Taxpayers are entitled to interest on refunds under Section 244A of the Income Tax Act, and this does not constitute 'interest on interest'.

JUDGMENT

Manmeet Pritam Singh Arora, J. (Oral)--The present appeal has been filed by Revenue-Appellant impugning the order dated 29th June, 2018, passed by the Income Tax Appellate Tribunal (hereinafter referred to `ITAT') in ITA No. 5486/Del/2014 for the Assessment Year ('AY') 2001-02.

2. Briefly stated the facts are that initially, the income of assessee i.e. the respondent herein was assessed at Rs.73,17,35,961/- vide an order dated 19th January, 2010. Consequent to the above, a demand for payment of interest under Section 234D(2) and Section 220(2) of the Income Tax Act, 1961 ('the Act') was raised by Revenue on the respondent herein. However, upon subsequent re-computation of the income vide an order dated 3rd February, 2010, passed under Sections 154/250/143(3) of the Act, the income of the assessee was assessed at Rs.40,88,00,550/- after setting-off brought forward losses for AY 1996-1997. Consequently, as a result of the reduction of taxable income, the respondent herein was entitled to refund of sum deposited as interest under Section 234D and Section 220 (2) of the Act. The assessee was held entitled to refund of a sum of Rs.1,66,46,933/- under Section 234D and a sum of Rs.1,99,131/- under Section 220(2) of the Act.

3. The respondent was, however, aggrieved by non-grant of `interest' on the aforesaid order of refund under Sections 234D and 220(2) of the Act. The Respondent therefore filed an appeal before the Commissioner of Income Tax (Appeals) ['CIT(A)'] against the said order on the ground that the Assessing Officer ('AO') has erred in not granting interest under Section 244A of the Act on the refund granted. The CIT(A) dismissed the appeal of the respondent, relying upon the judgment of the Supreme Court in the case of Commissioner of Income Tax, Gujarat vs. Gujarat Fluoro Chemicals, reported in (2014)1 SCC 126. The CIT(A) concluded that the claim of `interest' by the respondent for the refund amounts to `interest on interest' and held that it is beyond the scope of Section 244A of the Act.

4. The respondent aggrieved by the aforesaid order of the CIT(A) filed an appeal before the ITAT, which allowed the appeal placing reliance on the judgment of the Division Bench of this Court in the case of Preeti N Aggarwala v. Chief Commissioner of Income Tax & Anr., reported in [2017]394 ITR 557(Del) and a judgment of a Coordinate Bench of the ITAT, Ahmedabad in the case of ACIT v. Alembic Glass Industries Ltd., reported in 111 ITD 320 (Ahd). The ITAT held that the respondent is entitled to interest under Section 244A(1)(b) of the Act on the sum refunded to the assessee on recomputation, as a result of the reduction of its taxable income.

5. The learned counsel for the Revenue states that the ITAT has erred in awarding interest on the refund as the same amounts to grant of `interest on interest', which is beyond the scope of Section 244A of the Act. He further states that the ITAT erred in placing reliance on the judgment of Preeti N Aggarwala (supra). In this regard, he placed reliance upon the order passed by the predecessor Division Bench of this Court in the case of Sutlej Industries Limited vs. CIT in ITA No. 493/2003 dated 6th January, 2016, referring the issue of entitlement of an assessee to interest under Section 244A of the Act on the amount of self assessment tax paid, which becomes refundable upon assessment. He contends that the issue of interest on refund granted under Section 234D and Section 220(2) of the Act in the present proceedings is similar to the said issue. The learned counsel contends that since the said reference is still pending before a larger Bench, t