COMMISSIONER OF INCOME TAX Vs. HASMUKHLAL BAGADIA

JUDGEMENT

(1.) THIS is an appeal filed by CIT (Revenue) under Section 260A of Income Tax Act against an order dated 31 -8 -2005 passed by Tribunal in case No. ITA No. 487/Ind/1999. The appeal was admitted for final hearing on following substantial question of law:

(2.) HEARD Mr. R.L. Jain, learned senior Counsel with Ms. Veena Mandlik, learned Counsel for the appellant revenue and Mr. G.M. Chaphekar, learned senior Counsel with Mr. D.S. Kale, learned Counsel for respondent.

(3.) THE facts of the case lie in a narrow compass. The assessment years involved in the case are 1990 -91 and 1992 -93. The question is as to from which date, the assessee is entitled to claim interest under Section 244(1A) of the Income Tax Act on the amount in question for which they had furnished the bank guarantee in favour of department. According to assessee, since the department encashed the bank guarantee on 15 -11 -1991 and hence, they are entitled to claim interest on the sum so encashed, which eventually was directed to be refunded to assessee by the orders of authority under Section 244(1A) whereas according to department, since the bank guarantee was encashed by department on 3 -10 -1992 and hence, the department is not liable to pay any interest on the sum so encashed prior to period of 3 -10 -1992 i.e. from 15 -11 -1991 to 3 -10 -1992. In other words, the contention of revenue is that revenue is liable to pay interest only from the date on which they encashed the bank guarantee and received the money in their account and not from the date prior to it.