2025 (5) TMI 292 - HC - Income Tax

Interest as awarded to the applicant u/s 244A(1)(b) r.w.s.132B(4)(b) which provides only for payment of simple interest - HELD THAT - The observation of the Court in the order 2021 (10) TMI 1464 - ALLAHABAD HIGH COURT that it had provided for interest payment at the rate of one and a half percent (cumulatively) is not a part of the order dated 06.10.2021. The order dated 18.11.2022 was passed on an application filed by the opposite parties for correction of the order and the Court in its order dated 18.11.2022 states that the order does not require any correction on the aforesaid count. No provision under the Income Tax Act has been brought to the notice of the Court showing the formula for computing cumulative interest. It is the plea of the applicant that cumulative interest means compound interest. There is no statutory provision from which any inference can be drawn that cumulative interest means compound interest. In any case the lack of any statutory provision regarding payment of cumulative interest or the formula to calculate the same leads to the conclusion that the opposite parties cannot be held liable for willful disobedience of the order of this Court.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the opposite parties have willfully disobeyed the order dated 06.10.2021 passed in Writ Tax No. 988 of 2018, thereby attracting contempt proceedings.

- The correct interpretation and application of Sections 132B(4)(b) and 244A(1)(b) of the Income Tax Act, 1961, specifically regarding the rate and nature of interest payable on the seized amount.

- Whether the interest payable should be simple interest or compound (cumulative) interest.

- Whether the payment of Rs. 42,32,000/- made by the opposite parties constitutes full compliance with the Court's order.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Alleged Willful Disobedience of Court Order

Relevant Legal Framework and Precedents: The contempt application is predicated on the assertion that the opposite parties failed to comply with the order dated 06.10.2021. Contempt of court requires a clear and deliberate violation of a judicial order.

Court's Interpretation and Reasoning: The Court examined whether the payment made by the opposite parties was in compliance with the order. It was admitted and on record that Rs. 42,32,000/- had been paid to the applicant. The opposite parties contended that this payment was made pursuant to the Court's directions.

Application of Law to Facts: Since the payment was made according to the terms of the order, the Court found no evidence of willful disobedience. The applicant's contention that the payment was insufficient was linked to the nature of interest calculation rather than non-payment.

Treatment of Competing Arguments: The applicant argued that the payment was not full compliance because the interest was calculated on a simple interest basis, whereas the applicant claimed entitlement to compound interest. The Court rejected this argument, holding that the order mandated simple interest only, as per the statutory provisions invoked.

Conclusion: The Court concluded that there was no willful disobedience and dismissed the contempt application.

Issue 2: Interpretation of Interest Provisions under Sections 132B(4)(b) and 244A(1)(b) of the Income Tax Act, 1961

Relevant Legal Framework: Section 132B(4)(b) and Section 244A(1)(b) govern the entitlement and calculation of interest on amounts seized and subsequently refunded. The statutory language prescribes payment of interest but does not explicitly define the nature of such interest as simple or compound.

Court's Interpretation and Reasoning: The Court initially granted interest at the rate of 1.5% per month, as per the order dated 06.10.2021, to be calculated from 120 days after the last authorization issued against the petitioner. A subsequent correction order dated 18.11.2022 clarified a typographical error, correcting the period from 20 days to 120 days for commencement of interest calculation.

Key Evidence and Findings: The correction application filed by the opposite parties was considered, and the Court held that the rate of interest (1.5%) was correctly applied. The Court emphasized that the order did not provide for compound interest, and the term "cumulatively" used in the order dated 18.11.2022 did not equate to compound interest.

Application of Law to Facts: Since the statutory provisions do not provide for compound interest or a formula for cumulative interest, the Court held that the interest payable was simple interest. The applicant's plea that cumulative interest meant compound interest was found unsupported by any statutory provision or precedent.

Treatment of Competing Arguments: The applicant's argument for compound interest was rejected on the basis that no statutory authority or precedent supported such a claim. The Court distinguished between the terms "cumulative" and "compound," clarifying that the former does not necessarily imply the latter in this context.

Conclusion: The Court held that interest payable under the relevant provisions is simple interest and the payment made accordingly complied with the order.

Issue 3: Extent of Refund and Interest Payable

Relevant Legal Framework: The original order dated 06.10.2021 specified a refund of Rs. 16,00,000/- with interest on that amount only, arising from the seizure of Rs. 32,34,600/- made by police authorities on 03.06.1998. The Court also noted similar entitlements for other persons involved in related seizures.

Court's Interpretation and Reasoning: The Court acknowledged that the block assessment order was made in the status of Association of Persons (A.O.P.), which was later quashed by the Tribunal without allowing reassessment. The Court found that no further costs or compensation were warranted beyond the refund and interest awarded.

Application of Law to Facts: The refund and interest were calculated strictly as per the provisions and the Court's order. The Court found that the revenue authorities had complied with the order by making the payment.

Treatment of Competing Arguments: The applicant sought additional amounts or costs, but the Court declined, finding no basis to award further sums beyond the refund and interest.

Conclusion: The refund and interest awarded were deemed appropriate and fully complied with by the revenue authorities.

3. SIGNIFICANT HOLDINGS

"The interest was awarded to the applicant under Section 244A(1)(b) read with Section 132B(4)(b) of the Income Tax Act which provides only for payment of simple interest."

"No provision under the Income Tax Act has been brought to the notice of the Court showing the formula for computing cumulative interest. It is the plea of the applicant that cumulative interest means compound interest. There is no statutory provision from which any inference can be drawn that cumulative interest means compound interest."

"As the order passed by the Writ Court has been complied by the opposite parties, no further orders are required to be passed in the present contempt application."

Core principles established include the interpretation that statutory interest under the cited provisions is simple interest unless expressly provided otherwise, and that mere use of the term "cumulative" does not convert simple interest into compound interest.

Final determinations:

- The payment of Rs. 42,32,000/- by the opposite parties constituted full compliance with the Court's order.

- The interest payable under Sections 132B(4)(b) and 244A(1)(b) is simple interest at 1.5% per month from 120 days after the last authorization.

- No willful disobedience or contempt was established against the opposite parties.

- No additional costs or compensation beyond the refund and interest awarded were warranted.