Facts of the Case

The Revenue challenged the order dated 9 June 2005 passed by the Income Tax Appellate Tribunal, Delhi Bench "D" in ITA Nos. 4125 to 4128/Del/2004 relating to Assessment Years 1978-79, 1982-83, 1983-84 and 1984-85. The dispute concerned the assessee's entitlement to interest under Section 244(1A) of the Income-tax Act on amounts paid under Section 220(2) of the Act. The Tribunal had decided the issue in favour of the assessee.

Issues Involved

Whether the assessee was entitled to interest under Section 244(1A) of the Income-tax Act, 1961 in respect of payments made by the assessee under Section 220(2) of the Act.

Petitioner’s Arguments

The Revenue contended that the Tribunal erred in granting the benefit of interest under Section 244(1A) on the amount paid under Section 220(2) and challenged the Tribunal's order before the Delhi High Court.

Respondent’s Arguments

The assessee relied upon the settled legal position and supported the Tribunal's finding that interest under Section 244(1A) was payable in respect of amounts paid under Section 220(2). The assessee further relied upon judicial precedents which had already decided the issue in favour of taxpayers.

Court Order and Findings

The Delhi High Court noted that the issue was no longer res integra in view of its earlier judgment in Modipan Ltd. Corp. vs CIT (2004) 270 ITR 257. The Court observed that in Modipan Ltd. Corp., reliance had been placed upon the judgment of the Gujarat High Court in CIT vs Gujarat State Warehousing Corporation (2002) 256 ITR 596.

The Court further noted that the Gujarat High Court had relied upon several decisions of different High Courts, including the Madras High Court, Madhya Pradesh High Court and Kerala High Court. Finding no reason to take a different view, the Delhi High Court held that no substantial question of law arose for consideration.

Accordingly, the appeal filed by the Revenue was dismissed.

Important Clarification

The judgment reaffirms that where the issue regarding entitlement to interest under Section 244(1A) on amounts paid under Section 220(2) has already been settled by binding judicial precedents, no substantial question of law arises for consideration.

The decision follows and strengthens the principle laid down in:

  1. Modipan Ltd. Corp. vs CIT (2004) 270 ITR 257
  2. CIT vs Gujarat State Warehousing Corporation (2002) 256 ITR 596

Thus, interest under Section 244(1A) is available in accordance with the settled interpretation adopted by the Courts in respect of qualifying refund amounts connected with payments made under Section 220(2).

Link to download the order-https://delhihighcourt.nic.in/app/case_number_pdf/2006:DHC:25231-DB/MBL24082006ITA12002006_153542.pdf

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