Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2016 (4) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (4) TMI 316 - HC - Income TaxQualification for exemption under Section 10(15)(iv)(c) - CBDT rejecting the prayer of the Petitioner for refund being the excess tax withheld at source on the penal interest paid by the Petitioner to Sanwa International Finance Limited (SIFL), Hong Kong - whether the payment by the Petitioner of penal interest and other charges would fall within the definition of ‘Interest’ under Section 2(28A)? - Held that:- It must be noticed that its claim for refund was actually never rejected on merits since the order of the CIT(A), which substituted the order of rejection by the ITO advised the Petitioner to approach the CBDT. In fact, even the CIT advised the Petitioner likewise. It was pursuant to both these orders, the Petitioner approached the CBDT. At the time of making of the application to the CBDT on 21st August, 1998, the circular dated 6th August, 1998 had been issued. The whole idea was to provide a remedy for excessive or wrongful deduction of TDS, the refund of which was sought. This circular was beneficial to the person who had deducted TDS and was seeking refund. Therefore, there was no question of the CBDT not considering the applicability of the said circular as far as the Petitioner was concerned. These decisions, therefore, do not come to the aid of the Revenue to justify its rejection of the application made by the Petitioner. There is only one ground on which the CBDT rejected the Petitioner’s application for refund. This was that the penal interest was paid by the Petitioner as a result of violation/transgression of the Agreement and was, therefore, not exempt under Section 10(15)(iv)(c) of the Act. This is factually incorrect since Clause 27 of the Agreement itself provides for waiver, in the event of default, by SIFL subject to certain conditions. The penal interest was imposed as part of the conditions of the Agreement itself. Therefore, the payment of penal interest cannot be said to be for breach of the terms of the conditions but in terms of the conditions imposed for condoning such breach. The impugned order of the CBDT, therefore, proceeds on an erroneous interpretation of the clauses of the Agreement. The order of the CBDT does not state that the Petitioner otherwise does not satisfy the conditions contained in the CBDT’s circular dated 6th August, 1998. It also does not state that the said circular would not apply to the Petitioner’s application for refund. This is yet another reason why the Court is not prepared to entertain the plea of the Revenue to the above effect because that was not the ground on which the CBDT rejected the Petitioner’s application. In the considered view of the Court, therefore, the impugned order dated 8th December 1998 of the CBDT rejecting the Petitioner’s application for refund is unsustainable in law. Since it is not the case of the Revenue that the Petitioners prayer for refund of the sum of ₹ 64,53,214 is not admissible in terms of Circular No. 769 dated 6th August, 1998 of the CBDT, a direction is issued to the DCIT to pass appropriate orders granting refund to the Petitioner for the said sum together with whatever interest is admissible in accordance with law within a period of four weeks from today. - Decided in favour of assessee
|