TMI Blog2009 (7) TMI 872X X X X Extracts X X X X X X X X Extracts X X X X ..... but withheld by the Revenue, such as interest due which though included in the amount of refund under s. 240 of the Act by virtue of certain decisions referred to above - it is held that assessee was not entitled to any interest on interest as it was not a case of the refund of amount out of any tax paid by or collected from the assessee nor it has a date of payment by the assessee from which it can run. - - - - - Dated:- 17-7-2009 - Member(s) : R. P. GARG., I. S. VERMA., SANJAY ARORA. ORDER-I.S. VERMA, J.M.: April, 2008 In this appeal, the assessee has objected to the order of the CIT(A)-XIII, Ahmedabad, dt. 8th June, 2001 passed for asst. yr. 1996-97, by way of following grounds: "1. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in points of law and facts. 2. In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in confirming order passed under s. 154 of IT Act withdrawing interest under s. 244A on payment of self-assessment tax. He ought to have appreciated that this is at least a debatable issue, order under s. 154 of IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his order which reads as under: "Order under s. 154 of the IT Act, 1961 Assessee company vide letter dt. 3rd March, 1999 has made following contentions: 1. Deduction under s. 80G for Rs. 2,50,000 was not granted in the assessment order under s. 143(3) dt. 23rd Nov., 1998 due to non-availability of exemption certificate from CIT. 2. Additional tax charged under s. 143(1A) of Rs. 23,000 may be deleted and credit along with interest under s. 244A should be granted. 3. Interest under s. 244A of the IT Act is not given on refund of Rs. 1,32,65,511 issued on 25th Sept., 1997 as per intimation under s. 143(1)(a) dt. 12th Sept., 1997. 2. On verification of the case records. it is found that the contention of the assessee company mentioned above at serial No. 1 is correct. As assessee has submitted the exemption certificate issued by CIT along with their rectification application, deduction under s. 80G for Rs. 2,50,000 is allowed to assessee. 3. Regarding second contention of the assessee, it is found that since assessee has failed to submit the exemption certificate even at the time of regular assessment under s. 143(3), the additional tax under s. 143(1A) has been corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cent on Rs. 1,00,000. It is also found that while granting interest under s. 244A of the IT Act in the order passed under s. 154 dt. 7th June, 1999 on the amount of Rs. 1,32,93,091 inter alia includes the payment of Rs. 75,00,000 under s. 140A. A notice under s. 154 of the IT Act was issued to the assessee mentioning above facts on 6th March, 1999 to appear on 13th March, 2000 and represent the case. However, nobody attended on appointed date. Hence, it is presumed that assessee has nothing to say regarding the above-mentioned issue. As the mistake is apparent on record, the same is rectified under s. 154 of the IT Act. Total income is recomputed as under: Income as per order under s. 154 dt. 7-6-1999 Rs. 3,19,60,400 Add: Excess depreciation claimed i.e. 25% of Rs. 1,00,000 Rs. 25,000 --------------- Revised total income Rs. 3,19,85,400 --------------- Withdraw excess interest granted under s. 244A on self-assessment payment of Rs. 75,00,000. Issue revised DN/challan/RO, as the case may be, after due ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f interest on excess payment by way of advance tax or TDS amount. Clause (b) of sub-s. (1) of s. 244A provides payment of interest when the excess payment is made on the basis of notice of demand issued under s. 156 as provided vide Explanation below cl. (b) of sub-s. (1) of s. 244A of the Act. There is no provision in the said section for payment of interest on excess payment by way of self-assessment tax. The Authorised Representative has contended that all payments of whatsoever nature should be considered as the payments and hence interest under s. 244A should be allowed. However, this view does not find support from the provisions of the Act which provides allowing of interest only on excess payment of TDS amount, advance tax payment or payment in pursuance of a demand notice issued by the Department. The reliance on the case of D.J. Works is of no help as the issue in the said case was totally different. The Authorised Representative has also contended that once return is filed, self-assessment tax merges with the tax payments and therefore interest under s. 244A should be paid on the entire refund amount. However, this view is also not supported by any provision in the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. vs. ITO dt. 7th July, 2006 [reported at (2006) 104 TTJ (Ahd)(SB) 773-Ed.] and decision of Tribunal, Mumbai Bench "A" in the case of Dy. CIT vs. Haffkine Ajintha Pharmaceuticals Ltd. for asst. yrs. 1989-90 and 1991-92 in ITA Nos. 1464 and 1465/Mum/1997, dt. 27th March, 2003. The learned counsel, further relied on the decision of Tribunal, Ahmedabad Special Bench "A" in the case of Punitaben Karsanbhai Patel Oral Specific Deferred Family Trust Ors. vs. ITO (2006) 104 TTJ (Ahd)(SB) 773 : (2006) 103 ITD 175 (Ahd)(SB) and another decision of Tribunal, Ahmedabad Bench "C" in the case of Dhanvi Trading Investment (P) Ltd. vs. AO (2000) 69 TTJ (Ahd) 757 : (2000) 72 ITD 245 (Ahd). Alternatively, it was submitted that in any case, the issue being debatable, interest once granted cannot be withdrawn in exercise of powers vested under s. 154 of the Act and reliance in this respect was placed on the decision of Hon'ble Supreme Court in the case of T.S. Balaram, ITO vs. Volkart Bros. Ors. (1971) 82 ITR 50 (SC) and another latest decision of Hon'ble Madras High Court in the case of CIT vs. Cholamandalam Investment Finance Co. Ltd. (2007) 211 CTR (Mad) 384 : (2007) 294 ITR 438 (Mad). A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue involved in the proceedings, i.e., mistakes sought to be rectified by the AO is liable to be two interpretations or there is no mistake at all, then the AO is bound to drop the proceedings initiated by way of a notice under s. 154 of the Act. 7.3 From the above discussion, what we are intending to draw is that initiation of proceedings under s. 154 of the Act either by the assessee by way of a petition or by the officer in exercising of his suo motu powers will not automatically result in correction of the alleged mistake. The officer is bound to satisfy himself that the alleged mistake falls within the ambit of an apparent mistake of facts or of law. 8. In view of above discussion, we are of the opinion that to decide the issue in hand the first question for our consideration is as to whether there was any mistake in the intimation issued under s. 143(1)(a) of the Act on 23rd Sept., 1997 on the basis of which a refund of Rs. 1,32,65,511 was determined and granted on 25th Sept., 1997, but interest under s. 244A was not granted. In other words, was non-granting of interest under s. 244A on the refund which was granted as a result of excess payment of taxes including the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of s. 143 or s. 144 or s. 147 or s. 154 or s. 155 or s. 250 or s. 254 or s. 260 or s. 262 or s. 263 or s. 264 or an order of the Settlement Commission under sub-s. (4) of s. 245D, the amount on which interest was payable under sub-s. (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 AO 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 of demand shall be deemed to be a notice under s. 156 and the provisions of this Act shall apply accordingly. (4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years." (ii) So far as decisions are concerned, we are of the opinion that, at that time, following decisions/circular of the Board were available and are relevant for consideration and, therefore, are dealt herewith: (a) The decision of Hon'ble Supreme Court in the case of Modi Industries Ltd. vs. CIT. In this case, the Hon'ble apex Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remove this inequity. as also to simplify the provisions in this regard, the Amending Act, 1987, has inserted a new s. 244A in the IT Act, applicable from the asst. yr. 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 ss. 214, 243 and 244 to provide that the provisions of these sections shall not apply to the asst. yr. 1989-90 or any subsequent assessment years. 11.4 The provisions of the new s. 244A. The provision of the new s. 244A are as under: (i) sub-s. (1) provides that where in pursuance of any other passed under this Act, refund of any amount becomes due to the assessee then, (a) if the refund is out of any advance tax paid or TDS during the financial year immediately preceding the assessment year interest shall be payable for the period starting from the 1st day of April of the assessment year and on the date of grant of the refund of interest shall, however, be payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid under s. 140A (Rs. 75 lacs), the assessee was entitled to interest on total refund including the refund of Rs. 75 lacs. Non-granting of interest by the Revenue, while computing the assessee's income under s. 143(1)(a) of the Act was, therefore, in our opinion, a mistake of law, as well as the facts and was apparent from the records. The mistake was so obvious that there was no room for interpreting the law, as it stood at that time, in any way, other than as we have opined above. 9.1 To make the things clear, we are of the opinion that non-grant of interest to the assessee while granting refund of Rs. 1,32,65,511 was a mistake apparent from the record and, therefore, our answer to question posed by us at the beginning is "Yes" i.e. there was apparent mistake in intimation under s. 143(1)(a) which resulted in non-allowances of interest under s. 244A of the Act. 10. Once we have found that non-granting of interest on refund of Rs. 1,32,65,511 granted on 25th Sept., 1997 was due to a mistake either of law or of facts, the natural corollary, which follows is that AO was duty-bound to rectify the intimation issued under s. 143(1)(a) of the Act on 23rd Sept., 1997 either of his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined at Rs. 56,940 and after giving credit to the pre-assessment tax paid by the assessee which included the payment made on account of self-assessment (corresponding to s. to 140A, of the IT Act), a refund of Rs. 3,40,366 was determined. The AO did not allow the assessee interest under s. 18 of the Surtax Act r/w s. 244(1A) of the IT Act. Hence, the matter went upto the level of Hon'ble High Court when at the instance of the Revenue, the following question was referred for opinion of the Hon'ble High Court. The High Court after relying on the decision of Hon'ble Supreme Court in the case of Modi Industries Ltd. vs. CIT upheld the assessee's claim and question was answered in favour of assessee and against the Revenue. The relevant part of the order of Hon'ble High Court reads as under: "In the case reported in Modi Industries Ltd. vs. CIT (1995) 128 CTR (SC) 361 : (1995) 216 ITR 759 (SC), the Supreme Court has held that s. 214 provides for payment of interest to an assessee on the excess amount of advance tax paid. After adjustment of advance tax at the time of regular assessment, if some balance remains to the credit of the assessee, that balance is treated as excess amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(a). 7. The proviso to s. 244A(1)(a) makes it clear that no interest shall be payable if the amount of refund is less than 10 per cent, on regular assessment with regard to the refund of advance tax paid under s. 115WJ in respect of fringe benefits; (ii) TCS under s. 206C; and (iii) advance tax or any tax treated as paid under s. 199. But, with respect to other tax as per s. 244A(1)(b), the interest shall be payable even if the amount is less than 10 per cent, of the tax as determined under s. 143(1) or on the regular assessment, because there is no proviso to s. 244A(1)(b) as provided under s. 244A(1)(a). 8. That apart, the law is well-settled that even for the refund of tax paid under s. 140A on self-assessment, the assessee is entitled to interest as held by this Court in CIT vs. Ashok Leyland Ltd. (2002) 254 ITR 641 (Mad). 9. It is also 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. 10. We are also strengthened by the decision of the apex Court for the above view taken in Sandvik Asia Ltd. vs. CIT, wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the self-assessment tax paid because the provisions of s. 244A(1)(b) covers the cases of self-assessment tax also." (b) Decision of Tribunal, Mumbai Bench "B" In the case of Dy. CIT vs. Late Smt. Niranjan M. Majitha in ITA No. 298/Mum/2000, dt. 11th Oct., 2001. In this appeal, the Hon'ble Tribunal, after relying on the Circular No. 549, dt. 31st Aug., 1989 reported in [(1990) 82 CTR (St) 1 : (1990) 182 ITR (St) 1] at p. 48 and various decisions, allowed the assessee's claim of interest under s. 244A(1)(b) of the Act on refund arising out of self-assessment tax paid under s. 140A of the Act. The relevant part as contained in para Nos. 11 to 15 reads as under: "11. We have carefully considered the rival contentions. Sec. 244A provides for payment of interest to the assessee on refunds. Clause (a) of sub-s. (1) provides for payment of interest where the refund is out of TDS or advance tax or tax treated as paid under s. 199. We are not concerned with this clause. Clause (b) provides for payment of interest 'in any other case'. The clause as well as the Explanation below the clause are reproduced below: (b) in any other case, such interest shall be calculated at the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney remaining with the Government. The equitable mortgage (sic) laid down by the Supreme Court in the case of Modi Industries Ltd. is that the assessee is entitled to interest in respect of amounts paid by him in excess of the demand, whatever be the nature of the tax payment, because interest is compensation paid for use of the money by the Government and self-assessment tax stands in no different footing from the other payments such as TDS, advance tax etc. If it is paid in excess of the demanded tax. This conclusion is supported by the observations made by the Supreme Court in the case of Modi Industries Ltd. Sec. 244(1A) which was considered by the Supreme Court provided for interest on refund of amounts paid by the assessee after 31st March, 1975 in pursuance of any order of assessment. This provision did not expressly allow interest on advance tax or TDS. Notwithstanding this the Supreme Court construed s. 244(1A) as referring not only the amount which has been paid directly pursuant to the order of assessment, but also as including the amount of TDS and advance tax, which were lying to the credit of the assessee and were ultimately adjusted and set off against the demands r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands of the main trusts and the demand subsequently settled under KVSS. It is quite unnecessary to repeat that the income has already been assessed in the hands of the main trusts. Therefore, nothing remains thereafter to be assessed in the hands of the beneficiary trusts. as far as the income of main trust is concerned. Moreover, a case of assessment can be contemplated in the present cases because the stand taken by the assessees is that the income of the main trusts has to be assessed in the hands of the individual beneficiary trusts. It is on the basis of that proposition that the returns were filed by the beneficiary trusts. While returns were filed by the beneficiary trusts in their individual capacities, they are in fact offering income for taxation. Sec. 140A provides that when an assessee files a return of income and where tax is due as per the said return, the tax shall be paid by the assessee before filing the return of income and the proof of such payment of tax shall be accompanied along with the return of income. This is called self-assessment. When an assessee files a return with positive income and remits tax thereon under s. 140A, in fact, an assessment is being co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at reason matters were taken before appellate authorities. When these matters were pending before the different authorities that the Kar Vivad Samadhan Scheme was promulgated and the assessee got an occasion to settle the dispute by accepting the impugned income to be assessed in the hands of the main trusts on substantive basis. The main trusts paid the taxes as per the Kar Vivad Samadhan Scheme and certificates were issued by the concerned authorities in compliance thereof. The beneficiary trusts having already been assessed on protective basis, rectification petition under s. 154 was filed before the AO to exclude the impugned income from the assessments of the beneficiaries. The AO, on the basis of the Kar Vivad Samadhan Scheme orders and relevant records, passed orders under s. 154 excluding the income from, the hands of the beneficiary trusts which resulted in the refund of tax along with interest. The Gujarat High Count has already in one of the group cases of the asses sees has passed an order dt. 30th July, 2001 in which the Court has held that one and the same income cannot be taxed in the hands of different assessees. In the present case, when the dispute regarding the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arte AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt.' 39. In view of the above, we find that the orders passed by the assessing authority were not erroneous; but, on the other hand, were just and proper. As we find no error in the orders of the assessing authority we find that the CIT had no jurisdiction to invoke s. 263 and pass the revision orders contested herein. 40. Now we conclude here. For the reasons stated above, both on merit as well as in law, we find that the revision orders passed by the CIT in these cases are not sustainable in law. Accordingly we quash the revision orders and restore the orders of the assessing authority issuing refund with interest due thereon. 41. Certain other contentions are raised in respect of certain assessees before us. But all those contentions related to orders passed before the revision action taken by the CIT. Therefore, all those issues are to be treated as merged with the earlier orders. Therefore, we find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, 2000 withdrawing the interest granted as per order under s. 154 of the Act dt. 7th June, 1999 also was illegal and bad in law and, therefore, order of the CIT(A) upholding such an illegal order cannot be sustained. 18. Our aforesaid view is further fortified by the latest decision of Hon'ble Madras High Court in the case of CIT vs. Cholamandalam Investment Finance Co. Ltd. which is directly on the issue and has been discussed in para No. 12(ii)(b) of this order, and, therefore, for the reasons stated hereinbefore and following the aforesaid decision, we set aside the order of Revenue authorities withdrawing the interest allowed under s. 244A of the Act vide order under s. 154 of the Act dt. 7th June, 1999. 19. Additional ground: The additional ground raised by the assessee reads as under: "In law and in the facts and circumstances of the appellant's case, the learned CIT(A) has grossly erred in not directing learned AO to grant interest on interest on refund." 20. The learned counsel for the assessee submitted that the issue involved in the additional ground is a substantial question of law and, therefore, may be allowed to be raised by way of additional ground at thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Departmental Representative, on the other hand, submitted that assessee is not entitled to any interest on interest because so far as decision in the case of Sandvik Asia Ltd. is concerned, the Hon'ble Supreme Court has allowed the interest as compensation and not as per provisions of IT Act. The learned Departmental Representative, further submitted that the Tribunal, Ahmedabad Bench "A" in the case of Gujarat State Fertilizers Chemicals Ltd. vs. Dy. CIT for asst. yr. 1995-96 in ITA Nos. 2348 and 2349/Ahd/2004, dt. 31st July, 2006, has discussed the decision of Hon'ble Supreme Court in the case of Sandvik Asia Ltd. and dismissed the assessee's claim. He, therefore, submitted that the assessee is not entitled to any interest on interest. 25. After careful consideration of the rival submissions, facts and circumstances of the case and various decisions relied upon by the parties, we are of the opinion that since the issue relating to payment of interest on interest has not been considered neither by the CIT(A) nor by the AO, it will be in the interest of justice, if the issue is restored back to the file of AO. Consequently, the issue relating to payment of interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication under s. 154. In response, the assessee stood granted interest on the amount of refund that stood determined on assessment, i.e., Rs. 132.93 lacs (the actual refund working to Rs. 132.66 lacs on account of adjustment of some past liabilities for Rs. 0.27 lacs), upto 25th Sept., 1997, i.e., the date of grant of refund, vide order under s. 154 dt. 7th June, 1999. 29.4 As the interest allowed included that on self-assessment tax, the AO suo motu invoked the provision of s. 154 of the Act to withdraw the same to the extent it stood allowed on the self-assessment tax component of Rs. 75 lacs, vide order dt. 16th March, 2000. 29.5 The learned CIT(A), in appeal, confirmed the said action of the AO. He was of the view that though the AO's action in withdrawing interest does not fall within the purview of s. 154, being a debatable issue, on which clearly two views are possible, even as argued by tile assessee before him, it was so even at the time interest stood allowed to the assessee under s. 154. In other words, the interest, which stood allowed under s. 154, was clearly barred for being allowed under the said section. As such, per the subsequent partial withdrawal, i.e., o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first, in my view. the decision in the case of CIT vs. Cholamandalam Investment Finance Co. Ltd. settles the debate as to whether the issue under reference is debatable or not in favour of the view that it is so; that being the reason why the order under s. 154 withdrawing interest already allowed stood quashed by the Hon'ble High Court of Madras. As such, the entire discussion made in the earlier part of my learned Brother's order, which endeavours to establish that the issue is not debatable, so that the AO's action of allowing interest on self-assessment tax was not one on which two views are reasonably or conceivably possible and, hence, could not be 'rectified' by the AO under s. 154, is rendered superfluous, being, as would, be apparent, in clear contradiction with the said decision on which the assessee has itself placed extensive reliance. In fact, this is precisely the ground (and which stands now endorsed by the Madras High Court), on which the learned CIT(A) found the assessee's claim unacceptable. The whole premise of the decision is that the issue being debatable, the same cannot be a subject-matter of rectification proceedings. As such, whether the interest stands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original intimation with regard to the impugned interest, i.e., to the same effect as the said decision through the quashing the order under s. l54. There is nothing in law to prevent the rectification of a rectification order, provided, of course, that the subject-matter of rectification constitutes' a 'mistake'. In the present case, the non-allowance of interest under s. 244A (on self-assessment tax) in the first instance was definitely not a mistake, as held by the Hon'ble Madras High Court and, therefore, its 'rectification' was a mistake committed per the first order under s. 154, and which (mistake), stood rectified per the second order. 31.2 The relevant part of the provision in respect of self-assessment tax, s. 140A, reads as under, with the Explanation to s. 140A(1) coming into effect from 1st April, 1989, i.e., the same date as s. 244A: "140A Self-assessment.-(1) Where any tax is payable on the basis of any return required to be furnished under s. 139 or s. 142 or, as the case may be, under any provision of this Act, the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any delay in furnishing the return or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income [s. 140A(1)). It is for this reason that the same stands titled as self-assessment tax. As such, for one, it is only towards the assessee's admitted liability to tax for the relevant assessment year and, secondly, ought not to or would not, that is, generally, give rise to a refund of tax; the assessee being not required to deposit tax in excess of his liability under the Act, particularly as it stands determined by him after the close of year and after finalization of his return of income. So, however, refund of self-assessment tax may arise, for any reason as (say) where the assessee claimed deduction (sic) its disallowance, but does not, all the same, wish to be liable for interest on the tax thereon as (say) where the assessee estimates the tax liability at a higher amount, but could not pay the same by way of advance tax due to paucity of funds for the time being, and so forth. The above delineates the basic conceptual difference that characterizes self-assessment tax from other prepaid taxes (which stands recognized both statutorily and legally) and, thus the (sic) regarded differently under the Act, even as both are only towards the tax liability for the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is granted. Explanation: For the purposes of this clause, 'date of payment of tax or penalty' means the date on and from which the amount of tax or penalty specified in the notice of demand issued under s. 156 is paid in excess of such 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 CIT or CIT whose decision thereon shall be final." 32.3 It clearly, provides for allowance of interest on tax refund on account of: (a) prepaid taxes; and (b) in any other case. While the date of reckoning the same in respect of prepaid taxes, irrespective of the actual daters) of payment of tax, is the first day of the relevant assessment year, that for cases falling under cl. (b) is the date on which the tax stands paid in excess of that demanded [Explanation to s. 140A(1)]. The interpretation of the words "date of payment" has itself been a subject-matter of debate and varying interpretations by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod for which no liability outstands in respect of the refund? It is only after the determination of the assessee's tax liability under s. 143(1) or on regular assessment that a refund, representing the Revenue's liability to the assessee gets determined or crystallized. Rather, if not so understood, apart from, to my mind, not having any mandate in law, the provision (for allowance of interest) could be subject to abuse in that the assessees could deposit amounts, ostensibly as self-assessment tax, to avail of interest by placing their surplus funds with the Revenue. 32.5 Thus, the law, to the extent that can be reasonably said to have been laid down by the apex Court and other pronouncements of binding nature, is only that once the tax paid gets adjusted against the assessee's assessed tax liability for the relevant year, the assessee would be entitled to interest on any refund that is so determined. subject of course to the specific provision (of the Act) in its regard, as for the computation of the period of 'delay'. It is so as unarguably the question of the said delay, or the period for which the interest is payable to the assessee cannot be considered as independent of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intimation (dt. 23rd Sept., 1997) stood passed without any application of mind, nor any warrant in law to so contend; especially in view of the decision in the case of Cholamandalam Investment Finance Co. Ltd., where the interest stood allowed in the first instance only under s. 143(1)(a). Rather, it could well be that the first order under s. 154 (dt. 7th June, 1999) allowing interest suffers from this infirmity, with the assessee being allowed interest on the entire refund of Rs. 132.93 lacs w.e.f. 1st April, 1996, i.e., without making any distinction between the prepaid tax and self-assessment tax and which, if so, would clearly exhibit that the first order under s. 154 stood passed inadvertently or in a mistaken manner, i.e., insofar as the allowance of interest on self-assessment tax of Rs. 75 lacs is concerned. So however, there is some substance (in the facts of the present case) in the said argument, in as much as the interest stood also not allowed on the prepaid tax component of refund, and on the exigibility of which there is, admittedly, no doubt; the language of the Act being unambiguously clear in the matter. It is, therefore, that an exercise in ascertaining an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a matter of settled law, so that adoption of any view one way or the other; could not be subject to rectification, by treating it to be a mistake apparent from record. And which, therefore, being not valid in the eyes of law, stood correctly and validly rectified by the AO. I decide accordingly. 34. As regards the additional ground (which stands dealt with vide paras 19 to 25 of the order), my learned Brother has remitted the matter back to the file of the AO for a decision in accordance with law, even as both the sides have cited case law in their favour before us. In my view it is incumbent on the Tribunal, after having admitted the additional ground raised before it for the first time, on the ground of it being a legal issue (with all the relevant and pertinent facts on record and not disputed), to decide the same. The Revenue, through the learned Departmental Representative, has cited a recent decision by the Tribunal (Ahmedabad Bench 'A') in the case of Gujarat State Fertilizers Chemicals Ltd. vs. CIT (ITA Nos. 2348 and 2349/Ahd/2004, dt. 31st July, 2006), wherein it has, after an at length consideration of the extensive case law in the matter cited before it, includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee's appeal under reference, Your Honour had been requested to refer one question for the opinion of Third Member and Your Honour had been pleased to nominate Hon'ble Shri R.P. Garg, Vice President, Tribunal Ahmedabad Zone as the Third Member-as per your order dt. 31st July, 2008. 2. Now, it has come to notice that there was difference of opinion on another issue also, which relates to the assessee's claim of interest on delayed payment of interest and was raised by way of additional ground. 3. In view of above facts, the given below question is also referred to Your Honour (Hon'ble President of Tribunal) with a request that the same be referred to the Third Member for his opinion or pass such an order as Your Honour may deem fit: "whether on the facts and circumstances of the case and in law, the issue raised by the assessee by way of additional ground, should be decided on merits or be remanded to AO for consideration in accordance with law after allowing the assessee an opportunity of being heard." R.P. GARG, SENIOR VICE PRESIDENT (AS THIRD MEMBER): 25th June, 2009 On a difference of opinion between the two Members, the President, Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the amount of interest should not have been allowed as the issue was a debatable one and that the first order allowing interest was a mistake from record and was debatable one. While dismissing the appeal of the assessee, the CIT(A) observed that there is no provisions for grant of interest on excess payment by way of self-assessment. It has to be either from advance tax or TDS or a payment made pursuant to notice of demand. 6. The assessee came in second appeal before the Tribunal and there struck a difference of opinion between the two Members. The learned JM having gone through the provisions of s. 244A of the Act, the Board's circular and the decision of the Supreme Court in the case of Modi Industries Ltd. vs. CIT (1995) 128 CTR (SC) 361 : (1995) 216 ITR 759 (SC), opined that the assessee was entitled to interest under s. 244A of the Act on the entire refund irrespective of the nature of payment which had resulted in the refund and the Revenue was under obligation, as per the law as existed on the date to grant interest on such refund. In other words, he observed that the nature of payment which resulted in refund, i.e. whether the refund was out of excess payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustment on final assessment to date of refund. 8. Parties are heard and rival submissions considered. We shall first take up the first issue first. It is true that the assessee was not required to pay any tax based on the return filed by the assessee because even the TDS and advance tax paid was in excess of the tax liability. It was thus paid not a tax payable under s. 140A but was paid by the assessee without any liability under the Act. It is also true that the sum of Rs. 75,00,000 was paid through challan as self-assessment tax by the assessee on 29th Nov., [sic-June] 1996; and that it was adjusted as "self-assessment" tax in Revenue records. It was not a case of either AO or CIT(A) that it was not a self-assessment tax paid by the assessee or that the refund was out of that. The case of Revenue is that no interest on the refund of this amount out of self-assessment was allowable under s. 244A of the Act. Be that as it may, it was a payment under the Act and in our opinion, would be a case of refund which would fall in the categories of 'other case' as provided in sub-s. (1)(b) of s. 244A. 9. Sec. 244A under which the interest is to be granted reads as under: "(1) Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be a notice under s. 156 and the provisions of this Act shall apply accordingly. (4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years." 10. This section came w.e.f. 1st April, 1989 and is applicable to assessment years from 1989-90 onwards. Prior to this the granting of interest was governed by provisions of ss. 214, 244, and 244(1A) of the Act. 11. On a close reading of this provisions of s. 244A it is apparent that the interest is available to an assessee under cl. (a) only on that amount of refund which is out of the TCS under s. 206C or paid by the assessee by way of advance tax or treated as paid under s. 199 during the financial year preceding the assessment year. Apparently this clause would not cover self-assessment tax as it is neither a TCS under s. 206C nor paid by the assessee by way of advance tax nor treated as paid under s. 199. The interest under this cl. (a) is to be calculated for every month or part of the month from the 1st day of April of the assessment year to that date on which the refund is granted. Proviso, however, provides that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay the assessee interest on the refundable amount under s. 244(1A). For the purpose of this section, the amount of advance payment of tax and the amount of TDS 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." 16. Therefore as per the Explanation as well as the decision in Modi Industries Ltd. by the Supreme Court, the tax paid as self-assessment tax becomes a payment of tax pursuant to a notice of demand issued on adjustment against demand on assessment and accordingly the interest on the refund to an assessee out of self-assessment tax is to be granted under s. 244A of the Act. In the case of this assessee it was adjusted vide intimation issued under s. 143(1) of the Act issued on 23rd Sept., 1997 and therefore self-assessment tax became a tax paid pursuant to notice of demand notice on this date. 17. The aforesaid is a clear proposition of law which does admit of any debate and therefore granting of interest by first rectification order dt. 25th Sept., 1997 was not in accordance with law. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or treated as paid under s. 199, which is to run from 1st day of April of the assessment year; and cl. (b) grants interest in 'other cases' which is to run from the date of payment of tax or penalty paid in excess of tax demanded. In both the possibilities the refund must be out of any tax or penalty paid by or collected from the assessee to make him entitled under the new provisions of s. 244A of the Act. 20. Reliance placed by the assessee on the Supreme Court decision in the case of Sandvik Asia Ltd. v. CIT was found to be of no help, because it was a case prior to asst. yr. 1989-90 and it was even otherwise a case where the interest has been granted in a writ as compensation and not as interest on interest under the provisions of the IT Act. Certain decisions were considered in this case before the Supreme Court laying down a ratio that "the amount of refund" include refund of tax as well as interest and these were found to be discussed by the Court under the heading "Does the Act provide for payment of compensation for delayed payment of amounts due to ah assessee in a case where these amounts include interest?" as under: "24. In our view, the Act recognizes the principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h had to be repaid to assessee. 28. In our opinion, the appellant is entitled to interest under s. 244 and/or s. 244A of the Act in accordance with the terms and provisions of the said sections. The interest previously granted to it has been computed upto 27th March, 1981 and 31st March, 1986 (under different sections of the Act) and it's present claim is for compensation for periods of delay after these dates. 29. In the impugned order, the Bombay High Court has rejected the appellant's contention mainly on the ground that the word refund must mean an amount previously paid by an assessee and does not relate to an amount payable by the Revenue by way of interest on such sums. The High Court's conclusion is based mainly on the wording of the proviso to s. 240 of the Act. As already discussed by us in para supra the proviso can have no relevance whatsoever as it was not part of the Act during the relevant period. The said proviso was inserted w.e.f. 1st April, 1989. 30. The High Court in its judgment has referred to the provisions of s. 244(1A) and the decision of this Court in Modi Industries Ltd. extracted two paras from this Court's judgment holding that there can be no que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y by the Revenue in paying of interest, and this does fall within the meaning of refund as set out in s. 237 of the Act. The relevant provision is s. 240 of the Act which clearly lays down that what is relevant is whether any amount has become due to an assessee, and further the phrase any amount will also encompass interest. This view has been accepted by various High Courts such as the Delhi, Madras, Kerala High Court, etc." 21. The Supreme Court itself disapproved the Bombay High Court decision by observing in para 12 that the High Court was influenced by the amended provisions which came into effect from 1st April, 1989 as under: "12. We have given our anxious and thoughtful consideration on the elaborate submissions made by counsel appearing on either side. In our opinion, the High Court has failed to notice that in view of the express provisions of the Act an assessee is entitled to compensation by way of interest on the delay in the payment of amounts lawfully due to the appellant which were withheld wrongly and contrary to the law by the Department for an inordinate long period of upto 17 years. The High Court, in our opinion, has unnecessarily made the judgment a bulky ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest and not for rate of interest. Be that as it may, it also shows that grant of interest on interest is more by way of compensation under general principles and not under the Act. In any case it was under the pre-existing provisions of law upto asst. yr. 1988-89 contained in s. 244 whereas we are concerned in this case with provisions of s. 240 r/w s. 244A of the Act which came into effect from 1st April, 1989 i.e., asst. yr. 1989-90 arid thereafter. 25. As held by the Tribunal after considering various decisions held as under: "21. The term 'refund' has not been defined under the said Act. The dictionary meaning thereof, as appearing in the Advanced Law Lexicon is that 'to repay; to give back; to restore; reimburse... to make return or restitution of a sum received or taken; to hand back, repay, restore'. In New Lexicon Webster's Dictionary it is 'to payback (money spent): to reimburse (some one): to make repayment', whereas in terms of the Shorter Oxford English Dictionary, it means, 'to give, restore, to make return or restitution of (sum received or taken), to hand back, retake, restore, to reimburse'. Considering these dictionary meanings of the word 'refund', it can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, act as per the provisions of IT Act and if a benefit or a relief is not available to an assessee under the provisions of the Act it cannot be granted on the grounds of equity or the general provisions of law as can be granted by the High Court or Supreme Court in their writ jurisdiction. Even otherwise as held by Bombay High Court, Full Bench in CIT vs. Carona Sahu Co. Ltd. (1984) 38 CTR (Bom) 219 : (1984) 146 ITR 452 (Bom) that though interest is compensatory in character, yet there is no right to receive interest other than by a right created by a statute and therefore, the right to receive interest depends upon the construction of the statute. In India Carbon Ltd. (1997) 6 SCC 479, the Supreme Court also held that interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in that behalf. The newly added provisions of the Act in s. 244A apparently reveal that there is a liability to pay interest on delayed payment of refund amount but they do not provide for payment of any interest on interest, even though there is delay in payment of such interest to the assessee. Until the IT Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, already allowed on the refund due out of payment of self-assessment (under s. 140A of the Act) of Rs. 75 lakhs, be sustained or cancelled? 2. Whether on the facts and circumstances of the case and in law, the issue raised by the assessee by way of additional ground, should be decided on merits or be remanded to the AO for consideration in accordance with law, after allowing the assessee an opportunity of being heard." 2. The Hon'ble Third Member, Shri R.P. Garg, Senior Vice President has now expressed his opinion whereby he has agreed with the view taken by the learned JM in respect of question No. 1. Accordingly, the issue involved in question No. 1 is decided in favour of the assessee and against the Revenue (sic). As regards question No. 2, the learned Third Member Shri R.P. Garg, Senior Vice President has agreed with the view taken by the learned AM. The relevant observations made by the learned Third Member, Shri R.P. Garg, Senior Vice President are as under: "28 As stated above in the present case, there is no refund of granting interest, secondly, it is not a case of the refund of interest from out of the tax paid by or collected from the assessee nor has it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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