TMI Blog2007 (6) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 195(2) of the Act is also payment made under section 156 of the Income-tax Act. 3.The learned CIT(A) erred in applying the case laws which has no direct relevance to the facts of the appellant s case. 4.Without prejudice and in the alternative, the appellant submits that interest should be granted under section 244A(1)( a ) on the refund of TDS paid in pursuance of order under section 195(2)." 3. Mr. Ojas Choksi, learned Counsel appeared for the assessee and Mr. A.K. Mehrish, Departmental Representative appeared for the revenue and put forward their contentions. 4. The brief facts of the case relating to ITA No. 3531/Mum./2005 are that the assessee-company had commissioned its naptha desulphurization plant and in order to check the operation of the new plant, the assessee-company called two technicians from M/s. Haldor Topsoe, Denmark. Two invoices were raised by the said company in Denmark aggregating to US $ 43,290.06 comprising of service charges for services of technicians, US $ 38,500 and reimbursement of expenses US $ 4,790.06. It was submitted before the Assessing Officer that as per the DTAA between India and Denmark, tax is to be deducted only from payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee-company to deduct tax @ 20 per cent on the entire amount of DM 6,00,000, which the assessee-company deducted and paid and thereafter effected the remittance. In appeal, the CIT(A) vide his order in appeal No. CIT(A)XXXI/IT. 12/96-97/02-03, dated 12-7-2002 held that sale/purchase of technical documents is not royalty as per article 12 of the DTAA between India and Germany and also as per section 9 of the Income-tax Act. The CIT(A) allowed the appeal of the assessee and directed the Assessing Officer to refund the tax. The Assessing Officer while giving effect to the CIT(A) s order refunded the tax of Rs. 27,84,000 but did not allow interest under section 244A of the Income-tax Act. The assessee is aggrieved and filed an appeal before the CIT(A), who rejected the claim of the assessee making similar observations as in order of CIT(A) in ITA No. 3531/Mum./2005. The assessee is aggrieved by both the above said orders of CIT(A) and is in appeal before us against the same. 6. The issue in both the appeals is the grant of interest under section 244A of the Income-tax Act on the amounts paid by the assessee, in compliance to the order issued under section 195 of the Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an appeal against the order under section 195(2) of the Income-tax Act. Once the CIT(A) has granted the relief and refund arises to the assessee, the assessee is empowered to appeal against the non-granting of any part of refund under section 240 of the Income-tax Act. 7. We have heard the rival submissions and perused the records. In the facts of the present case, the assessee had deducted taxes on the amounts remitted to Denmark/Germany pursuant to order under section 195(2) of the Income-tax Act passed on 15-7-1996. The sum of Rs. 27,84,000 and Rs. 22,005 was paid to the exchequer on 17-7-1996. In appeal, the CIT(A) held that the assessee was not required to deduct tax on such remittances remitted by the assessee-company. Accordingly, the Assessing Officer was directed to refund the taxes deposited pursuant to order under section 195(2) of the Income-tax Act. The Assessing Officer while granting relief to the assessee though determined refund of amount paid to the assessee on account of tax deducted by the assessee-company prior to remittance of the said amounts, but refused to grant any interest under section 244A of the Income-tax Act. 8. Under the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient reason to be recorded in writing, exempt him from the operation of the provisions of that clause." 11. Thereafter, the procedure in appeal as in a regular appeal filed under section 246/246A of the Income-tax Act and also under the provisions of section 248/249 of the Income-tax Act is same as provided in section 250 of the Income-tax Act. In the present facts and circumstances of the case, the CIT(A) granted relief to the assessee holding that no tax is deductible out of the remittances made to Denmark/Germany and directed the Assessing Officer to refund the amount of tax so deposited by him. 12. Pursuant to the orders of CIT(A) under section 250 of the Income-tax Act, section 240 of the Act provides as under : "240. Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf: Provided that where, by the order aforesaid : ( a )an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demand. (2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final. (3) Where, as a result of an order under sub-section (3) of section 115WE or section 115WF, or section 115WG or sub-section (3) of section 143 or section 144 or section 147 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 paid and requiring him to pay such amount; and such notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplied] 16. Their Lordships of Hon ble Apex Court in Sandvik Asia Ltd. s case ( supra ), referring to the decision of Hon ble Madras High Court in Needle Industries (P.) Ltd. s case ( supra ), and had held that the assessee is entitled to interest under section 214 and/or section 244 of the Act ; in accordance with the terms and provisions of the said section i.e ., interest on interest is eligible to be paid by the revenue authorities for the delay in issue of payments. 17. The Mumbai Tribunal in Grindwell Norton Ltd. s case ( supra ) had held as under : "In sub-section (1) to section 244A, where refund of any amount becomes due to the assessee, it is stipulated that in addition to the refund the assessee shall be entitled to received on the said refund. Under clause ( a ) to sub-section (1) of section 244A, the interest shall be payable on the refund of tax deducted at source or advance tax paid by the assessee and under clause ( b ) to sub-section (1) to section 244A, the interest shall be paid on refund of any tax other than advance tax or TDS. The Explanation appended to clause ( b ) to section 244A clarified the date of payment of tax or penalty. The Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "... In our view, the Act recognizes the principle that a person should only be taxed in accordance with law and hence where excess amounts of tax are collected from an assessee or any amounts are wrongfully withheld from an assessee without authority of law the Revenue must compensate the assessee. At the initial stage of any proceedings under the Act any refund will depend on whether any tax has been paid by an assessee in excess of tax actually payable by him and it is for this reason that section 237 of the Act is phrased in terms of tax paid in excess of amounts properly chargeable. It is, however, of importance to appreciate that section 240 of the Act, which provides for refund by the Revenue on appeal, etc., deals with all subsequent stages of proceedings and therefore is phrased in terms of any amount becoming due to the assessee. ..." 20. In the facts and circumstances of the present case, the refund becomes due to the assessee pursuant to the order of CIT(A) wherein it was held that assessee was not to deduct tax at source on the amounts remitted to the recipient outside India. The refund of money paid by the assessee becomes due to it on the passing of the Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice of demand is to be issued under section 156 of the Act, which very categorically provides that where any tax, interest, penalty or any other sum is payable, because of any order passed under the Act . The order under section 195(2) of the Act has been passed under the provisions of the Act and any notice of Demand for the said amount due pursuant to order passed under section 195(2) is bound to be issued under section 156 of the Income-tax Act. 23. The provisions of clause ( b ) of section 244A(1) of the Act very categorically provides that interest on any refund arising because of payment of tax in any other case , which shall include the payment made by the assessee pursuant to order under section 195(2) of the Income-tax Act, by which the Assessing Officer requisitioned the assessee to deduct the tax and deposit the same in treasury before remitting the amounts due to the recipients outside India. Accordingly, the assessee is entitled to receive interest under section 244A(1)( b ) of the Income-tax Act on amounts deposited pursuant to order passed under section 195(2) of the Act, which in-turn have become due to the assessee because of the order passed in appeal aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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