 143(3) is passed. No part thereof can be with-held for the assessment on the ground of being provisional. 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the assessment 1989-90 and subsequent assessment years, while the provisions of sections 214, 243 and 244, which have been replaced by the provisions of new sections 244A, shall cease to apply to the assessment year 1989-90 and onwards. Clause (b) of section 244A(1) provides that in case the refund is out of any other amount, interest shall be calculated for the period from the date of payment of the tax or penalty to the date on which the refund is granted. This was done on two grounds, namely, that the provisions of Section 244A do not provide for payment of interest on refund due on account of waiver of interest that is charged under Sections 234A-C of the Act and second, that the power assumed by the Settlement Commission for waiver of interest, by following the CBDT circular referred to, does not enable the Commission to provide for payment of interest under Section 244A. This sub-section (1A) provides that where a refund arises out of appeal effect being delayed beyond the time prescribed under sub-section (5) of section 153, the assessee shall be entitled to receive, in addition to the interest payable under sub-section (1) of section 244A, additional interest on such refund amount calculated at the rate of 3 per cent per annum, for the period beginning from the date following the date of expiry of the time allowed under section 153(5) to the date on which the refund is granted. However, it is certain that when there is inordinate delay in the payment of interest, the courts do not hesitate to award compensation to the assessee despite no specific provision in the statute. Since in the present case delay of 4 months in filing the return is attributable to the assessee, interest shall not be payable to him for this period. 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. (Refer to Example III in Para 11.8). Therefore, it is proper to assume that the words “on which the refund is granted” in s. 244A mean the date of signing the Income-tax Refund Order i.e., the refund voucher. ” used in sections 234A and 234B in which it is categorically stated that even where the delay is for part of a month say even for 1 day, interest at 2% (p.m.) will be charged. Thus there cannot be any compounding of interest payments under section 244A. In fact, the income-tax department itself deducts TDS in case interest is paid on the refund amount to a non-resident. . In the case of DCIT v. Savita Oil Technologies Ltd. in ITA. 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.”. This would be so because the assessee contends that for the purpose of sub-section (1) of Section 244A the term ‘month’ should be understood as British Calender month and since Rule 119(A) of the Rules provides for ignoring a fraction of month and granting interest for the full month instead, the assessee in the second example given above should receive interest for month of January as well as for the month of February. Period: 10/01/2020–12/31/2020 Interest rate per annum compounded daily; Commonly viewed tax types Refunds Late payments and assessments; Income ** 2% This is of course an exception to clauses (a) and (b) of section 244A(1) of the Act. In several cases, where a refund has to be granted to the assessee, the Revenue officials used to take longer time in clearing such refunds resulting in considerable hardship to the assessee and with a view to expedite grant of refund, a uniform period of three months has been specified in ss. The sum found refundable to the Petitioners as a result of the waiver of interest order passed by the CCIT is a definite sum that was wrongly deducted from the Petitioners as interest. 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 … Accordingly, the assessee is entitled to receive interest on amounts paid either by way of self-assessment tax or in pursuance of a notice of demand. In view of the ratio laid down by the Hon'ble Supreme Court in the judgment, the interest on the delayed refund becomes part of the principal amount and the delayed interest includes the interest for not refunding the principal amount. )], Also see for similar decisions: Kerala State Civil Supplies Corpn. The said provision prescribes penalty for non-filing or late filing of returns and the penalty is to be calculated on every month of such default. No. It is provided that where it is not possible for the Assessing Officer to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer if satisfied, may allow an additional period of six months to give effect to the order: It is further provided that where an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 requires verification of any issue by way of submission of any document by the assessee or any other person or where an opportunity of being heard is to be provided to the assessee, the order giving effect to the said order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 shall be made within the time specified in section 153(3). Refund due and payable to the assessee is debt-owed and payable by the Revenue. AR of the assessee. Refund determined and issued as per Intimation u/s 143(1) after certain adjustments. If your refund is issued between April 15 and June 30, you'll earn 5% interest, compounded daily. Example II: Grant of refund under section 143(1) out of advance tax paid or tax deducted at source in a case where the return is filed late by the assessee - interest payable by the Department under section 244A : (i) Tax paid by way of advance tax/TDS before 31-3-1989, (ii) Tax due as per return of income for assessment year 1989-90, (iii) Due date for filing the return of income, (vii) Date of actual refund granted under section 143(1), *(VIII) Interest payable by the Department @ 1.5% per month for six months (i.e., 10 months comprised in the period 1-4-1989 - 31-1-1990 minus 4 months of delay in filing the return) i.e., @ 9% on Rs. 769 dated 6-8-1998 prescribed the Procedure to be paid for the second quarter, ending on June 30, 'll. Decided by ITAT Mumbai ( Special Bench ) in the case of, Asia. 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