Per Shri T. R. Thiruvengadam, Account Member - These appeals by the revenue for the assessment years 1961-62 to 1963-64 raise a common point. It is that the AAC erred in holding that interest should be paid under section 244(2) of the Income-tax Act, 1961 (the Act) as on the amount of interest under section 220(2) of the Act collected which became refundable. For these assessment years certain refunds became due to the assessee as a result of the order of the Supreme Court under section 263 of the Act. These amounts consisted of income-tax, penalty and interest under section 220(2). The interest under section 220(2) was earlier collected because the payment of the demands was not made within the time allowed to the assessee. The ITO while granting refund of these amounts, allowed interest under section 244. The interest under section 244 was allowed by him only in respect of the income-tax and penalty that were collected earlier by him and not in respect of the interest under section 220(2). It appears from the orders of the ITO and the AAC and of the memorandum of appeals field by the assessee before the AAC that the amount of interest under section 220(2) was Rs. 6,903. The assessee moved a petition under section 154 of the Act before the ITO requesting him to allow interest under section 244 on the interest collected earlier section 220(2). The ITO rejected this on the ground that the words any amount referred to under section 240 of the Act mean only tax and penalty levied. The assessee filed appeals before the AAC in respect of these three assessment years and the AAC held that the refund referred to in Section 240 is of any amount that has become due to the asessee and would, therefore, include the interest under section 220(2) which became refundable to the assessee by virtue of the proviso to section 220(2). He therefore, directed the ITO to grant interest on the amount of Rs. 6,903. Hence, the assessee has filed these appeals.
2. It is submitted on behalf of the revenue that the department does not charge interest on the amount of interest under section 220(2) if that becomes due and payable, but not paid. It is submitted that the same analogy would apply in respect of the refund of the interest collected earlier under section 220(2). It is also pointed out that in sub-section (1A) of section 244, which has been incorporated later, reference has been made only to tax and penalty and there is no reference to interest.
3. On behalf of the assessee, it is submitted that the language of section 244 is clear and cannot be diluted. It refers to section 240 and section 240 merely directs the refund of any amount that is due to an assessee. Such amount would include interest under section 220(2).
If the intention is not to grant interest on this amount, there would have been an express prohibition against it under section 244(1).
4. We consider that there is no reason to interfere with the order of the AAC. Section 240 authorises refund of any amount that is due to an assessee as a result of any order passed in appeal other proceedings under the Act. Sub-section (1) of section 244 makes a references to section 240 and lays down that, where a refund is due to an asessee in pursuance of an order referred to in section 240, interest shall be paid to the assessee by the Central Government at a stated percentage.
As pointed out by the learned counsel for the assessee, there is no prohibition in this provision that interest shall not been paid on the interest collected under section 220(2). That the interest collected under section 220(2) also becomes refundable on the passing of an order in a plea is not disputed. It is, in fact, laid in the proviso to sub-section (2) of section 220. Section 240 refers to refund becoming due to an assessee as a result of any order passed in appeal or other proceeding under this act. The refund of the interest under the proviso to section 220(2) may be considered to arise out of the order in appeal which is in this case the judgment of the Supreme Court. So it can be considered to arise out of the proceedings contemplated in the proviso to sub-section (2) of section 220. In either case, the refund of the interest under section 220(2) is an amount coming within the purview of section 240 and, therefore, eligible for the interest contemplated in sub-section (1) of section 244.