Facts of the Case

  1. Assessments for AYs 1989-90 and 1990-91 were completed creating tax demands.
  2. In 1994, the assessee obtained exemption under Section 10(23C)(iv) of the Income-tax Act, 1961.
  3. Pursuant to the exemption, the assessments were rectified under Section 154 and the taxable income was assessed at nil.
  4. The Assessing Officer granted refunds of taxes already paid.
  5. Interest on such refunds was denied on the ground that the assessee had allegedly waived its right to claim interest.
  6. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's decision.
  7. The assessee succeeded before the Income Tax Appellate Tribunal, which held that there was no waiver of the statutory right to interest.
  8. Aggrieved by the Tribunal's decision, the Revenue filed appeals before the Delhi High Court.

 

Issues Involved

  1. Whether the assessee was entitled to interest on the refund granted pursuant to rectification of assessment under Section 154?
  2. Whether the assessee had waived its statutory right to claim interest under Section 244A of the Income-tax Act, 1961?
  3. Whether any substantial question of law arose from the findings of the Income Tax Appellate Tribunal?

 

Petitioner’s (Revenue's) Arguments

  • The Revenue contended that no interest was payable on the refund because the assessee had given an assurance that it would not claim interest on delayed refunds.
  • Reliance was placed upon correspondence indicating such an understanding between the assessee and the Department.
  • It was argued that the assessee had effectively waived its right to claim interest and therefore could not subsequently seek the benefit of Section 244A.

 

Respondent’s (Assessee's) Arguments

  • The assessee submitted that it had never waived its statutory right to receive interest on refunds.
  • An affidavit of the Executive Director of the assessee organization was placed on record categorically denying any waiver.
  • The assessee argued that interest under Section 244A is a substantive statutory right and cannot be denied in the absence of a clear and proven waiver.
  • Since the Department failed to produce any document evidencing waiver, the claim for interest could not be rejected.

 

Court Findings / Observations

The Delhi High Court noted that the Tribunal had examined the matter in detail and recorded a categorical finding of fact that no waiver had been established.

The Tribunal had relied upon the following precedents:

  1. DCIT v. Central Concrete and Allied Products (236 ITR 595) (Calcutta High Court)
  2. National Horticulture Board v. Union of India (253 ITR 12) (Punjab & Haryana High Court)

These decisions recognized that interest under Section 244A is a substantive and inherent statutory right.

The High Court observed that:

  • The affidavit filed by the assessee denying waiver remained uncontroverted.
  • The Department failed to place on record any document proving that the assessee had waived its entitlement to interest.
  • The Tribunal's conclusion that there was no waiver was a pure finding of fact.

Since the finding was factual and based on evidence, no question of law, much less a substantial question of law, arose for consideration by the High Court.

 

Court Order

The Delhi High Court dismissed both appeals filed by the Revenue.

The Court upheld the Tribunal's finding that there was no waiver of the assessee's right to claim interest under Section 244A and consequently declined to interfere with the order granting such benefit.

 

Important Clarification

  • Interest under Section 244A is a substantive statutory right available to an assessee entitled to a refund.
  • Such right cannot be denied merely on the basis of an alleged assurance unless a clear and proven waiver is established.
  • Findings regarding waiver, when based on appreciation of evidence, constitute findings of fact.
  • In the absence of a substantial question of law, the High Court will not interfere with factual findings recorded by the Tribunal.

 

Sections Involved

  • Section 244A – Interest on Refunds
  • Section 154 – Rectification of Mistakes Apparent from Record
  • Section 10(23C)(iv) – Exemption to Certain Specified Institutions
  • Section 260A – Appeal to High Court (Implicitly involved)


Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2008:DHC:2175-DB/BDA29072008ITA5492008.pdf

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