TMI Blog2014 (5) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... acts necessary for assessment in terms of section 147 of the income Tax Act - The mere fact that the amount was received from income tax department does not obliterate the requirement and duty cast on the assessee to disclose all facts relevant to the assessment - the benefit of the proviso to section 147 is not available to the assessee in the case – there was no error or illegality in the orders for the issue of validity of reopening of assessment. Assessment of the interest received u/s 244A of the Act – Held that:-Section 244A(1) clearly reveals that as soon as any refund becomes due under any provisions of the Act, the assessee becomes entitled to receive the interest in respect of such refund calculated in the manner provided in clauses (a) and (b) of such provisions - the moment the refund is granted, as enforceable debt is created in favour of assessee in respect of interest due on such refund - income can be said to accrue on the date of refund itself - when interest is actually granted along with the refund, the requirement of sections 4 and 5 of the Act are fully satisfied and the same can be taxed in the year of receipt – Decided against Assessee. Netting of inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. 7.The learned Commissioner (Appeals) erred in holding that had the interest income of Rs.ll,77,49,053 offered by the appellant in the return, the difference between assessed tax and tax payable under section 115JB would have been less and consequently lesser amount of tax credit would have been available to the appellant for adjustment against the tax liability of subsequent years. The learned Commissioner (Appeals) ought to have appreciated that during the relevant assessment year, no tax credit for tax paid under section 115JB was allowed to carry forward to subsequent years. Interest on Income-tax refund 8. The learned Commissioner (Appeals) erred in confirming to addition of interest on Income-tax refund of Rs.11,77,49,053 to total income of the appellant under the normal provision. 9. The learned Commissioner (Appeals) ought to have appreciated that during the relevant tax year, interest paid by the appellant was more than interest income and therefore no interest income was accrued to the appellant. Income under the head Income from other sources 10. The learned Commissioner (Appeals) erred in confirming the action of the Assessing Officer in assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities below. 2.3 We have considered the rival submissions as well as relevant material on reocrd. There is no dispute that the assessee received a sum of Rs. 11,77,49,053/- towards interest u/s 244A of the Income Tax Act along with the refund pertaining to A.Y. 1994-95. In the return of income the assessee has neither offered this amount to tax nor disclosed this fact of receipt of the interest and the reasons for not offering to tax. The AO vide notice u/s 148 dated 22nd February 2008 has reopened the assessment after recording the following reasons:- The assessee received an amount of Rs. 11.78 crores as interest on a refund pertaining to the assessment year 1994-95, which was issued by the department vide rectification order of February, 2001. The interest income received by the assessee during 2000-01 being the relevant previous year to the assessment year 2001-02 was required to be offered for taxation in assessment year 2001-02. However, the same was not offered for taxation by the assessee in the assessment of assessment year 2001-02. The omission resulted in under assessment of income of Rs. 11.78 crores involving short levy of tax of Rs. 4. 61 crores includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lised and, therefore, is not assessable in this year. The Ld. AR of the assessee has pointed out that the AO has already given effect to the orders of Tribunal and has determined the interest u/s 244A at Rs. 8,01,46,478/- only. At the outset we note that this issue of taxability of the interest received u/s 244A of income tax has been considered and decided by the special bench of this Tribunal in the case of Avada Trading Co. (P) Ltd. Vs. ACIT (100 ITD 131) and held in para 8 as under:- 8. Let us now look at the relevant provisions of section 244A of the Act which for the benefit of this order are stated below : 244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of his section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely : (a)Where the refund is out of any tax paid under section 115WJ or collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in terms of the Tribunal order for the A.Y. 1994-95 the AO has already given effect to the said order and, therefore, no grievance is left in this respect. 4. Ground no. 9 is regarding netting of interest received u/s 244A by the amount of interest paid by the assessee. 4.1 We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. The assessee has claimed that the payment of interest in the year under consideration is more than the interest received by the assessee u/s 244A and, therefore, the interest received has to be netted against the interest payment by the assessee and no amount can be taxed in the year under consideration on account of interest receipt. It is pertinent to note that the interest paid under Income Tax Act falls under the category of income tax and, therefore, is not an allowable deduction. Whereas the interest received on refund of tax is an income assessable under the head income from other sources . An identicla issue has been dealt by the third member decision of this Tribunal in the case of DCIT Vs. Sandvik Asia Ltd. (133 ITD 126), wherein the Tribunal has condidered this aspect in para 11 to 13 as under:- 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This aspect of the matter was noticed by the Supreme Court at page 450 of the report. Thereafter the Supreme Court noticed that the argument before them on behalf of the assessee was that the real income of the assessee was only Rs. 27,034/-. This argument was rejected by the Supreme Court in the following words: - It was not disputed, as it could not be, that if the assessee had taken a loan from another bank and paid interest thereon his real income would not diminish to the extent thereof. The only question then is : does it make any difference that he took the loan from the same bank in which he had placed the Fixed deposit. There is no difference in the eye of the law. The interest that the assessee received from the bank was income in his hands. It could stand diminished only if there was a provision in law which permits such diminution. There is none, and, therefore, the amount paid by the assessee as interest on the loan that he took from the bank did not reduce his income by way of interest on the fixed deposit placed by him in the bank. The learned counsel for the assessee sought to point out a distinction between Dr. V.P. Gopinathan's case (supra) and the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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