Facts of the Case

·         The appeals pertain to the Assessment Years 1989-1990 and 1990-1991, arising from a common order passed by the Income Tax Appellate Tribunal (ITAT) on June 22, 2007.

·         Initially, assessments for both years were completed, creating tax demands against the assessee (India Trade Promotion Organization).

·         Subsequently, in 1994, the assessee was granted a tax exemption under Section 10(23C)(iv) of the Income Tax Act, 1961.

·         In view of this exemption, the assessment was rectified under Section 154 of the Act, and the taxable income of the assessee was assessed at 'Nil'.

·         Consequent to the rectification, the Assessing Officer (AO) granted a refund of the tax paid by the assessee but did not grant any interest on the said refund.

·         The Revenue department denied the interest based on an alleged assurance/undertaking given by the representative of the assessee stating that it would not claim interest on belated refunds. The department relied on a letter dated September 12, 1994, issued by the Under Secretary to the Government of India, Ministry of Finance, addressed to the Commissioner of Income Tax (II), New Delhi, to support this claim of waiver.

·         Aggrieved by the non-grant of interest, the assessee preferred appeals before the Commissioner of Income Tax (Appeals) [CIT(A)], who dismissed the appeals and sustained the order of the Assessing Officer.


Issues Involved

·         Whether the entitlement to interest on a tax refund under Section 244A of the Income Tax Act, 1961, is a substantive and inherent right of the assessee.

·         Whether the assessee had waived its statutory right to claim interest under Section 244A of the Act, as alleged by the Revenue department.

·         Whether any substantial question of law arose for consideration before the High Court against the factual findings of the ITAT.


Petitioner’s (Appellant's) Arguments

·         The Appellant (Revenue) argued that no interest was payable to the assessee on the delayed refund because an explicit assurance had been given by the representative of the assessee company to the effect that it would not make any claim for interest on belated refunds.

·         The Revenue placed reliance on the letter dated September 12, 1994, issued by the Under Secretary to the Government of India, Ministry of Finance, to contend that the existence of such a waiver was clearly discernible and documented.


Respondent’s Arguments

·         No one appeared on behalf of the Respondent (Assessee) before the High Court; however, their standing position before the lower authorities was sustained.

·         The assessee had submitted an affidavit executed by its Executive Director explicitly affirming and indicating that there was no such waiver of the right to claim statutory interest under Section 244A of the Act.

·         The assessee contended that the right to receive interest on delayed refunds is an inherent legal entitlement that cannot be denied on the basis of unsubstantiated correspondence or alleged oral assurances.


Court Order / Findings

·         The Delhi High Court observed that the ITAT had arrived at a clear finding of fact that there was no waiver of interest on the part of the assessee.

·         The Court noted that while the assessee had filed a concrete affidavit denying any such waiver, the Revenue department failed to bring on record any primary evidence or the alleged assurance given by the assessee to the Central Board of Direct Taxes (CBDT) showing that the claim to interest under Section 244A was waived.

·         Since the affidavit filed by the assessee remained uncontroverted by the Revenue and nothing to the contrary was placed on record, the ITAT properly accepted the affidavit to conclude that there was no waiver.

·         The High Court emphasized that the entitlement to interest under Section 244A is a substantive and inherent right, confirming the legal position established by lower forums.

·         The Court held that the conclusion reached by the ITAT was a pure finding of fact. Consequently, no question of law, let alone a substantial question of law, arose for consideration.

·         The High Court dismissed the appeals on merits without requiring the appellant to seek prior clearance from the Committee on Disputes.


Important Clarification

The order highlights that the statutory entitlement to interest under Section 244A of the Income Tax Act, 1961, represents a substantive and inherent right of an assessee. This right cannot be extinguished by revenue authorities through unilateral inferences or alleged assurances unless an explicit, incontrovertible waiver is established on record by the Department.


Section Involved

·         Section 244A of the Income Tax Act, 1961 (Interest on refunds).

·         Section 10(23C)(iv) of the Income Tax Act, 1961 (Exemption for funds/institutions established for charitable purposes).

·         Section 154 of the Income Tax Act, 1961 (Rectification of mistake).

 


Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2008:DHC:2173-DB/BDA29072008ITA5482008.pdf

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