-
Whether the Revenue must be directed to rectify the computation and release the balance interest when statutory interest under Section 244A was incorrectly computed.
-
Whether the Revenue is liable to pay interest or compensation to the assessee on delayed, unpaid Section 244A interest for the period of delay.
-
The assessee filed a rectification application for Assessment Year 2019-20, claiming short grant of statutory interest due under Section 244A.
-
The tax authority accepted the assessee’s grievance regarding the incorrect computation and short grant of interest.
-
The authority subsequently informed the assessee that the balance interest due could not be processed and paid due to system issues.
-
The remaining interest amount due to the assessee under Section 244A remained unpaid for over 4 years.
-
The assessee filed a writ petition seeking directions for the release of the balance interest along with further interest/compensation on the unpaid interest from 19-04-2022 until the actual date of payment.
-
The Revenue is directed to rectify the incorrect computation under Section 244A and release the remaining balance interest to the assessee.
-
Even in the absence of an explicit statutory provision for interest on interest, the assessee is entitled to compensation for the delay in releasing funds that constitute a debt owed by the Revenue.
-
Either as interest or as compensation, the assessee is entitled to interest on the unpaid Section 244A interest for the entire period of delay.
-
The compensatory interest must be calculated in accordance with Section 244A at the rate of 6% per annum from 19-04-2022 until the date of actual payment (ruled in favor of the assessee).
-
Mandated Rectification: Incorrectly computed statutory interest under Section 244A must be rectified and fully released without delay by the Revenue.
-
Compensation for Unpaid Interest: Unpaid statutory refund interest represents a debt owed by the State; any arbitrary delay in payment warrants compensation even if “interest on interest” is not explicitly coded into the statute.
-
Applicable Interest Rate: Compensatory interest on delayed refund interest is payable at the statutory rate of 6% per annum under Section 244A / Section 437 from the date of default until actual payment.
“11. Insofar as the relief in paragraph 2(d) is concerned, the interest under Section 244A(1A) of Rs. 7,58,77,348/- for three years combined, though determined on 23.08.2023, has not been paid till date and more than 2 years have elapsed. We are of the view that the Petitioner is entitled to interest even on such delayed payment of interest. Very recently, a Division Bench of this Court in case of Tata Communications Ltd. (supra), following the decision in case of India Trade Promotion Organisation (supra) of the Delhi High Court, has directed the Department to grant interest on delayed payment of interest already determined. The relevant paragraph is quoted as under:
“Therefore, though one may call it as interest on interest, in reality payment of interest on the unpaid amount occurs because of nonpayment of the total amount refundable, which is due and payable to the assessee consisting of the tax, which had to be refunded and the interest accrued on the delayed refund of the tax. The principal amount and the interest due to be added and treated as primary amount and interest becomes due and payable on this primary amount. It will be incorrect to treat it as compounding of interest. If this interpretation or approach is taken it would ensure that the Assessing Officer/Revenue refund the entire amount, which is due and payable, including interest payable under Section 244A. It discourages part payment.”
12. A Special Leave Petition against the said order has been dismissed in DCIT v. Tata Communications Ltd. [2025] (SC), both on merits and delay.
13. In any event, even if one argues that there is no provision for payment of interest on interest, still the Hon’ble Supreme Court, and this Court, both have held that dehors any specific provision for payment of interest, interest has to be paid as a matter of compensation for use of funds which is debt-owed and payable by the Revenue. In this regard, paragraphs 37 and 38 of the decision in case of Tata Chemicals Ltd (supra) is reproduced hereunder:
“37. A “tax refund” is a refund of taxes when the tax liability is less than the tax paid. As per the old section an assessee was entitled for payment of interest on the amount of taxes refunded pursuant to an order. passed under the Act, including the order passed in an appeal. In the present fact scenario, the deductor/assessee had paid taxes pursuant to a special order passed by the assessing officer/Income Tax Officer. In the appeal filed against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid. The amount paid by the resident/deductor was retained by the Government till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. 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. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/foreign company.
38. Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course.”
14.This decision was thereafter followed by this Court in Group M Media India (P) Ltd. (supra). In this case, despite there being no provision for grant of interest on refund of Equalisation Levy, the Court granted interest @ 6% by relying upon the principles as laid down in the case of Tata Chemicals (supra).”
| a. | to carry out necessary rectification to reflect interest payable under Section 244A for Assessment Year 2019-20 as per Rectification Application dated 30th November 2021 (Exhibit L); |
| b. | to pay Rs.3,25,83,819/- as outstanding interest under Section 244A for Assessment Year 2019-20; and |
| c. | to pay interest or compensation at the rate of 6% per annum on delayed payment of interest of Rs.3,25,83,819/- from 19th April 2022 till the date of payment. |