TMI Blog2015 (7) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... the file of the AO for verification of the accounts and for re-computation. It is further observed that the ground raised by the revenue is that the assessee itself has added the said sum in its computation sheet. According to us this is not relevant as the assessee had added the said amount in the regular computation and not under the computation u/s 115JA of the Act - Decided in favour of revenue for statistical purposes. Addition being ‘provision for exchange fluctuation’, while computing book profit - CIT(A) holding that the addition can be made only of the items provided for under the Explanations (a) to (f) to sec.115J of the Act and that the exchange fluctuation is not provided under the Explanation, held that the same cannot be added back - Held that:- The assessee had added the said amount in its computation sheet under the regular computation and not in the computation u/s 115J of the Act. We find that the decision of the jurisdictional High Court in the assessee’s own case applies to this ground also. Therefore, for the reasons given above, this issue also is set aside to the file of the AO for verification as directed the jurisdictional High Court. - Decided in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act' for short] therefore the same should be added back. 3. Brief facts relating to this issue are that in the regular computation of income under the Act, the assessee had added the provision for bad and doubtful debts, while in the computation u/s 115J of the Act, the assessee claimed that the above amount represented provision made for diminution in the value of an asset. However, AO added the same to the book profits u/s 115J of the Act against which the assessee preferred an appeal before the CIT(A) stating that the same cannot be added back to the book profit, as there is no provision in the explanation requiring such addition. The assessee relied upon the judgment of the Hon ble Apex Court in the case of HCL Comnet Systems and Services Ltd. (305 ITR 409). It was further contended that without prejudice to the above contention, the amount of provision is reduced from the amount of advances in the balance sheet and accordingly, it amounts to actual write off. For this proposition, the assessee relied upon the judgment of the Hon ble Karnataka High Court in the case of CIT vs. Yokogawa India Ltd. (in ITA No1062 of 2008 dated 29/8/2011) reported in (2012) 204 Taxman 305. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under:- In the present case, the debt is an amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore it was held that Item (c) of the Explanation is not attracted to the facts of the case. Item (c) in s. 115JA and 115JB(1) are identical. In order to attract the Explanation the debt which is doubtful or bad should satisfy the requirement contemplated in Item (c) of the Explanation, It is the amount or amounts set aside as provisions made for meeting the liability other than the ascertained liabilities. In the instant case also the bad and doubtful debt for which a provision is made which is in the nature of diminution in the value of any asset would not fall within item (c) of Explanation (i). It is in that context the CIT(A) as well as the Tribunal has granted relief to the assessee, Realizing the fatality of the said argument, it is contended now that Item (i) cannot amount to satisfaction as provision for diminishing in the value of assets is substituted, in case of the assessee falls under Item (c). In meeting the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) to the assessee is in no way affected. In that view of the matter, we do not see any merit in this appeal. From the aforesaid judgment it is clear if the bad debt or doubtful debt is reduced from the loss and advances from the debtors on the assets side of the balance sheet, the Explanation to section 115JA or 115JB of the Act is not at all attracted. If it is not reduced, section 115JA of the Act is attracted. It is purely a question of fact. From the material on record it is not possible to make out whether the aforesaid bad and doubtful debts are reduced from the loss and advances of the debtors from the assets side of the balance sheet. Without ascertaining the said fact it is not possible to answer the substantial question of law one way or the other. Therefore, the proper thing to do is to set aside the impugned orders and remit the matter back to the First Appellate Authority with a direction to the Authority to look into the records and then record a finding one way or the other in the light of the aforesaid judgment. That would meet the ends of justice. Therefore, the substantial question of law is not answered. 5. Accordingly, we pass the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition can be made only of the items provided for under the Explanations (a) to (f) to sec.115J of the Act and that the exchange fluctuation is not provided under the Explanation, held that the same cannot be added back. Aggrieved by the relief given by the CIT(A), the revenue is in appeal before us. 6. The learned Departmental Representative supported the order of the AO while the learned counsel for the assessee supported the orders of the CIT(A) and also the decision of the Hon ble High Court in the assessee s own case for earlier assessment year. The learned counsel for the assessee advanced the same arguments as in the case of the provisions made for bad and doubtful debts and it is stated that the assessee had added the said amount in its computation sheet under the regular computation and not in the computation u/s 115J of the Act. We find that the decision of the jurisdictional High Court in the assessee s own case applies to this ground also. Therefore, for the reasons given above, this issue also is set aside to the file of the AO for verification as directed the jurisdictional High Court and the ground of appeal No.3 is treated as allowed for statistical purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose may take into consideration the working furnished by the appellant along with the grounds of appeal and a copy of which may be furnished by the appellant to the AO. 6.4 With regard to the contention of the appellant that interest is to be granted for the month of payment/adjustment of tax/granting of refund. I had in my order cited supra held that as per the provisions of Rule 119A, interest is to be granted for the month of payment/refund of tax. The AO is accordingly directed to compute the interest. This ground of appeal is accordingly allowed. 8. Aggrieved by the relief given by the CIT(A), the revenue is in appeal before us. It is the case of the learned Departmental Representative that the assessee had sought interest on refund u/s 244A and that the CIT(A) granted relief by placing reliance on the judgment of the Hon ble Supreme Court in the case of Sandvik Asia Ltd., reported in 280 ITR 643 and that this reliance is erroneous in view of the subsequent judgment of the Apex Court in the case of CIT vs. Gujarat Fluoro Chemicals reported in 358 ITR 291 (SC). The learned counsel for the assessee, on the other hand, submitted that the judgment of the Hon ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest on interest, but is only seeking of the adjustment of the tax refund first to the interest due and thereafter to the tax refund. He, therefore, had submitted that assessee s as well as CIT(A) s reliance on Sandvik Asia Ltd., (cited supra) was misplaced. We agree with the above contention of the assessee. Now, the learned counsel for the assessee had placed reliance upon the judgment of the Apex Court in the case of HEG Ltd. (cited supra). Before applying the said judgment to the case before us, the provision of sec.244A is reproduced hereunder for ready reference: 244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this 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 for every month or part of a month compris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was granted refund, namely, TDS of ₹ 45,73,523 and tax paid after original assessment of ₹ 1,71,00,320. The Department contends that the words any amount will not include the interest which accrued to the respondent for not refunding ₹ 45,73,528 for 57 months. We see no merit in this argument. The interest component will partake of the character of the amount due under s. 244A. It becomes an integral part of ₹ 45,73,528 which is not paid for 57 months after the said amount became due and payable. As can be seen from the facts narrated above, this is the case of short payment by the Department and it is in this way that the assessee claims interest under s. 244A of the IT Act. Therefore, on both the aforestated grounds, we are of the view that the assessee was entitled to interest for 57 months on ₹ 45,73,528. The principal amount of ₹ 45,73,528 has been paid on 31st Dec., 1997 but net of interest which, as stated above, partook the character of amount due under s. 244A. 10. For the aforestated reasons, the civil appeal arising out of SLP (C) No. 18045 of 2008 filed by the Department fails and is dismissed, with no order as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onth comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted: Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 115WE or sub-section (1) of section 143 or on regular assessment; (b) in any other case, 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. 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 section 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 deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi High Court in the case of Commissioner of Income Tax versus Goodyear India Limited, 2001 (249) ITR 527 (Delhi) had occasion to examine the earlier provisions of refund under Sections 240 and 244 of the Act and had observed as under:- Section 244 deals with interest on refund where no claim is needed. Sub-section (2), inter alia, provides that where a refund is due to the assessee, in pursuance of an order referred to in Section 240 and the Assessing Officer does not grant the refund within the stipulated time, the Central Government is required to pay simple interest at the stipulated rate. Section 240 deals with refund on appeal, etc. This provision clearly lays down that where as a result of any order passed in appeal or other proceedings under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessed without his having to make any claim in that behalf. The crucial expressions in Section 240 are any amount which becomes due to the assessee as a result of any order passed in any appeal or other proceedings under the Act and the amount becomes due to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a result of orders passed in appeal or other proceedings under the Act, this refund is to be given along with interest, which is to be calculated as per Section 244 of the Act. If that interest is paid along with the excess tax, no further payment is to be made. It is only when the excess amount of tax is refunded but the interest is not refunded along therewith, the retention of interest amount would become unjustified and interest on interest would also become payable. The reason is simple. It is the tax which was paid in excess by the assessee which became refundable. The assessee would be compensated by paying interest thereupon. It is only when the interest is not refunded along with excess tax that the withholding of the said interest becomes unjustified and it becomes an amount due to the assessee on which the assessee can claim further interest. Such a situation has not happened in the present case as the amount of interest is calculated and refunded along with the refundable tax amount. 12. Same view has been taken by Punjab and Haryana High Court in Roadmaster Industries of India Private Limited versus Commissioner of Income Tax and Another, (2010) 329 ITR 69 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ths. We see no merit in this argument. The interest component will partake of the character of the amount due under Section 244A. It becomes an integral part of ₹ 45,73,528 which is not paid for 57 months after the said amount became due and payable. As can be seen from the facts narrated above, this is the case of short payment by the Department and it is in this way that the assessee claims interest under Section 244A of the Income-Tax Act. Therefore, on both the aforestated grounds, we are of the view that the assessee was entitled to interest for 57 months on ₹ 45,73,528/-. The principal amount of ₹ 45,73,528 has been paid on December 31, 1997 but net of interest which, as stated above, partook of the character of amount due under Section 244A. 15. A reading of the aforesaid passage from the decision of the Supreme Court in HEG Limited (supra) indicates that it would be incorrect and improper to regard payment of interest when part payment is made as interest on interest. What has been elucidated and clarified by the Supreme Court is that when refund order is issued, the same should include the interest payable on the amount, which is refunded. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds the tax payable. The interpretation given by us follows the same principle, when Revenue defaults and makes part payment of the amount refundable. The aforesaid interpretation also ensures that the Assessing Officer/Revenue refund the entire amount, which is due and payable, including interest payable under Section 244A. It discourages part payment. There is no other provision under the Act under which an Assessing Officer/Revenue can be made liable to pay interest when part payment is made and the entire amount, which is refundable is not paid to the assessee. Otherwise the Assessing Officer/Revenue can refund the principal amount and not pay the interest component under Section 244A for an unlimited period with impunity and without any sanction, which would amount to granting premium to a non- compliance of law. In the present case, the interest component was withheld for the period ranging between 9 to 13 years. 17. In view of the aforesaid discussion, we answer the questions of law in favour of the appellant and against the Revenue. The appeals are disposed of. No costs. We find that the facts and circumstances before us are similar to the case before the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
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