TMI Blog2011 (9) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... n favor of revenue. - 2486 of 2009 - - - Dated:- 13-9-2011 - MR.JUSTICE AKIL KURESHI, MS JUSTICE SONIA GOKANI, JJ. MRS MAUNA M BHATT for Appellant(s) MR VIJAY S RANJAN for Opponent(s) ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE AKIL KURESHI) 1.0 Revenue has filed this appeal challenging the judgment of the Income Tax Appellate Tribunal ('Tribunal' for short) dated 31st March, 2009. 2.0 In response to the notice issued, learned counsel Mr. Ranjan appeared on behalf of respondent assessee. 3.0 Counsel for both the sides made detailed submissions. With their consent such arguments were treated to be for final disposal of the Appeal. 4.0 The appeal arises in the following factual background:- 4.1 The respondent assessee had lodged its claim of interest under Section 244A of the Income Tax Act, 1961 ('the Act', for short) towards the tax paid which was later on found refundable but adjusted against other dues of the assessee. In short, the stand of the assessee was that under Section 244A of the Act, the asssessee was entitled to receive interest for the whole of the month of payment of tax as well as the month when the same was adjusted re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that where refund is out of tax other than advance tax or tax treated as paid under section 199 or tax collected at source, the interest is to be paid at the rates as prescribed from time to time, for every month or part of a month comprised in the period starting from the date of payment of such tax or penalty up to the date on which the refund is granted. It is also clarified by way of an Explanation that 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 is paid in excess of such demand. According to Sec.244A, as operative for and from assessment year 1989-90, the rate of interest to be granted on refunds as per the provisions of this Section for every month or part of month comprised in the period for which interest is to be granted. The Rule 119A of the I.T. Rules, 1962 makes it very clear, particularly clause (b) states that where the interest is to be calculated for every month or part of month comprised in a period, any fraction of a month shall be deemed to be a full month and the interest shall be calculated accordingly. In view of the above provisions, which are very clear, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid as well as the month when refund was either granted or adjusted. 14.0 Counsel submitted that word 'month' has not been defined under the said Act. The definition contained in General Clauses Act, therefore, should be adopted. According to such definition month shall mean a month according to the British calender. It was his contention therefore that the assessee would be entitled to interest for the whole of both the months i.e. the month when the tax was paid and the month when the refund was granted or adjustment was made. 15.0 Counsel drew our attention to the decision of Allahabad High Court in case of Commissioner of Income-Tax, Kanpur v. Laxmi Rattan Cotton Mills Co. Ltd. reported in [1974] 97 ITR 285 wherein in background of the provisions contained under section 271(1)(a) of the Act, the Division Bench of the High Court was of the opinion that the definition of word month contained in Section 3(35) of the General Clauses Act cannot be adopted for the purpose of said provisions contained in said Act. 16.0 Counsel, however, further pointed out that in later decisions of other High Courts this view has not been followed. Reference was made to the decision of Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 3(35) of the General Clauses Act. 20.0 Reliance was also placed on the decision of Bombay High Court in the case of Income Tax Commissioner-LTU vs. Asian Paints Ltd. rendered on 11th August, 2011 in Tax Appeal No.4994 of 2010 wherein the Court was primarily considering whether once the authorized agent of Central Government collected tax by debiting bank account of assessee, payment of tax to Central Government would be complete and fact that there was delay on part of authorized agent to credit that amount to the account of Central Government would be irrelevant for calculating interest under Section 244A of the Act. 21.0 Before dealing with the rival contentions it would be useful to take note of statutory provisions applicable. Since the adjustment of the tax previously paid occurred during the period of March, 1997 to November, 2000, we would be taking note of statutory provisions as applicable during the said period. 22.0 Relevant provisions of Section 244A(1)(a) of the Act at the relevant point of time read as under: 244A. (1) [Where refund of any amount becomes due to the assessee under this Act], he shall, subject to the provisions of this sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deemed to be the amount in respect of which the interest is to be calculated. 25.0 Section 3(35) of General Clauses Act reads as under, 3(35) month shall mean a month reckoned according to the British calender; 26.0 From the above statutory provisions, it can be seen that Section 244A provides for payment of interest where refund of any amount becomes due to the assessee under the said Act. In such a case the assessee is entitled to receive in addition to the refund amount, simple interest at the prescribed rate. Clause (b) of section (1) of Section 244A of the Act in particular provides that such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted. In the other words, interest at the prescribed rate is to be paid to the assessee on the refund of tax paid for every month or part of a month comprised in the period from the date of payment of the tax to the date on which refund is granted. 27.0 Rule 119(A) of the said Rules further clarifies that in calculating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Clause Act was examined in the background of the provisions contained in Section 271(1)(a) of the Act. 31.0 Word 'month' is described in Webster's Third New International Dictionary (unabridged) as a measure of time corresponding or nearly corresponding to the period of time moon's revolution or as one of the twelve portions into which the year is divided in the Gregorian calender as also a period of time about the length of a lunar month but not necessarily coinciding with a calender month. The same dictionary also explains term 'calender month' as one of the months as named in the 'calender' or the period from a day of one month to the corresponding day of the next month if such exists or if not to the last day of the next month. 32.0 In 'Judicial Officer's Law Lexicon' by Justice C.K.Thakker term calender month is explained as under: A period of time consisting of 30 days in April, June, September and November; of 31 days in the remainder of the months, except February, which consists of 28 days, except in leap-year, when the intercalary day is added, making 29 days. 33.0 In Judicial Dictionary by Aiyar's, the term 'calender month' is described as a leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case is accepted, in a case where the assessee pays tax on 31st January and is granted refund on 1st February of the same year, shall also be entitled to interest for two full months. This would be so because the assessee contends that for the purpose of sub-section (1) of Section 244A the term 'month' should be understood as British Calender month and since Rule 119(A) of the Rules provides for ignoring a fraction of month and granting interest for the full month instead, the assessee in the second example given above should receive interest for month of January as well as for the month of February. To our mind such interpretation would only lead to anomalous situation and should therefore be avoided. 39.0 As already noted earlier, various decisions cited before us adopting the definition of term month contained in section 3(35) of the Act were rendered in the background of penal provisions contained in Section 271(1)(a) of the Act. The said provision prescribes penalty for non-filing or late filing of returns and the penalty is to be calculated on every month of such default. Under this background various Courts were of the opinion that the term 'month' must be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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