When the COVID-19 pandemic exploded in the U.S. in March, the IRS was relatively quick to push back the deadline for filing taxes from April 15 to July 15, giving Americans three more months to get their returns together at a time when so many were reeling from the crisis. Get all latest content delivered straight to your inbox. Sec. 3826 of 2012 following the, , their Lordships have categorically held that-, prescribed the procedure for granting the refund of tax deducted at source under section 195. Further, if the refund arises due to the additional claim being allowed the same needs to be refunded with interest u/s 244A in view of the legal provisions contained in section 244A since interest is mandatory and automatic. The interest rate for the second quarter, ending on June 30, 2020, is 5% per year, compounded daily. (C) 1011/2016] in the context of waiver of interest u/s 220(2) with the following question of law-, “Whether the expression “in any other case” occurring in Section 244A (1) (b) of the Income Tax Act, 1961 (“Act”) would include the amount of refund which constitutes the interest that has been waived by the Income Tax Department (“Department”) under Section 220 (2A) of the Act?”. So much so, in our view, the officer has no escape from granting interest to the assessee in terms of section 244A(1)(a) of the Act.”. No part thereof can be with-held for the assessment on the ground of being provisional. Pr. Accordingly, the entire interest received is subject to tax in the first instance. The period to be excluded from the computation of period for allowability of interest has to be determined by the Pr. CBDT vide Instruction No. 280 ITR 643 had held that "assessee was entitled to compensation by way of interest under section 214 and section 244 for the delay in payment interest u/s 214 and 244 lawfully due to the assessee which were withheld wrongly and contrary to law by the department for inordinate long period." date of payment of interest then on what amount the interest will be paid. In the other words, interest at the prescribed rate is to be paid to the assessee on the refund of tax paid for every month or part of a month comprised in the period from the date of payment of the tax to the date on which refund is granted. 3. Where an assessee has furnished his return of income and total taxes paid is more than the tax liability of the assessee and the assessee claim the excess taxes paid as a refund and the same is found due to him, the income tax law provides for payment of interest on the amount of income-tax refund to the assessee. 4809/DEL/2016 decided on 06.06.2019 following the decision of Smt K. Devyani Amma vs DCIT 328 ITR 10 directed the AO to treat the interest on refund as income of AY 2015-16 i.e. This issue came up for consideration before the Hon’ble Gujarat High Court in case of CIT vs. Arvind Mills Ltd., in ITA No. The larger Bench of the Hon'ble Supreme court in the case of ‘CIT Vs. H.E.G. Interest payable by the Department @ 1.5% per month for 6 months and 10 days (1-4-1989 to 10-10-1989). The Amending Act, 1989, has, therefore, amended sub-section (1) of this section to provide for calculation and payment of interest to the assessee on refund becoming due to him in pursuance of total income determined under the provisions of the new section 11.4(. In several cases, where a refund has to be granted to the assessee, the Revenue officials used to take longer time in clearing such refunds resulting in considerable hardship to the assessee and with a view to expedite grant of refund, a uniform period of three months has been specified in ss. The Mumbai Tribunal following the decision in. ) In other words, interest chargeable in such a case will be at 6%. In view of this, these appeals of the assessee are treated as allowed.”, The Revenue moved Miscellaneous Application, against the said order only to be dismissed by the ITAT. A question on the issue came up for consideration before the Delhi High Court in the case of Preeti Aggarwala vs. CIT [W.P. Prior to insertion of section 244(1)(aa), it was a burning question whether interest on refund arising due to excess payment of self-assessment tax u/s 140A is subject to interest under section 244A or not, was a subject matter of litigation. The provisions of section 214 relating to interest payable by the Government on the excess amount of advance tax paid by the assessee have been replaced, with effect from the assessment year 1989-90, by the provisions of a new section 244A by the Direct Tax Laws (Amendment) Act, 1989. Hence, in our considered opinion, the assessee is entitled to interest on the delayed payment of interest and accordingly the assessee's appeal is allowed.". Rule 119A prescribes the Procedure to be followed in calculating interest under the provisions of the Act. And at a time when so many Americans are desperate for money, that interest may really come in handy, especially if you're looking at a sizable refund. The assessee disputed this position. Read Also: Refund of TDS to Deductors/Buyers. 7. Thus, in cases where interest is payable by the Central Government to assessees under s.243 of the Act, such interest is to be calculated up to the date of issue of the refund voucher. Refund may also become due to the assessee as a result of appeal effect order. 6262 & 6263/Mum/2010 decided by ITAT Mumbai on 21.12.2011. . While most tax filers do end with a refund each year, those who land in the opposite scenario and don't pay their tax bills on time will owe interest to the IRS. , remanded appeal back to High Court for fresh decision by a Larger Bench. In this case, interest shall be given from the 1st day of the assessment year irrespective of the fact that the TDS was deposited during AY 2019-20. In the present case the respondent-assessee had voluntarily included the amount received on account of transport subsidy as taxable income. Similarly, Bombay High Court in the case of, Chetan N. Shah Vs. M.K. In the case of DCIT v. Savita Oil Technologies Ltd. in ITA. [, Rajasthan State Electricity Board vs. CIT & Ors. If yes, then from which date the interest will be payable on such refund u/s 244A? However, there was no provision to pay interest on the refund of such TDS amount. If a tax or penalty is paid in pursuance to a notice of demand, if paid in excess of the demand, is entitled to interest u/s 244A and no other payment is eligible to the said interest. In this case, the decision of Kerala High Court in the case of, K. Devayani Amma Vs. DCIT (2010) 328 ITR 10 (Ker). In the case of M. Jaffer Saheb (Decd.) For example, for AY 2021-22, the interest shall be payable from 1st April 2021 and not from 01.04.2019 in respect of income offered and the corresponding TDS and refund is claimed in AY 2021-22. (C) 1011/2016]-Delhi HC], 2. A question will arise whether interest u/s 244A is payable on the amount of such refund arising as a result of allowing the additional claim? Vs. DCIT (2017) 391 ITR 33 (Guj.-HC). The interest granted u/s 244A on the refund amount is taxable in the hands of the assessee under the head ‘Income from other sources’. This article discusses the relevant provisions of the Income Tax Act, 1961 (“Act”) with, relevant Judicial Decisions/landmark Case Laws on Interest u/s 244A, Direct Tax Laws Act, 1987 (as amended by Direct Tax Laws (Amendment) Act, 1989). Therefore, it would be inappropriate for this Court to consider that judgment now as binding authority. 7620/Mum/2016 decided on 24 April, 2019 almost all the important judgements on the issue of interest on refund of self assessment tax is discussed. The issue eventually reached the Tribunal. Similarly, Bombay High Court in the case of Chetan N. Shah Vs. M.K. AR of the assessee. If interest is payable from the 1st day of the assessment year can it be concluded that the time required to verify the additional claim of the assessee is the delay attributable to the assessee u/s 244A(2) and hence such period of delay should be excluded from computing the period of interest. In other words, HEG Ltd. seems to suggest that there would be dues on bar, refund and delayed interest. No. The Tribunal referred to the provisions of sub-sections (1) and (2) of Section 244A of the Act and held that the stand of the assessing officer was incorrect and directed the AO to grant interest u/s 244A from 1st April itself. Exceptions: When interest under section 244A on the income tax refund is not payable-. The assessee contended that the Department had enjoyed the benefit of these funds while the appellant was deprived of the same. The words “as the case may be” refers to the period for which the interest will become payable and that the period is said to be dates of payment of tax or penalty to the date on which the refund is granted. [MMTC Ltd. vs. ACIT (ITA No. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. 493 of 2003 & 120 of 2004, dated 6-1-2016, the High Court referred the identical matter to Larger Bench, and held that no interest under section 244A would be allowed to assessee on refund of such tax. If you're still waiting for your federal tax refund, the Internal Revenue Service has a bit of good news for you. This year, however, the IRS is using the earliest starting date -- April 15 -- as its basis in calculating refund interest. When the collection is illegal, there is a corresponding obligation on the revenue to refund such amount with interest inasmuch as they have retained and enjoyed the money deposited. In case return is furnished for the first time after getting condonation u/s 119(2)(b), then the interest shall be admissible from the date of furnishing of return of income to the date on which the refund is granted u/s 244A(1)(a)(ii). Rate of interest on income-tax refund and refund of TDS: For each type of refund, the provisions prescribed for payment of interest at the rate of 0.5% per month or any part thereof. 6262 & 6263/Mum/2010, interest granted u/s 244A on the refund amount is taxable. The court held that the delay in claiming refund was attributable to the assessee inasmuch as it did not apply for the same prior to 9-4-1999. IRS Penalty & Interest Rates . The Tribunal was, therefore, correct in allowing the interest to the assessee. It is of no matter that the interest that is waived is discretionary in nature, for the moment that discretion is exercised, a concomitant right springs into being in favour of the assessee. The reason for the decision is reproduced below-, “8. 15. ” used in sections 234A and 234B in which it is categorically stated that even where the delay is for part of a month say even for 1 day, interest at 2% (p.m.) will be charged. Interest on refund amount arising due to Additional Claims, Further, if the refund arises due to the additional claim being allowed the same needs to be refunded with interest u/s 244A in view of the legal provisions contained in section 244A since interest is mandatory and automatic. The brief facts of the case is that the department has recovered arrear taxes with interest u/s 220(2) from the assessee. , the period for which such interest is to be calculated shall be rounded off to a whole month or months and for this purpose any fraction of a month shall be ignored; and the period so rounded off shall be deemed to be the period in respect of which the interest is to be calculated; interest is to be calculated for every month or part of a month. If you need more time than that to file your taxes, you can request an extension, at which point you'll get until Oct. 15 (six months from the date of the original deadline) to get your return in to the IRS. (C) 2659/2012 dated 14.03.2013. This article discusses the relevant provisions of the Income Tax Act, 1961 (“Act”) with relevant Judicial Decisions/landmark Case Laws on Interest u/s 244A. 27th Oct., 1994. A question arises whether the ‘month’ is taken as a British Calendar month or a period of 30 days. 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