TMI Blog2014 (8) TMI 971X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to allow interest under section 244A(1)(b) by treating the tax paid on self-assessment as prepaid tax for the purpose - Decided in favour of assessee. - ITA No.153 of 2007 (O&M) - - - Dated:- 25-8-2014 - MR. AJAY KUMAR MITTAL AND MR. FATEH DEEP SINGH, JJ. For the Appellant : Ms. Urvashi Dhugga, Advocate For the Respondent : Ms. Manisha Gandhi, Sr. Advocate with Mr. Tarurag Gaur, Advocate JUDGEMENT Ajay Kumar Mittal J.- 1. This appeal has been preferred by the Revenue under section 260A of the Income-tax Act, 1961 (in short, the Act ), against the order dated August 31, 2006, annexure A 3 passed by the Income-tax Appellate Tribunal, Chandigarh Bench A (in short, the Tribunal ) in I. T. A. No. 236/Chandi/2005 for the assessment year 1989-90, claiming the following substantial questions of law : (1) Whether the hon'ble Income-tax Appellate Tribunal was right in directing to allow interest under section 244A(1)(b) by treating the tax paid on self-assessment as prepaid tax for the purpose ? (2) Whether, on the facts and in the circumstances of the case, the hon'ble Income-tax Appellate Tribunal is correct in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Co. [1995] 216 ITR 172 (Bom), Saraya Sugar Mills Ltd. v. ITO [1997] 226 ITR 475 (All), E. Philip Joseph v. ITO [1998] 234 ITR 846 (Ker), National Horticulture Board v. Union of India [2002] 253 ITR 12 (P H), CIT v. Ashok Leyland Ltd. [2002] 254 ITR 641 (Mad), CIT v. Shelly Products [2003] 261 ITR 367 (SC), Kerala State Civil Supplies Corporation Ltd. v. Joint CIT (Assessment) [2006] 282 ITR 647 (Ker) and CIT v. Cholamandalam Investment and Finance Co. Ltd. [2007] 294 ITR 438 (Mad). 5. On the other hand, learned counsel for the assessee on the strength of the judgments in National Horticulture Board's case (supra), CIT v. Sutlej Industries Ltd. (I. T. A. No. 1204 of 2005, decided on March 15, 2010 (Delhi)) reported in [2010] 325 ITR 331 (Delhi), CIT v. M. M. T. C. Ltd. [2000] 246 ITR 725 (Delhi) and Cholamandalam Investment and Finance Co. Ltd.'s case (supra), contended that the assessee was entitled for interest under section 244A(1)(b) of the Act on tax deducted at source, advance tax as well as self-assessment tax. The Tribunal had rightly held that the assessee was eligible for interest under section 244A(1)(b) of the Act on the refund. 6. The primary question th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereon shall be final. 8. The aforesaid provision came up for interpretation and consideration in National Horticulture Board's case (supra) wherein it was held as under (page 16 of 253 ITR) : A conjoint reading of the provisions quoted above shows that the assessee is entitled to receive interest on the amount of refund at the rates prescribed in clauses (a) and (b) of sub-section (1) of section 244A. The rationale underlying this provision is to compensate the assessee in lieu of the deprivation of his property right by virtue of unlawful collection of tax. If the proceedings resulting in the refund are delayed due to reasons attributable to the assessee, then the period of delay has to be excluded from the period for which the interest is payable. In other words, if the assessee is responsible for the delay in the finalisation of the proceedings on the basis of which he becomes entitled to refund, then the period of delay is to be excluded from the total period for which interest becomes payable. However, there is nothing in the plain language of sub-section (1) and (2) of section 244A from which it can be inferred that the asses see can be deprived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the regular assessment, because there is no proviso to section 244A(1)(b) as provided under section 244A(1)(a).' The Madras High Court further observed (page 443 of 294 ITR) : 'It is also trite law that wherever the assessee is entitled to refund, there is a statutory liability on the Revenue to pay the interest on such refund on general principles to pay the interest on sums wrongfully retained (reference Sandvik Asia Ltd).' The Supreme Court dismissed the Special Leave Petition (SLP) No. 16877 of 2008 filed by the Revenue against the decision in Chola mandalam Investment and Finance Co. Ltd. [2007] 294 ITR 438 (Mad), vide order dated December 3, 2009. The Supreme Court has also, recently, in the case of CIT v. H.E.G. Ltd. reported in [2010] 324 ITR 331 (SC), vide its order dated December 3, 2009, held that the expression 'refund of any amount' would include interest under section 244A (on refund of tax deducted at source) to which the assessee was lawfully entitled but had been wrongly withheld by the Department. 10. It was further held that the amount of tax due on the returned income is to be paid by way of tax deducted at sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case (supra). 11. It may be observed that in so far as the nature of payment of tax is concerned, the tax deducted at source, advance tax and also tax paid by way of self-assessment, after its adjustment in the tax liability of the assessee on regular assessment loses its original character and becomes tax paid in pursuance of the liability. Once that is so, it cannot be held that the assessee is only entitled to interest under section 244A(1)(b) on tax deducted at source or advance tax and not on self-assessment tax paid under section 140A of the Act which was found to be paid in excess. The assessee shall be entitled to interest under section 244A(1)(b) of the Act on the refund of self-assessment tax as well. 12. The Tribunal, while adjudicating the issue, had noticed as under : 6. We have considered the rival submissions carefully on this issue. Section 244A deals with the grant of interest on refund of any amount of tax which becomes due to the assessee in terms of the pro visions of Act. Clauses (a) and (b) of sub-section (1) of section 244A deal with two different situations. Clause (a) deals with refund of taxes which have been paid under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows that tax paid under section 140A is also taken as paid in pursuance of an assessment after the completion of assessment. 7. Moreover, the rationale of the provisions of section 244A has been a subject matter of review by the hon'ble jurisdictional High Court of Punjab and Haryana in the case of National Horticulture Board (supra). It has been opined that the rationale underlying the provision was to compensate the assessee for deprivation of his property right which was by virtue of an unlawful collection of tax. In fact, tested on such anvil, interest under section 244A on refund of tax paid as self-assessment tax cannot be considered as outside the purview of section 244A of the Act. The significance of the Explanation below clause (b) is merely to stipulate the period for which the interest has to be granted. For the purpose of clause (b), the interest is payable for the period starting from the date of the payment of tax ending up to the date on which such refund is granted. Therefore, in principle, we uphold the stand of the assessee that it was eligible for interest under section 244A(1)(b) on the refund accruing to it as a result of the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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