R.F.NARIMAN,J. - (1.) The question which this appeal raises is whether the High Court of Karnataka at Bangalore was correct in holding that the assessee in the present case was not entitled to interest under Section 244 (A) of the Income-Tax, 1961 Act, when refund arose to it on account of interest that was partially waived by an order of the Settlement Commission. We are concerned in the present case with the assessment years 1993-94 and 1994-95. The assessee, being a partnership firm, filed a return for these years and once the order of assessment was completed, interest under Sections 234(A) to (C) was levied.
(2.) Aggrieved by this levy of interest, the assessee filed an application before the Settlement Commission, requesting the Commission to waive the interest on the ground that it caused hardship to it. The Settlement Commission, by its order dated 22.03.2000, referred to a circular of the CBDT which gave it the power to waive such interest; and by the aforesaid order, interest was partially waived for the assessment years in question. On an application made by the assessee, the Assessing Officer, by his order dated 25.04.2000 refused to grant interest on the refund that was payable, and was not paid, within three months from the specified date. This was done on two grounds, namely, that the provisions of Section 244(A) do not provide for payment of interest on refund due on account of waiver of interest that is charged under Sections 234(A)-(C) of the Act and second, that the power assumed by the Settlement Commission for waiver of interest, by following the CBDT circular referred to, does not enable the Commission to provide for payment of interest under Section 244(A).
(3.) An appeal that was filed before the C.I.T. (Appeals) was allowed. This was done by referring to a judgment of the Madras High Court in Commissioner of Income-Tax v. Needle Industries Pvt. Ltd. (1998) 233 ITR 370 and with reference to the CBDT circular which enabled the Settlement Commission to waive interest. An appeal by the Revenue to the Income-Tax Appellate Tribunal (ITAT) was dismissed. However, in appeal to the High Court, by the impugned judgment dated 09.12.2009, the High Court of Karnataka held that, since waiver of interest was within the discretion of the Settlement Commission, no right flowed to the assessee to claim refund as a matter of right under law. In the aforesaid circumstances, the judgments of the Tribunal and C.I.T. (Appeals) were set aside and the Assessing Officer's order was restored.;