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TMI Blog2009 (3) TMI 901X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned CIT(A) has failed to note that any order granting refund/interest to the assessee is in favour of the assessee and the assessee can not be said to be aggrieved there from and in that case the order has reached finality as far as the assessee is concerned. 2.3 The learned CIT(A) ought to have appreciated that in as much as the assessee is vested with the right to claim the interest Under Section 244A by an order from the revenue the taxing of the interest on accrual/receipt basis is in order. 3. In this ground, it has been contended on behalf of the department that the CIT(A) erred in holding that the addition of interest granted by the department Under Section 244A of the Act, was not taxable in the year of receipt. 4. The assessee, a public limited company was engaged in the business of manufacturing paper and paper boards. The return for AY 2001-02 was filed on 30.10.2001 showing loss of Rs. 23,24,91,821. In the assessment order passed Under Section 143(3) on 09.03.2004, the loss was determined at Rs. 21,24,99,417. One of the additions made by the AO was of Rs. 1,92,43,578 representing interest on refund allowed by the department Under Section 244A of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7] 225 ITR 746 (SC). (iv) J.K. Spinning and Weaving Mills Co. v. Addl. CIT Kanpur [1976] 104 ITR 695 (All.) (v) P. Mariappa Gounder v. CIT [1998] 232 ITR 2 (SC) (vi) Kedarnath Jute Mfg. Co. Ltd. v. CIT (Central), Calcutta [1971] 82 ITR 363 (SC). (vii) CIT, Tamil Nadu-IV v. M.K.K.R. Muthukaruppan Chettiar [1984] 145 ITR 175 (Mad.) 7. We have considered the rival submissions in the light of material on record and the precedents cited. It is seen from the assessment order that the impugned amount of Rs. 1,92,43,578 represented interest Under Section 244A relating to AY 1994-95 to 2000-01 as under. Assessment year interest under section 244A (Rs.) 1994-95 91,383 1996-97 4,30,602 1997-98 1,52,96,459 1998-99 25,52,986 1999-2000 2,22,564 2000-01 6,49,584 8. The CIT(A) deleted the addition for the reasons given in paragraph 4.3 of his order as under. 4.3 On the given facts it is found that the orders which have given rise to the interest Under Section 244A are subject matter of further appeals and have not reached finality. Therefore the right to receive the interest is in dispute and as per the settled principles of accountancy the impugned amount cannot be broug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 244A of the IT. Act, on the tax refundable in the proceedings Under Section 143(1)(a) of the Act, accrued to the assessee in the year of its receipt or in the year in which the proceedings under Section 143(1)(a) attained finality? 11. In the case of Avada Trading Co.(P) Ltd. (supra), the contention of the learned AR was that the right to interest Under Section 244A(1) was inchoate/contingent in as much as quantification of the same was dependent on the final outcome of assessment Under Section 143(3). The conclusions reached by the Tribunal (Special Bench) are as under. (Headnotes) I. According to the charging provisions of Sections 4 and 5, the income is chargeable in the year in which it either accrues or is received as the case may be. The issue regarding accrual of income is concluded by the judgment of the Supreme Court rendered in the case of E.D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27, wherein it has been held that income accrues when right to receive is acquired and such right can be said to have been acquired when an enforceable debt is created in favour of the assessee. [Para 7] II. A bare look at the provisions of Sub-section (1) of Section 244A revea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or obligation upon the Assessing Officer to make an assessment under Section 143(3). The moment the return is processed under Section 143(1)(a) and refund is issued on the basis of intimation under Section 143(1)(a), an enforceable legal right is created in favour of the assessee under Section 244A and simultaneously the Assessing Officer is under legal obligation to grant the interest. The effect of assessment under Section 143(3) would be that interest on refund under Section 244A would get substituted in terms of Sub-section (3) of Section 244A without affecting right already accrued. [Para 12) V. Further, the judgment of the Supreme Court rendered in the case of CIT v. Chunilal V. Mehta & Sons (P.) Ltd. [1971] 82 ITR 54 clearly shows that once a right accrues under an agreement, then such accrual is not affected by dispute between the parties. Further, in case of dispute, the final outcome would ultimately relate back to the year of accrual. [Para 13] VI. It was also contended by the assessee that it would be without remedy if the interest was reduced by virtue of assessment under Section 143(3). That apprehension was unfounded. If interest is reduced by virtue of Sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a refund is granted, an enforceable debt is created in favour of the assessee in respect of interest due on such refund. Consequently, income can be said to accrue on the date of refund itself. 12.4 Therefore, when such interest is actually granted along with the refund, the requirements of Sections 4 and 5 are fully satisfied and the same has to be taxed in the year of receipt. 12.5 The Tribunal (SB) unequivocally held that there was no merit in the contention of the assessee that such right was contingent as the interest so received could be varied or withdrawn at a later stage. According to the dictionary meaning, a right or obligation can be said to be contingent when such right or obligation was dependent on something not yet certain. 12.6 The Tribunal (SB) emphasized that according to Section 244A, the only condition for grant of interest was that there must be a refund due to the assessee under any provision of the Act, that there was no other condition in the said provision affecting such right, and therefore, the moment a refund becomes due to the assessee, an enforceable debt is created in favour of the assessee and the assessee acquires a right to receive the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 998-99 25,52,986 1999-2000 2,22,564 2000-01 6,49,584 16.1 The anxiety of the learned AR was that, in future, because of any of the reasons mentioned in Sub-section (3) of Section 244A, the above interest may get reduced and the assessee may have to return part of the impugned interest on which he is being asked to pay tax and because of limitation it may not be possible to modify the assessment for AY 2001-02 and/or 2002-03. 16.2 We find it difficult to address ourselves to a hypothetical question like this one. The provision of Section 254(1) restricts our jurisdiction to the subject-matter of this appeal which we have decided, as per law, in the above paragraphs. 17. The decisions relied upon by the learned AR are not applicable to the facts of this case. 18. To conclude, the legal position that emerges from the order of the Tribunal (SB) is that the interest, granted by the department to the assessee Under Section 244A of the Act, along with the refund, fully satisfies the requirements of Sections 4 and 5of the Act and, therefore, it has to be taxed in the year of its receipt. The judgment of the Supreme Court in the case of E. D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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