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42. Ground no.10, is on the issue of disallowance of interest under section 244A of the Act.

43. Before us, the learned Counsel for the assessee relied on the Special Bench decision of the Tribunal in Avada Trading Co. (P.) Ltd. v/s ACIT, [2006] 100 ITD 131 (SB), wherein it has been held as under:-

"7. Rival contentions have been considered carefully. The question for consideration is whether interest U/s 244A granted to assessee in the proceedings U/s 143(1)(a) of the Act is taxable in the year of its receipt or in the year in which proceedings U/s 143(1)(a) attains finality. According to the charging provisions of Section 4 and 5 of the Act, the income is chargeable in the year in which it is either accrued or received as the case may be. The issue regarding accrual of income is concluded by the judgment of the Hon'ble Supreme Court in the case of E.D. Sassoon & Co. Ltd. 26 ITR 27, wherein it has been held that income accrues when right to receive is acquired and such right can be said to have been acquired when an enforceable debt is created in favour of the assessee. This legal position has been applied by the Courts including the Apex Court in various cases.

A bare look at the provisions of S/Section (1) reveals that as soon as any refund becomes due under any provisions of the Act, the assessee becomes entitled to receive the interest in respect of such refund calculated in the manner provided in Clause (a) and (b) of such provisions. Therefore, the moment the refund is granted, an enforceable debt is created in favour of assessee in respect of interest due on such refund. Consequently, income can be said to accrue on the date of refund itself. Therefore, when such interest is actually granted along with the refund then, in our opinion, the requirement of Section 4 and 5 of the Act are fully satisfied and the same can be taxed in the year of receipt.

9. The main contention of the assessee's Counsel is that such right is contingent as the interest so received can be varied or withdrawn after the assessment U/s 143(3). We are unable to accept such contention of assessee for the reasons given hereafter. According to the dictionary meaning, a right or an obligation can be said to be contingent when such right or obligation is dependent on something not yet certain. According to Section 244A, the only condition for grant of interest is that there must be a refund due to assessee under any provision of the Act. There is no other condition in the said provision affecting such right. Therefore, the moment a refund become due to assessee, an enforceable debt is created in favour of assessee and assessee acquires a right to receive the interest. Sub- section 3 of Section 244A only affects its quantification under certain circumstances and not the right of interest. The Hon'ble Supreme Court in the case of Shri Goverdhan Ltd., 69 ITR 675, has observed at Page-681 that once a debt is created, then the liability cannot be said to be contingent merely because it is to be quantified at later date. Under Section 244A, even the interest is quantified immediately whenever a refund is issued. In our view, the right to grant interest is absolute since existence of such right is not dependent on any event. For example, assessee is granted interest of Rs.1,000/- on the date of 17 Glaxo India Limited ITA no. 6027/Mum./1999 ITA no. 5392/Mum./1999 C.O. no. 005/Mum./2000 granting refund. Subsequently, U/s 244A(3), it is reduced to Rs.600/- by virtue of assessment U/s 143(3). Can it be said that right to interest did not accrue on the date of refund? In our opinion, the right of interest came into existence on the date of refund by virtue of Section 244A(1) though its quantification may or may not vary depending upon the outcome of assessment.

12. The ratio of the above judgment is clearly applicable to the present case. According to the above judgment, if an enforceable debt is created under a statute then any subsequent event would not affect the existence of such right / obligation despite the fact that such debt is subject matter of appeal. The right to interest U/s 244A is not dependent upon any assessment in as much as there is no compulsion or obligation upon the Assessing Officer to make an assessment U/s 143(3). The moment the return is processed U/s 143(1)(a) and refund is issued on the basis of intimation U/s 143(1)(a), an enforceable legal right is created in favour of assessee U/s 244A and simultaneously the Assessing Officer is under legal obligation to grant the interest. Merely because quantum of such interest may vary on assessment made U/s 143(3), it cannot be said that legal right was not acquired on the date of refund. The effect of assessment U/s 143(3) would be that interest on refund U/s 244A would get substituted in terms of S/Section (3) of Section 244A without affecting right already accrued.