Assessee not entitled to interest on refund of excess self-assessment tax paid by him, rules Delhi HC

March 3, 2015[2015] 55 taxmann.com 1 (Delhi)

IT : Refund of excess self-assessment paid by assessee would not be eligible for interest under section 244A as the provisions of section 244A would not apply thereto

• The provisions contained in Section 115WJ (Advance tax in respect of fringe benefits), Section 199 (Credit for tax deducted), Section 206C (Profits and gains
from the business of trading in alcoholic liquor, forest produce, scrap, etc.) or Section 207 (Liability for payment of advance tax) have no connection with the liability to pay self-assessment tax.

• Therefore, clause (a) of sub-section (1) of Section 244A would not apply to refund out of the amount paid as self-assessment tax.

• Clause (b), on the other hand, is residuary provision.Noticeably, for purposes of calculating the liability of the Revenue towards interest on the amount being refunded under Section 244A(1)(b), the beginning point is prescribed as the "date of payment of tax (or penalty)". This expression is defined in the explanation appended to the clause to be indicative of the date of payment of the amount "specified" in the demand notice under Section 156.

• Thus, the legislation makes it clear that for the residuary clause, the amount paid by the assessee (from which refund is to be made) must have been deposited pursuant to demand notice issued by the assessing authority. To put it conversely, the clause would not apply, by virtue of the explanation, in case the excess amount (being refunded) has been paid by the assessee otherwise than in compliance with demand notice or voluntarily. This is the import and effect of the explanation if the language employed thereof is read, understood and construed in its natural and ordinary sense.

• Since the words used are clear, plain and unambiguous, there is no scope for beneficent construction since it would lead to re-legislation, which is impermissible.

• There cannot be a general rule that whenever a refund of income tax is to be paid, the Revenue must necessarily pay interest on the refunded amount. The letter and spirit of the law on the subject is that the party which committed the error in proper calculation (or delay in proper assessment) must bear the burden.

• If the excess amount is paid due to erroneous assessment by the Revenue, having exacted such burden wrongfully and inequitably on the assessee and having retained the excess amount thus received, the reimbursement must be accompanied by payment of interest at the statutorily prescribed rate.

• Conversely, if the assessee is to blamed for the miscalculation (or for delay or, for that matter, want of claim of refund), the Revenue does not owe any interest even if the excess payment of tax is liable to be refunded.

• It is trite that a fiscal statute is to be construed strictly. The claim of interest on refund of income tax has to be pegged on the statutory clauses only.

• There being no allegation that such excess deposit was pursuant to demand by the Revenue, the claim for interest on excess payment voluntarily made cannot be sustained.

• In the result, the appeal is allowed and the impugned order passed by ITAT directing the AO to pay interest to the assessee on the refunded amount is set aside.