Judgment :- (This I.T.A. Filed U/S 260A of the Income Tax Act, 1961 Arising out of Order Dated 25.3.2004 passed in ITA No. 728/Bang/2000 for the Assessment year 1994-95 praying to formulate the substantial questions of law stated therein, allow the appeal and set aside the orders passed by the Income Tax Appellate Tribunal, Bangalore in ITA No. 728/Bang/2000 Dated 25.3.2004 Commissioner and consequently confirm the order passed by the assessing officer dated 25.4.2000 etc.) K.L. Manjunath J. The Revenue has come up in this appeal challenging the order passed by the Income Tax Appellate Tribunal, Bangalore bench, in ITA 728/Bang/2000 dated 25.3.2004 wherein the Tribunal has confirmed the order passed by the Commissioner for Income Tax (Appeals), Bangalore, dated 30.8.2000 raising the following substantial questions of law:- 1. Whether, the Appellate Authorities were correct in holding that the assessee was entitled to interest under Section 244A of the Act on the amount of interest paid under Section 234A, 234B and 234C of the Act which was waived in accordance with the Board notification dated: 23.5.1996 issued under Section 119 of the Act by the Settlement Commission. 2. Whether, the Appellate Authorities have jurisdiction to entertain a statutory appeal under the provisions of the Income Tax Act against the intimation passed by the Assessing Officer / Deputy Commissioner of Income Tax declining to grant interest under Section 244A of the Act. 2. The facts leading to this case are as hereunder:- The assessee is a partnership firm. For the assessment year 1994-95, the return of income was filed. The order of assessment was completed and interest under Sections 234A, 234B and 234C of the Income Tax Act (for short hereinafter referred to as ‘the Act’) was levied. Aggrieved by the levy of interest under the above provisions, the assessee filed an application before the Settlement Commission requesting the Settlement Commission requesting the Settlement Commission to waive of the interest on the ground it causes hardship to him. The Settlement Commission waived the interest levied by the Assessing Officer in order to mitigate the hardship as pleaded by the assessee. Pursuant to the order of the Settlement Commission, the Deputy Commissioner of Income Tax gave effect to the order and passed an order to refund the interest collected under Sections 234A, 234B and 234C of the Act by his order dated 25.4.2000. Pursuant to the order of the Settlement Commission, the Deputy Commissioner of Income Tax gave effect to the order and passed an order to refund the interest collected under Sections 234A, 234B and 234C of the Act by his order dated 25.4.2000. While passing the order of refund, the Deputy Commissioner held that the assessee cannot claim interest under Section 234A of the Act as the interest is refunded by waiving the levy of interest on account of the request made by the assessee pleading hardship. The assessee not being satisfied with the order of refund dated 25.4.2000 passed by the Deputy Commissioner of Income Tax preferred an appeal before the Commissioner of Income Tax (Appeals) Bangalore. The said appeal came to be allowed on 30.8.2000 on the ground that under section 244A of the Act, the assessee is entitled to claim interest. The Revenue being aggrieved by the order passed by the Commission of Income Tax (Appeals) preferred appeal before the Income Tax Appellate Tribunal, Bangalore Bench on the ground that the assessee as a matter of right cannot claim interest under Section 244A of the Act since there was no pre-existing right to claim the interest by him as the interest levied under Sections 234A, B and C of the Act was waived off only on account of the request of the assessee. In such circumstance, the Deputy Commissioner was justified in not allowing the interest as contemplated under Section 244A of the Act. The Tribunal after hearing the parties dismissed the appeal on the ground that the assessee is entitled to claim interest under Section 244A of the Act. In the circumstance, the present appeal is filed by the Revenue. 3. Having heard the counsel for the parties, we are of the view that the substantial question of law has to be reframed by us considering the background of this case. Accordingly, we reframe the substantial question of law to be answered by us in this appeal as hereunder:- “Whether the Commissioner of Income Tax (appeals) and the Income Tax Appellate Tribunal were justified in holding that the assessee is entitled to claim interest under Section 244A of the Act when the interest was waived off by the Settlement Commission based on the hardship pleaded by the assessee?” 4. The facts of this case are not in dispute to the following extent; that, pursuant to the return filed by the assessee the Assessing Officer has passed an order of assessment. While computing the assessment, interest was levied under Sections 234A, B and C of the Act and that the order of assessment has become final since no appeal was preferred against the order of assessment. However, it is not in dispute that the assessee went before the Settlement Commission requesting the Settlement Commission to waive off the interest on the ground that this levy of interest would cause hardship to him. Accordingly, the matter was settled by waiving interest levied by the Assessing Officer. Therefore, it is clear that interest was waived at the instance of the assessee and not on account of any error committed by the Assessing Officer in levying interest under this above provisions of law erroneously. Section 244A of the Act reads as under:- Section 244A – interest on refunds. (1) Where refund of any amount becomes due to the assessee under this Act, he shall subject to the provisions of this Section, be confined to receive in addition to the said amount, simple interest thereon calculated in the following manner, namely:- a) Where the refund is out of any tax (paid under Section 115WJ or) (collected at Source under Section 206C or) paid way of advance tax or treated as paid under Section 206C or) paid by way of advance tax or treated as paid under Section 199, during the financial year immediately year, such interest shall be calculated at the rate of (one – half percent) for every month or part of a month comprised in the period from the first day of April of the assessment year to the date on which the refund is granted: Provided that no interest shall be payable if the amount of refund is less than ten percent of the tax as determined (under (sub section (1) of section 115WE or) sub section (I) of section 143 or) on regular assessment. (b) In any other case, such interest shall be calculated at the rate of (one-half percent) for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund to granted. (b) In any other case, such interest shall be calculated at the rate of (one-half percent) for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund to granted. (2) xxxx (3) xxxx (4) xxxx 5. From the reading of the above provision, it is clear that the assessee is entitled to claim interest on refund of any amount due to him under the Act, simple interest therein calculated as provided under Section 244A(1) (a & b). In the instant case, the order or refund is passed by the Settlement Commission not on account of any right accrued under Act in favour of the assessee due to any wrong or any illegal order passed by the Assessing Officer, but it is only on account of the hardship pleader by the assessee which only a discretionary power vested with the Settlement Commission. If such discretion had not been exercised by the Settlement Commission, the assessee was not even entitled to claim refund of the amount paid under Section 234A, B and C of the Act. Therefore, in this background, when the authority exercising its discretion has decided to waive off the interest paid by the assessee, whether the assessee as a matter of right can claim interest invoking Section 244A of the Act has to be considered by this Court. 6. Mr.Kulkarni, learned counsel appearing for the assessee relying upon the judgment of the Madras High Court in Commissioner of Income Tax – VS – needles Industries Private Ltd. reported in ITR vol.233 1998 page 370 contends, that, the assessee is entitled to claim interest even though interest is waived off by the Settlement Commission. He further contends that the judgment of the Madras High Court in Needless Industries case, has been considered and upheld by the Hon’ble Supreme Court in Sandvik Asia Ltd. – vs – Commissioner of Income Tax and Others reported Income Tax Reports Vol.280 2006 643 and he further contends that a similar view is also taken by the Madhya Pradesh High Court in (2007) 295 ITR 571 (MP) in Commissioner of Income Tax – VS – Hope Textiles Ltd. Relying upon these judgments, he requests to dismiss this appeal. 7. 7. Per contra, Sri.Seshachala, learned counsel for the Revenue, contends that the facts involved in Needle Industries case has no application to the facts of this case and he further contends that in Needle Industries case, the Madras High Court had an occasion to consider the provisions of Rule 117A of the Income Tax Rules (for short hereinafter referred to as ‘the Rules’). Therefore, he contends that the said ruling is nothing to do with the present case. He further contends that even in Sandvik Asia’s case, there was no occasion for the Supreme Court to consider regarding grant of refund of interest pursuant to an order passed by the Settlement Commission. Similarly, he contends that the judgment of Madhyapradesh High Court has also no application to the facts of this case. 8. In view of the rival submissions, this Court has to consider whether the Madras High Court had any occasion to consider the provisions of Section 234 of the Act in the backdrop of the waiver of interest by the Settlement Commission and whether the case of Needle Industries can be pressed into service to consider the present appeal and similarly, this Court has to examine whether the Supreme Court had an occasion to consider the levy of interest on refund of interest on account of the waiver under a settlement in Sandvik Asia’s case. 9. 9. In order to appreciate the case of Needle Industries Ltd., we have to consider Rule 117A of the Rules, which reads as hereunder:- Section 117A of the Rules (In respect of assessment relating to an assessment year commencing on or before the first day of April, 1988, the Assessing Officer) may reduce or waive the interest payable under section 139 in the cases and in the circumstances mentioned below, namely:- i) where the return of income is furnished by a person who has been treated under section 163 as an agent of an non-resident and is assessed in respect of the letter’s income; ii) where the return of income is furnished by an assessee whose only source of income during the relevant previous year is a share in the income of an unregistered firm which has been assessed on its total income in respect of that previous year under clause (b) of section 183; iii) where the return of income of a deceased individual is furnished by his legal representative and the legal representatives satisfies the [Assessing Officer] that he had sufficient cause for not furnishing such return tire; iv) where the return of income has been furnished in pursuance of a notice issued under section 148; 10. In Needle Industries case, considering the provisions of Rule 117A of the Rules, a Division Bench of the Madras High Court has held that the assessee is entitled to claim interest on refund of the amount. But, in the instant case, the waiver of interest has not been passed by relying upon the circumstance contemplated under Rule 117A. In the instant case, by virtue of the order passed by the Settlement Commission based on the request of the assessee interest has been waived off and not as a matter of right accrued to the assessee. Therefore, we are of the view that the decision in Needless Industries Case has no application to the facts and circumstances of this case. 11. It is no doubt true that in Sandvik Asia’s case, the Hon’ble Supreme Court considering the case of Needle Industries, has affirmed the judgment in Needle Industries. But the facts involved in Sandvik Asia’s case of are entirely different. Similarly in the case of Hope Textiles Ltd, the High Court of Madhya Pradesh had no occasion to consider the question that arises in the present case. But the facts involved in Sandvik Asia’s case of are entirely different. Similarly in the case of Hope Textiles Ltd, the High Court of Madhya Pradesh had no occasion to consider the question that arises in the present case. Therefore, we are of the view that the submission made by Sri.Kulkarni, learned counsel for the assessee, cannot be accepted. 12. There is no dispute in regard to allowing interest under Section 244A of the Act in favour of the assessee where an order of refund is passed in regular course based on the entitlement of the assessment of the assessee to claim refund on account of the reversal of the order passed by the Assessing Officer or by the Commissioner of Income Tax (Appeals) or of the order of the Tribunal or by the High Court. Similarly, if there is any error in calculation and if the assessee was entitled to refund, in such circumstance, the assessee is always entitled to claim refund under Section 244A of the Act. But, in the instant case, the assessee by making use of the request considered by Settlement Commissioner is trying to claim interest on refund, which according to us is not entitled since there was no right accrued to the assessee if the Settlement Commission had not agreed to waive off to consider the hardship of the assessee. It was the discretion of the interest and no such right was right was accrued to the assessee to claim refund as a matter of right under law. In the circumstance, we are of the view the Tribunal as well as the Commissioner for Income Tax Appeals-Appellants herein did not consider the provisions of Section 244A of the Act in the background of the present case. In the circumstance, we have to hold that the orders passed by the Income Tax Appellate Tribunal as well as the Commissioner of Income Tax (Appeals) as erroneous and liable to be set aside. 13. In the result, the appeal is allowed. The question of law framed by us is answered in favour of the Revenue and against the assessee holding that the assessee is not entitled to claim interest on the refund order passed by the Deputy Commissioner of Income Tax dated 25.4.2000.