ACIT (OSD) vs Jindal Poly Films Pvt. Ltd.

1.

That on the facts and in the circumstances of the case and in law, the L.d. Commissioner of Income Tax Appeals has erred in directing the Assessing Officer to grant interest under section 244A1 of the Incometax Act, 1961 from 01.04.2008, despite the fact that the refund aruse on account of an additional claim which was neither made in the return of income nor during the assessment proceedings, but was raised for the first time at the appellate stage.

2 That the Id CTTA erred in law and on facts in not appreciating that WHARE a refund arises pursuant to an additional claim raised for the first time at the appellate stage, înterest under section 244A of the Act is not admissible for the period of delay attributable to the assessee, in view of the binding precedent of the Honble ITAT, Delhi Bench in ACTT v. Samast Vikas Ltd. 2025 175 faxmann.com 145 Delhi Trib.

3.

That the Ld. CITA further erred in not considering the provisions of section 244A2 of the Act, which mandate exclusion of the period attributable to the assessee while computing interest on refund, and thereby wrongly allowed interest for a period during which no valid claim giving rise to the refund was in existence

4 That the Ld. CITA has misdirected himself in law in treating interest under section 244A1 as automatically allowable from the first day of the assessment year, even in cases WHARE the refund anses solely due to an additional claim made at the appellate stage, which is contrary to the statutory scheme and the binding judicial precedent in ACTT v. Samast Vikas Ltd, 2025 175 taxmana.com 145 Delhi Trib.

5 That the order of the Ld CTTA, to the extent it directs grant of interest under section 244A1 from 01.04.2008, is erroneous, contrary to the facts of the case, and unsustainable in law and, therefore, liable to be set aside

6 That the appellant craves leave to add, amend, alter OR withdraw any of the above grounds of appeal at OR before the time of hearing

21.03.2016 passed The CIT(A) declined admit the additional ground the CIT(A) u/s premise that the claim made in the of income. ^{04.06.2024 250} passed The ^{ITAT held the} subsidy ^{be capital in} and thereby ^not by ITAT u/s chargeable the matter back file ofAO ^{254 of} quantifying ^{the of}subsidy. forthe limited purpose ^13.03.2025 Appeal ^{effect The AO passed appeal effect order treating} subsidy capital passed receipt and determined ^{taxable income} Rs.124.42.63.479. byAO u/s resulting refund ^of Rs.19,27,73,998. 254/250/153A ^of refund ofpayment ofprepaid ^taxes

^Most importantly, account of advance and therefore, ofright,^{entitled interest under section} 244A ^{from the} day ^of the relevant ^year, i.e., ^from 1.04.2008,

However, interest refund u/s 244A ofthe Act allowed only ^from 04.06.2024 i.e., ^{date of}ITAT order instead of ^1st day of ^the relevant i.e. 01.04.2008

4.

^It is^submitted that interest refund ^{due the} respondent-assessee ^{is be} mandatorily ^{calculated in accordance} with provisions of ^{section 244A} of ^{the Act.} the case, the refund due the is, is emphatically reiterated, undisputedly out of the advance paid and thereby ^{interest thereon is to} be computed from ^the first day ^ofthe relevant ^{assessment year} i.e., from 01.04.2008.

Compensatory interest ^u/s 244A ^is mandatory

^{6. It is} emphatically ^{submitted that grant} of compensatory interest ^{under section 244A is} mandatory and ^at all discretionary.

^{7. Interest} is granted ^to compensate ^the taxpayer of ^{the money retained by the government} and therefore. it ^is open the Revenue deny ^such compensatory interest.

^3. Reliance, ^{in this} regard, ^is placed ^on the following: clarified that

CBDT ^{Circular No.549} dated 31st October, 1989: ¹⁸² ITR ¹ (St.):^resultinsCBDT^{from the} earlier inequity the provisions ^{of 244А the}department provisions which ^contained certain gaps due which interest ^not paid by The legislative ^{intent to} the ^for money remaining ^{with the} Government. ^for to compensate the assessee ^introduce simplified section ^of computing ^interest the Government. utilization of the ^money ofthe ^assessee lying with

³⁶³ ITR 658 (SC): The Court while directing Union of India Tata Chemicals: [2014] under section ¹⁹⁵ of ^the tax withheld ^interest under section 244A refund out of by party which ^{quo et bono} ought Act, held "Whenever ^money has been received be refunded, the right to interest follows, as a matter of course". The Court held that interest is compensatory and observed as under:

"38.

Providing for payment of interest to 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."

9.

In the impugned order, the AO has, without providing any reason/ justification, computed the interest payable on refund under section 244A of the Act from 04.06.2024 i.e., date of ITAT order instead of 1st day of the relevant assessment year i.e. 01.04.2008. The AO has nowhere even remotely mentioned about any delay in any proceedings resulting in refund, much less being attributable to the assessee.

10.

The respondent-assessee is eligible to receive interest under section 244A(1)(a) on the refund amount, as there is no delay and latches attributable to the assessee in claiming the said refund.

11.

Insofar as claim of subsidy made for the first time before the CIT(A), it is submitted that any claim allowed to the assessee at any stage/forum, only recognizes the position that the assessee was in the first instance never required to pay taxes on that portion of income.

12.

The aforesaid position of law has been repeatedly reiterated in the following decisions wherein specifically in context with additional claims made for the first time before the AO/CIT(A)/ ITAT, it was held that the same cannot be construed as resulting in delay in processing of refund and the assessee is entitled to interest on refund under section 244A of the Act from the first day of relevant assessment year:

Ajanta Manufacturing Limited: [2017] 391 ITR 33 (Guj): In this case, the assessee raised issue of subsidy during assessment, which was not considered since not valid return was filed. The CIT(A) directed exclusion of subsidy, AO, however, denied interest under section 244A. The Court held as under:

(a)

The issue of delay under sub-section (2) of section 244A is to be considered by the PCIT/ PC CIT. AO was therefore, not right in holding that there was delay [refer paras 13, 14];

(b)

Sub-section (2) requires proceedings resulting in refund to be delayed on the part of the assessee. Proceedings were not delayed and merely because claim was allowed by the appellate commissioner would not change this position [refer para 16].

- Chetan N. Shah vs. CIT: [2015] 53 taxmann.com 18 (Bom): In this case, claim was made for the first time before the AO, which was rejected as the claim was not made vide a valid return. Later the assessee filed a revision application under section 264 wherein the claim was allowed. In the context of interest under section 244A, the Court held that the AO has no discretion in allowing interest and held that interest should be allowed since there is no delay in any proceedings attributable to the assessee.

- CIT vs. Melstar Information Technology Ltd.: (2019) 265 Taxman 50 (Bom) – In this case, the assessee had not claimed certain expenditure before AO but eventually raised claim before ITAT. In remand proceedings, CIT(A) granted additional benefit claimed by assessee which resulted in refund. ITAT directed payment of interest under section 244A of the Act on such refund since delay could not be attributed to assessee. On further appeal, the High Court held that since there is no allegation or material on record to suggest that any of the proceedings before the ITAT or remand proceedings before the CIT(A) were in any manner delayed on account of reasons attributable to the assessee, the ITAT was, therefore correct in allowing the interest to the assessee.

- CIT vs. South Indian Bank Ltd.: [2012] 340 ITR 574 (Ker): In this case, fresh claim was, raised for the first time before the AO on 10.01.2001. Later interest u/s 244A was denied upto 10.01.2001. The Court held that the AO cannot deny interest since there was no delay in proceedings attributable to the assessee. The Court further held that the issue of delay, if at all, should have been decided by the PCIT/ PCCIT and not by AO.

13.

Strictly without prejudice to the above and even otherwise, it is submitted that even in case some period or a part of the period is to be excluded from the period for the purpose of calculation of interest, this issue has to be decided by the authorities specifically prescribed under sub-section (2) of section 244A of the Act i.e., Principal Chief Commissioner/ Chief Commissioner/Principal Commissioner/Commissioner. The AO himself cannot, it is submitted, take onto himself power and deprive an assessee from the interest payable under section 244A of the Act.

14.

Reliance in this regard is placed on the following decision wherein it was held that for the purposes of sub-section (2) of section 244A of the Act, where the AO is of the view that the delay in processing the request for refund has been caused for reasons attributable to the assessee, it is Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who shall decide the question as to which period is to be excluded:

- PCIT vs. HCL Infotech (P.) Ltd.: [2026] 184 taxmann.com 38 (Del)

- Kerala State Civil Supplies Corpn. Ltd. vs. JCIT: 151 Taxman 55 (Ker.)

- MMTC Ltd. V. ACIT: 60 taxmann.com 381 (Del) Power Finance Corporation Ltd. V. ACIT: 28 SOT 220 (Del)

- Otis Elevator Company (India) Ltd. V. DCIT: 141 taxmann.com 391 (Mum)

- DCIT vs. Videocon International Ltd.:6 SOT 227 (Mum) Artist Tree Pvt Ltd vs. ITO: 93 ITD 603 (Mum)

Interest on refund allowable in terms of section 244A(3) of the Act

15.

It may further be imperative to note that in the present case, the refund arose consequent to the order of the ITAT passed under section 254 of the Act. Thus, even otherwise the provisions of sub-

“5.1.2

The AO, as mentioned in the assessment order reproduced above, restricted the interest u/s 244A from the date of the order the Hon’ble ITAT dated 04.06.2024 to the dated of order giving effect i.e. 12.03.2025.

5.1.3

The appellant in its submission has vehemently contested the action of the AO in limiting the period of interest u/s 244A. The appellant has contended the interest should have been worked out from the first year of the assessment year upto the date of grant of refund. The appellant has contended that the provisions of section 244A(1)(a) are applicable in the case of the appellant and not the provisions of 244A(2). The appellant has also contended that the refund in the appellant’s case is out of advance tax and TDS/TCS hence the refund is to be computed from the first day of the April of the assessment year.

5.1.4

The appellant has relied upon the decision of the Coordinate Bench of Chandigarh Tribunal in case of M/s Vardhman Textiles Ltd. Vs. DCIT (ITA No. 1264 to 1267/CHD/2019 & 103-106/CHD/2020 dated 30.07.2021). The appellant has further relied upon the decision of the Hon’ble Gujarat High Court in case of Ajanta Manufacturing Ltd. Vs. DCIT (2017) 391 ITR 33 (Guj). The appellant has also relied upon the decision of the Hon’ble Bombay High Court in cases of CIT Vs. Melstar Information Technology Ltd. (2019) 265 Taxman 50 (Bom).

5.1.5

In addition to above the appellant has relied upon the following judicial pronouncements:

i.

Hon’ble Bombay High Court in cases of State Bank of India in ITA No. 1218 of 2016

ii.

Hon’ble Kerela High Court in case of CIT vs South Indian Bank Ltd (2012) 340 ITR 574 (Ker) Page 29 of 36 AAACJ7650E- JINDAL POLY FILMS LIMITED A.Y. 2008-09 ITBA/NFAC/S/250/2025-26/1082506363(1)

5.1.6

I have considered the submissions of the appellant as well as the arguments of the AO in the order u/s 254/250/153A while giving effect to the direction of the Hon’ble ITAT. It is noted that the AO held that the claim of subsidy as capital receipt was made first time before ld CIT(A) and has been allowed by Hon’ble ITAT vide order dated 04.06.2024 hence the interest u/s 244A is to be allowed w.e.f 04.06.2024.

5.1.7

To adjudicate the matter, it is pertinent to refer to the provisions of section 244A which are reproduced as under:

Interest on refunds. 244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely:— (a) where the refund is out of any tax collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period,—

(i)

from the 1st day of April of the assessment year to the date on which the refund is granted, if the return of income has been furnished on or before the due date specified under sub-section (1) of section 139; or

(ii)

from the date of furnishing of return of income to the date on which the refund is granted, in a case not covered under sub-clause (i): 50[Provided that where refund arises as a result of an order passed by the Assessing Officer in consequence of an application made by the assessee under sub-section (20) of section 155, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period from the date of such application to the date on which the refund is granted;] Page 30 of 36 AAACJ7650E- JINDAL POLY FILMS LIMITED A.Y. 2008-09 ITBA/NFAC/S/250/2025-26/1082506363(1) (aa) where the refund is out of any tax paid under section 140A, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date of furnishing of return of income or payment of tax, whichever is later, to the date on which the refund is granted: Provided that no interest under clause (a) or clause (aa) shall be payable, if the amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 143 or on regular assessment; (b) in any other case, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.

Explanation.—For the purposes of this clause, "date of payment of tax or penalty" means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand. (1A) In a case where a refund arises as a result of giving effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 , wholly or partly, otherwise than by making a fresh assessment or reassessment, the assessee shall be entitled to receive, in addition to the interest payable under subsection (1), an additional interest on such amount of refund calculated at the rate of three per cent per annum, for the period beginning from the date following the date of expiry of the time allowed under sub-section (5) of section 153 to the date on which the refund is granted: 51[Provided that where proceedings for assessment or reassessment are pending in respect of an assessee, in computing the period for determining the additional interest payable to such assessee under this sub-section, the period beginning from the date on which such refund is withheld by the Assessing Officer in accordance with and subject to provisions of sub-section (2) of section 245 and ending 52[with the date up to which such refund is withheld], shall be excluded.]

(1B) Where refund of any amount becomes due to the deductor in respect of any amount paid to the credit of the Central Government under Chapter XVII-B, such deductor shall be entitled to receive, in addition to the said amount, simple interest thereon calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date on which— (a) claim for refund is made in the prescribed form; or Page 31 of 36 AAACJ7650E- JINDAL POLY FILMS LIMITED A.Y. 2008-09 ITBA/NFAC/S/250/2025-26/1082506363(1) (b) tax is paid, where refund arises on account of giving effect to an order under section 250 or section 254 or section 260 or section 262, to the date on which the refund is granted. (2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee or the deductor, as the case may be, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable under sub-section (1) or (1A) or (1B), and where any question arises as to the period to be excluded, it shall be decided by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner whose decision thereon shall be final. (3) Where, as a result of an order under sub-section (3) of section 115WE or section 115WF or section 115WG or sub-section (3) of section 143 or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly. (4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years: Provided that in respect of assessment of fringe benefits, the provisions of this subsection shall have effect as if for the figures "1989", the figures "2006" had been substituted.

5.1.8

The provisions of section 244A(1) clearly layout that whenever the assessee is entiltled for any refund arising out of TCS/advance tax then the interest shall be calculated for the period starting from the first day of April of the assessment year. The provisions of secton 244A(2) provide that if the proceedings resulting in the refund are delayed for reason attributable to assessee then such period shall be excluded which is attributable to the assessee and in case of despute the same shall be decided by Pr.CCIT/CCIT/Pr. CIT/CIT. The appellant’s contention is that merely “making a claim at a later stage” was not equivalent to delay in the proceedings of refund and making a claim at a later stage did not tantamount to delay in the proceedings of refund. Page 32 of 36 AAACJ7650E- JINDAL POLY FILMS LIMITED A.Y. 2008-09 ITBA/NFAC/S/250/2025-26/1082506363(1)

5.1.9

It is noted that in the instant matter the refund arose to the assessee on account of acceptance of a claim of non- taxability of a receipt in appellate proceedings, which receipt was originally returned by it as taxable and the claim was made for the first time only before the first appellate authority. It is also noted that the AO in the impugned order dated 13.03.2025 has not laidout any reasoning why the provisions of section 244A(1) are not applicable and why the provisions of section 244A(2) are being invoked.

5.1.10

The provisions for entitlement to interest on refund is laid down in subsection (1) , a bare perusal of which reveals that any refund due to an assessee is to be compensated with interest for the entire period for which the surplus amount remains with the State/Government . The Section is very clear and there is no ambiguity in the same. All refunds of advance payments of taxes in the form of TDS, TCS and advances taxes paid, are to be compensated for the period from the first day of assessment year to the grant of refund. While all self assessment taxes or other taxes paid are to be compensated for the periods from the date of filing of return of income or the date of payment of taxes whichever is later, to the grant of refund. The only caveat or exception is provided in subsection (2) , that where any proceedings of refund are delayed by the assessee, this period is to be excluded from the period for which interest is to be paid. Further it is only the Pr.CCIT/CCIT/Pr.CIT/CIT who is empowered to decide the period of delay.

5.1.11

Hence, it can be concluded that interest on refunds granted is compensatory in nature. The Hon’ble Apex Court has held in the case of Union of India vs Tata Chemicals Ltd(2014) 43 taxmann.com 240 as under:

“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 Page 33 of 36 AAACJ7650E- JINDAL POLY FILMS LIMITED A.Y. 2008-09 ITBA/NFAC/S/250/2025-26/1082506363(1) 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.”

5.1.12

The moot issue to decide in the instant appeal is whether or not the act of making a claim belatedly by the assessee resulting in refund tantamounts to “delay in proceedings resulting in refund” as mentioned in section 244A(2) of the Act. In my view, any claim of the assessee allowed at any stage resulting in refund whether in the first appellate stage, the second appellate stage or even before the Hon'ble High Court or Hon'ble Supreme Court, only recognises the position that the assessee was never required to pay taxes on that portion of the income. The entire process envisaged under law, of assessments and appeals is a continuous process of assessing true and correct income of the assessee, beginning with the assessee himself disclosing the same in his return of income and the same thereafter being scrutinized in assessment and thereafter any adverse conclusion drawn thereon being challenged before the appellate authorities and higher judicial authority. The entire process, therefore, of assessment and appeals culminates in the determination of true and correct income on which the assessee was required to pay its taxes. Any claim allowed to the assessee at any stage whether made for the first time or whether taken up in appeal only underlines the position that no taxes were required to be paid by the assessee on the said claim at all. Therefore, in such circumstances, the refund generated on account of the same, having been retained by the State unlawfully is entitled to be compensated with interest for the entire period for which it is so retained.

5.1.13

The esential ingredient of sub-section (2) of Section 244A is that the proceedings resulting into refund should have been delayed for the reasons attributable to the assessee, whether wholly or in part. If such requirement is satisfied, to the extent of the period of delay so attributable to the assessee, he would be disentitled to claim interest on refund. The act of revising a return or raising a claim during the course of the assessment proceedings cannot be said to be the reasons for delaying the proceedings which can be attributable to the assessee. Mere fact that the claim came to be granted by the Hon’ble ITAT, would not change this position. The decision of the Hon’ble ITAT actully means that it was to allow a claim which in law, in their opinion, was allowable by the Assessing Officer.

5.1.14

The AO in the order dated 13.03.2025 has not madeout a case that the appellant had needlessly or frivolously delayed the assessment proceedings at the original or appellate stage. In absence of any such foundation, mere fact that the assessee made a claim during the first appellate proceedings which was allowed at the second appellate stage would not imply that the assessee was responsible for causing the delay in the proceedings resulting into refund. It just means that the Page 34 of 36 AAACJ7650E- JINDAL POLY FILMS LIMITED A.Y. 2008-09 ITBA/NFAC/S/250/2025-26/1082506363(1) appellant was entitled for a claim at the level of AO onwards.

5.1.15

In the case of Chetan N. Shah vs. M.K. Moghe Commissioner of Income Tax (2015) 53 taxmann.com 18, the Hon’ble Bombay high court held that there is no provision for rejecting the claim of interest on account of a mistake by the assessee. That such a proposition would render the section otiose since excess taxes paid originate on account of some mistake either on fact or law on the part of the assessee. That it is only delay in disposal of proceedings resulting in refund attributable to the assessee which are not to be compensated with interest. The relevant findings are as under:

“13.

The Assessing Officer has been given no discretion in the matter of granting interest. The amount of interest has to be paid to an assessee in terms of Section 244A of the Act. The only limitation provided therein under Section 244A of the Act is under sub-section 2 thereof which mandates that where any refund results to an assessee, while computing the interest payable thereon, the delay which is attributable to the assessee, in obtaining the refund would be excluded. The Act itself does not provide for rejecting the claim for interest on account of a mistake committed by an assessee. If such a proposition is to be accepted then all excess amounts of tax paid by the assessee on account of a mistake would stand rejected rendering Section 244A of the Act otiose. Section 244A of the Act provides for interest on refunds in respect of any amount which has been paid in excess to that otherwise payable under the law. In most cases the excess amount paid as tax would originate on account of some mistake either on fact or of law on the part of the assessee. Advisedly the Act does not empower the authorities to reject a claim for interest on account of a mistake committed by the assessee.”

5.1.16

The delayed claim of the appellant therefore cannot be said to tantamount to delay in proceedings resulting in refund attributable to the appellant. Hence, in view of the above discussion, facts of the case and the judicial pronouncements on the issue, it is held that the appellant is entitled to interest on the refund u/s 244A w.e.f first April of the assessment year i.e. 01.04.2008 to 12.03.2025 instead of 04.06.2024 to 12.03.2025 as adopted by the AO vide order dated 13.03.2025.

5.1.17

In effect the appellant succeeds on ground No.1 and the AO is directed to compute the interest on the refund as per para 5.1.16 above. The ground No.1 is hereby allowed.