Summary
A partnership sought statutory interest on a refund arising when the Settlement Commission partially waived interest levied for assessment years1993–94 and1994–95. The Court held that the discretionary character of the waiver did not defeat the resulting right to refund and interest, and reversed the High Court.
Issues
- Whether Section244A covered a refund arising from discretionary waiver of interest by the Settlement Commission.
Provisions considered
- Section240, Income-tax Act,1961A Settlement Commission order is an order in other proceedings under the Act giving rise to a refund. (¶ 6–7)
- Section244A(1)(b), Income-tax Act,1961The residuary provision governs this refund; statutory interest is payable when the refund becomes due, subject to the section. (¶¶ 9–11, 20)
Held
- Section244A is wider than the predecessor Section244. Refund of any amount includes refunded interest; the statutory right compensates the assessee for money retained by the Department. This case fell within the residuary clause rather than clauses(a) or(aa). (¶ 8–17)
- Ghaswala did not preclude waiver authorised by applicable CBDT circulars under Section119. Although the Commission lacks an unrestricted power to waive statutory interest, it may exercise a waiver power so conferred. (¶ 18–19)
- Once an authorised order reduces or waives tax or interest, a refund becomes due. The exercise of discretion creates a corresponding right in the assessee; discretion at the waiver stage does not make the ensuing refund or statutory interest discretionary. (¶ 20–21)
Result
Appeals allowed; High Court judgment set aside and the view of CIT(Appeals) and the Tribunal allowing statutory interest on the refund upheld.