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2005 (10) TMI 212 - AT - Income TaxInterest Chargeable u/s 234D - Interpretations of the provisions of section 234D - Retrospective or Prospective effect - Whether interest u/s 234D should be charged from assessment year 2004-05 or with reference to regular assessment framed after 1-6-2003 irrespective of the assessment years involved or irrespective of the date when refund was granted? - HELD THAT:- In a case where an assessee claims refund of a substantial portion of advance tax or TDS treated as paid by him on the basis of the total income as declared in his return of income furnished u/s 139, such refund has to be granted to him at the time of processing of the return u/s 143(1). Subsequently, if regular assessment is made on a total income much higher than the returned income, the refund earlier granted to the assessee or a substantial portion of it is treated as tax payable. But while the assessee pays interest for shortfall in payment of advance tax with effect from the 1st day of the assessment year, nothing is charged from the assessee for having utilized the refund amount till the date of regular assessment. Section 234D now provides in the Income-tax Act to charge interest on excess refund granted at the time of summary assessment. Sub-section (1) of section 234D provides that where any refund is granted to the assessee under sub-section (1) of section 143 and no refund is due on regular assessment, or the amount refunded under sub-section (1) of section 143 exceeds the amount refundable on regular assessment, then, the assessee shall be liable to pay simple interest at the rate of two-third per cent on the whole or the excess amount so refunded for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment. Thus, section 234D is to be construed as in operation with effect from 1-6-2003 i.e., any regular assessment made on or after 1-6-2003, interest u/s 234D if chargeable is to be levied irrespective of the assessment year or irrespective of the date when the refund was granted. Interest u/s 234D is not levied for any default on the part of the assessee. It is levied merely because the assessee who claimed refund which was granted though not legally due to him. Thus, it is neither for non/delayed filing of return nor non/short demand of taxes etc. but merely to compensate the utilization of any sum during the period which the assessee was not legally entitled to use. There is no merit in the argument that interest even if chargeable should be only for the period commencing from 1-6-2003. What is to be seen is whether interest is chargeable when regular assessment is made on or after 1-6-2003. If the same is found chargeable, the period has to be seen from the date of granting refund till the date of regular assessment. The simple reason is that interest is chargeable for enjoying the refund which the assessee was not legally entitled in the case of Union Home Products [1995 (2) TMI 52 - KARNATAKA HIGH COURT] categorically held that interest is compensatory in character. Hon'ble Supreme Court in the case of CIT v. Anjum M.H. Ghaswala [2001 (10) TMI 4 - SUPREME COURT] held that interest is mandatory in nature. We accordingly hold that interest was rightly levied under the provisions of section 234D as the regular assessment is made on or after 1-6-2003. In the result, the appeal is dismissed.
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