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TMI Blog2014 (4) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... e lead managers. The said order, by which the assessee was required to pay the demand stood decided in favour of the assessee by the Tribunal, vide order dated 23rd January 2009 and the entire demand was cancelled. As a result of this, the TDS amount deposited by the company amounting to Rs. 3,38,56,547, became refundable to the assessee. However, the Assessing Officer, while giving effect to the Tribunal's order assessed a computation form working out the refund but denied interest under section 244A. Aggrieved by the denial of interest under section 244A, the assessee preferred first appeal before the learned Commissioner (Appeals), who held that, first of all, the order under section 195 passed by the Assessing Officer is different from the assessment order under section 143(3), wherein the issue of taxability of receipt can be decided by the Assessing Officer and not by any order passed under section 195. He further held that the tax deducted at source can be viewed merely as a security for likelihood of tax demand in future and the same cannot be treated as "tax" in view of the CBDT circular no.7 of 2007 dated 23rd October 2007, which stated as under:- "Refund to the person m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the learned Commissioner (Appeals). 7. We have carefully considered the rival contentions, perused the findings of the learned Commissioner (Appeals) and the case laws relied upon by the learned counsel. The Revenue, before us, has heavily relied upon the CBDT Circular no.7 of 2007, which again refers to Circular no.769 and 790 issued by the CBDT. Now let us analyse the relevant provisions of law. Section 195 casts an obligation upon the resident deductor to deduct tax at the prevailing rate for any sum which is remitted to a non-resident, which is chargeable to tax under the provisions of the Act. If the person responsible for making such payments, considers that such a sum would not be treated as income chargeable to tax in case of recipient, he may make an application to the Assessing Officer under section 195. If, on such an application or suo-motu, the Assessing Officer determines the amount of TDS and the rate at which the tax is to be deducted in pursuance of order passed under section 195, then the assessee has to deduct the tax. However, if such order of the Assessing Officer under section 195 is quashed or the tax which was required to be deducted is cancelled, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the refund of excess deduction or erroneous deduction of tax at source under section 195. The relevant observations and the findings of the Hon'ble Supreme Court are as under:- "32. The question before us is, whether the resident/deductor is also entitled to interest on refund of excess deduction or erroneous deduction of tax at source under Section 195 of the Act. 33. We would begin our discussion by referring to circular No. 790, dated 20.04.2000, issued by the Board. Omitting what is not necessary, the material portion of the circular is extracted: "........ 6. Refund to the person making payment under Section 195 is being allowed as income does not accrue to the non-resident. The amount paid into the Government account in such cases, is no longer „tax‟. In view of this, no interest under section 244A is admissible on refunds to be granted in accordance with this Circular or on the refunds already granted in accordance with Circular No. 769." 34. What the deductor/ resident primarily contend is that, what has been deposited by him is a tax, may be for and on behalf of non-resident/ foreign company and when the beneficial circular provides for refund of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/ deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/foreign company. 38. Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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