TMI Blog2010 (3) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... f 2005 - - - Dated:- 15-3-2010 - SIKRI A. K., SIDDHARTH MRIDUL JJ Sanjeev Sabharwal for the appellant. Ajay Vohra and Ms. kavita Jha for the respondent. JUDGMENT The judgment of the court was delivered by Siddharth Mridul J.- This appeal was admitted on the following substantial question of law : "Whether section 244(1)(b) read with the Explanation thereto excludes payment of interest on refund of self-assessment tax?" 2. Since it is a pure question of law, the learned counsel for the parties advanced arguments finally. They wanted some time to file the written synopsis of their submissions as well, for which one week time was granted. 3. For answering the aforesaid question the following brief facts are adumbrated : (a) The respondent-assessee had for the assessment year 1998-99, in addition to TDS and advance tax, also paid self-assessment tax under section 140A of the Income-tax Act, 1961 (in short "the Act"). (b) On April 24, 2002 an order was framed under section 250/143(3) of the Act whereby a refund of Rs. 66,90,474, earlier paid as self-assessment tax by the assessee, was made. The respondent-assessee claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the amount of the excess interest pay-able and requiring him to pay such amount ; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly. (2) On any portion of such amount which is refunded under this Chapter, interest shall be payable only up to the date on which the refund was made. 244. (1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Assessing Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at fifteen p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge of the assessee's tax liability in the assessment order), becomes refundable wholly or in part as a result of any appellate or other order passed, the Central Government will have to pay the assessee interest on the refundable amount under section 244(1A). For the purpose of this section, the amount of advance payment of tax and the amount of tax deducted at source must be treated as payment of income-tax pursuant to an order of assessment on and from the date when these amounts were set off against the tax demand raised in the assessment order, in other words the date of the assessment order. (iii) With effect from April 1, 1985, interest payable under section 214 will increase or decrease in accordance with the variation in the quantum of the excess payment of tax brought about by orders passed subsequent to the regular assessment as mentioned in sub-section (1A)." 6. The provisions of section 244A read as follows : "(1) Where refund of any amount becomes due to the assessee under this Act he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot paid by the Department to the asses-see for money remaining with the Government. To remove this inequity, as also to simplify the provisions in this regard, the Amend-ing Act, 1987, has inserted a new section 244A in the Income-tax Act, applicable from the assessment year 1989-90 and onwards which contains all the provisions for payment of interest by the Department for delay in the grant of refunds. The rate of interest has been increased from the earlier 15 per cent. per annum to 1.5 per cent. per month or part of a month comprised in the period of delay in the grant of refund. The Amending Act, 1987, has also amended sections 214, 243 and 244 to provide that the provisions of these sections shall not apply to the assessment year 1989-90 or any subsequent assessment years." 8. In the case of Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643 (SC)), the Supreme Court held as under (headnote) : "In view of the express provisions of the Income-tax Act, 1961, an assessee is entitled to compensation by way of interest for the delay in the payment of amounts lawfully due to the assessee which are with-held wrongly and contrary to law. The Government is liable to pay interest, at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision in Cholamandalam Investment and Finance Co. Ltd. [2007] 294 ITR 438 (Mad), vide order dated December 3, 2009. The Supreme Court has also, recently, in the case of CIT v. H. E. G. Ltd. [2010] 324 ITR 331, vide its order dated December 3, 2009, held that the expression "refund of any amount" would include interest under section 244A (on refund of tax deducted at source) to which the assessee was lawfully entitled but had been wrongly withheld by the Department. 11. On an analysis of section 244A of the Act it is seen that where "refund of any amount" becomes due to the assessee, the assessee is entitled to simple interest thereon. The mode and manner of calculating such interest is laid down in clauses (a) and (b) of sub-section (1) of the said section. Where the refund is out of pre-paid taxes, interest is calculated in terms of section 244A(1)(a) of the Act. Where the refund is of taxes paid other than pre-paid taxes covered in clause (a), the computation of interest is for the period prescribed in clause (b), sub-section (1) of the said section. In Cholamandalam Investment and Finance Co. Ltd. [2007] 294 ITR 438 (Mad), it was held that even though the short title to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government, by way of payment of interest for monies legitimately belonging to the asses-see and wrongfully retained by the Government, without any gaps. 15. Therefore, in our view where the self-assessment tax paid by the assessee under section 140A is refunded, the assessee should be, on principle entitled to interest thereon since the self-assessment tax falls within the expression "refund of any amount". The computation of interest on self-assessment tax has to be in terms of section 244A(1)(b), i.e., from the date of payment of such amount up to the date on which refund is actually granted. We find support for this conclusion from the decision of the Madras High Court in Cholamandalam Investment and Finance Co. Ltd. [2007] 294 ITR 438, the special leave petition against which order was dis-missed by the Supreme Court. Even otherwise, it is trite law that wherever the assessee is entitled to refund, there is statutory liability on the Revenue to pay the interest on such refund on general principles to pay the interest on sums wrongfully retained (Sandvik Asia Ltd. supra). 16. In view of the discussion above, we answer the question of law in favour of the assessee and a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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