ITA No. 1224/DEL/2022: ACIT vs. Samtel Machine & Projects – Adjusting Interest Before Tax Issue

Case Summary: ITA No. 1224/DEL/2022

Assessment Year: 1994-95

The appeal by the Assistant Commissioner of Income Tax (ACIT), Central Circle-II, Noida, against Samtel Machine & Projects (P) Ltd., Delhi was dismissed by the Income Tax Appellate Tribunal (ITAT), Delhi ‘G’ Bench. This case, noted under ITA No. 1224/DEL/2022, was heard by Shri N.K. Billaiya, Accountant Member, and Shri Yogesh Kumar U.S., Judicial Member, and the order was pronounced on August 16, 2023.

Background

The appeal was lodged by the Revenue against the order of the ld. CIT(A) – 4 Kanpur dated January 17, 2022, for the Assessment Year 1994-95. The primary grievance of the Revenue related to the deletion of interest under section 244A, arguing that interest accrued to the assessee should first reduce the interest portion before the principal portion of tax.

Arguments and Decision

During the proceedings, the representative of the Revenue argued based on the provisions of section 140A(1), stating that in cases where the amount paid by the assessee under self-assessment falls short of the aggregate amount of tax and interest, the payment shall first be adjusted towards the interest payable. However, they contended that a similar provision does not exist under section 244A, which pertains to the calculation of interest on refunds.

On the other side, the respondent, Samtel Machine & Projects (P) Ltd., made their claim through an application under section 154 of the Act. The issue was whether the interest on tax deposited by the assessee, reduced by the amount of refund paid including interest, caused the assessee to lose interest on the principal portion. This claim was initially rejected by the Assessing Officer.

The ld. CIT(A) found the case in favor of the assessee, supported by the precedent of the jurisdictional High Court of Delhi in the case of India Trade Promotion Organization 361 ITR 646. The High Court had outlined the manner of computation of interest payable by the Revenue on refunds, which applied both when the Revenue has to pay interest on refunds and when an assessee is in default.

Following this decision, the ITAT dismissed the Revenue’s appeal, stating that the ld. CIT(A)’s decision was in alignment with the binding decision of the Hon’ble High Court of Delhi, and thereby, no interference was called for.

Conclusion

The final judgment in ITA No. 1224/DEL/2022, adjudicated on August 16, 2023, concluded with the dismissal of the appeal by the Revenue. The Tribunal’s decision underscores the criticality of adhering to judicial precedents and validates the principles laid down by the Hon’ble High Court of Delhi regarding the computation of interest under Section 244A of the Income-tax Act, 1961. This landmark ruling reaffirms the stance on the method of adjusting interest before tax, thereby setting a precedent for similar cases.

ITA No. 1224/DEL/2022: ACIT vs. Samtel Machine & Projects – Adjusting Interest Before Tax Issue