The object behind insertion of section 244A is 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 benefit to a resident/ deductor who has erroneously deducted tax at source /deducted excess TDS and deposited the same before remitting the amount payable to a non-resident/ foreign company.
• Section 240 of the Act provides for refund of any amount that becomes due to an assessee as a result of an order in appeal or any other proceedings under the Act.
• The phrase "other proceedings under the Act" is of wide amplitude. The other proceedings under the Act would include orders passed under section 154 (rectification proceedings), orders passed by the High Court or Supreme Court under section 260 (in reference), or order passed by the Commissioner in revision applications under section 263 or in an application under section 273A.
• In the instant case ,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 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.
• 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.
• The deductor is entitled to interest under section 244A(b) from the date of payment of TDS i.e. date of deposit of TDS with Govt.
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