Law: Income Tax Act, 1961

Section: 2(7),(28A),194A,201,240,244(lA),(3)&244A .

(a) Income-tax----Refund---Interest---Deduction of tax at source---Development Authority constructing flats and allotting them to buyers---Interest paid to buyers for period of delay---Failure to deduct tax at source---Notice of demand for tax and recovery---Development Authority an "assessee"--�Appellate Tribunal---Finding Development Authority not liable to deduct tax---Refund of tax recovered---Interest---Provision applicable to assessee applies---Indian Income Tax Act, 1961, Ss:2(7), (28A), 194A, 201, 240, 244(lA), (3) & 244A.(b) Words and phrases-------"Assessee"---Meaning of.The respondent development authority, which constructed flats and allotted them to buyers, on failure to allot the flats within the time stipulated in the agreements had to pay interest on the amount paid by the allottees for the period of delay. The concerned Officer raised demands against the respondent for the assessment years 1988-89, 1989-90 and 1990-91 on the basis that it had failed to deduct income-tax at source .on the payment of interest as provided under section 194A of the Income Tax Act, 1961. The Appellate Tribunal held that the amounts credited to the accounts of the allottees were not in the nature of interest within the meaning of section 2(28A) and set aside the order and directed refund of the amount recovered from the respondent. As the amount was not refunded, the respondent filed a writ petition. Pending the writ petition, the amount paid by the respondent was refunded with interest calculated under section 244(1). Thereafter, the respondent filed a miscellaneous petition claiming that interest should have been calculated for the assessment year 1988-89 as provided in section 244(1A), and for the assessment years 1989-90 and 1990-91 under section 244A. The High Court allowed the petition holding that the order where under the respondent was held to be an assessee in default and recovery was made was an order of assessment and the respondent was an assessee there under. That order having been set aside, sections 244(1A) and 244A were clearly attracted and the entitlement of the respondent to interest had to be determined with reference to section 244(1A) for…