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2015 (9) TMI 608 - ITAT MUMBAI

2015 (9) TMI 608 - ITAT MUMBAI - TMI - Exigibility to interest u/s.244A - refund of tax to the assessee for the relevant year - Held that:- The Apex Court per its larger bench decisions in Modi Industries Ltd. (1995 (9) TMI 324 - SUPREME Court) and Gujarat Fluoro Chemicals (2013 (10) TMI 117 - SUPREME COURT) settled that there is no right to get interest of refund except as provided by the statute. The proposition of the interest being exigible on any amount paid, irrespective of either any obli .....

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f the delay, if any, in the grant of refund.

Where an amount is paid with reference to or in violation of the provision, it cannot be said to be paid there-under. Section 140A requires payment of tax on the basis of the return, where-under only the assessee is to prefer his claims under the Act. The same, thus, contemplates an assessment by the assessee of its tax liability under the Act, as crystallized per the return finalized, i.e., for filing under the Act, paying the shortfall th .....

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s, however, on being allowed credit for against the tax payable, assumes the character of tax, i.e., upon the processing of the return for the relevant year, filed subsequently by the assessee, which constitutes a notice of demand u/s.156, vide proviso thereto. Prior thereto, the A.O. cannot take cognizance thereof, much less refund it. This, then, is the earliest point of time at which such excess can be regarded as payment of tax, exigible to refund u/s. 143(1) r/w s. 237. Not so regarding wou .....

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of interest, the same must necessarily be worked out at gross of interest u/s.244A up to the date of refund. The shortfall, if any, of the refund amount with reference to the amount so computed, would, therefore, have to be apportioned between the principal (tax) and interest amounts, so that interest u/s.244A shall arise on the un-refunded tax, while no interest u/s.244A is exigible under the Act on the unpaid interest there-under. The balance tax refund of ₹ 20.98 lacs (i.e., ₹ 20 .....

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s appeal arising out of its regular assessment under the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year (A.Y.) 1994-95, i.e., as further modified by the order giving appeal effect dated 05.03.2010 determining the revised income at ₹ 39,42,36,998/- and the concomitant tax liability at ₹ 20,40,88,026/-. Issue 2. The sole issue arising in the instant appeal is the exigibility to interest u/s.244A of the Act, if any, arising on the refund of tax to the assessee for .....

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bate, so that where refund is out of self-assessment tax, interest u/s.244A(1)(b) would be exigible from the date of payment of tax to the date of grant of refund. Reliance stands placed before us on the decision in the case of Stockholding Corporation of India vs. CIT (in WP No. 823 of 2000 dated 17.11.2014/copy on record), wherein, it is claimed, the aspect of date of payment of tax , w.e.f. which date interest u/s.244A(1)(b) is to be allowed, stands clarified, in a case of refund of self-asse .....

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in excess of such demand. That is to say, that this indicates that self-assessment tax is not under contemplation of section 244A(1)(b) in-as-much as the same could not be the tax specified in the notice of demand u/s.156. Relying before us on the decision in the case of CIT vs. Engineers India Ltd. [2015] 55 taxmann.com 1 (Del), it is contended that section 244A conceives of interest on refund of tax only in two situations, i.e., where arising out of prepaid taxes, viz. Advance-tax, TDS, etc. .....

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ng the primary facts and delineation of the settled law in the matter. 4.1 Primary facts: Income as per Return .. 39,84,26,927 Tax & Surchage Payable .. 20,61,85,934 TDS 1,57,84,322 Advance-tax 19,00,00,000 .. 20,57,84,322 (*) Shortfall of Advance-tax & TDS paid.. 4,01,612 Self assessment tax paid 2,65,00,000 [(*) Wrongly written as Excess in the impugned order.] 4.2 The Law The settled law qua the allowance of interest by the Revenue on grant of refund: The Hon ble Apex Court per its la .....

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: 8. Further it is brought to our notice that the Legislature by the Act No. 4 of 1988 (w.e.f. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest. (emphasis, supplied) True, the apex court in Union of India vs. Tata Chemicals Ltd. [2014] 363 ITR 658 (SC), reli .....

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ns of law stated in Modi Industries Ltd. (supra) would equally apply to refund of tax under the Act. As such, to the extent inconsistent, we shall be guided by the larger bench decisions by the Apex Court, which shall prevail. The settled law qua interpretation of statutes The words of a Statute must prima facie be given their ordinary meaning. When the words are clear, plain and unambiguous, then the Courts are bound to give effect to that meaning irrespective of the consequences. Further, effo .....

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Interest on refunds. 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 precedi .....

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and 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 d .....

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f that specified in the notice of demand. The reason is not far to seek. Except other than by way of prepaid taxes, covered u/s. 244A(1)(a), tax, which is subsequently found to be paid in excess, and thus refundable, would stand to be paid in pursuance to a demand. It is inconceivable that the assessee shall pay tax in excess of that demanded of him, in which case in fact it could not be said to be payment of tax in the first place. Such a payment in fact makes the said Explanation a non-starter .....

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sequent to each modification in the amount of tax (or penalty) payable under the Act. Self assessment tax, i.e., the tax paid on a self assessment by the assessee, is of the same species as advance tax, required to be paid by the assessee tax-payer by estimating his current income, applying the current rate of tax thereon (refer ss. 207 to 210). Payment of self assessment tax is only to make good the shortfall in the payment of advance tax, which is pegged at hundred per cent of the tax due, i.e .....

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1) covers refund of tax, howsoever paid, i.e., under any provision of the Act. The distinction between the clauses (a) and (b) thereof is only with regard to the period from which interest is to be allowed, the terminus point in either case being the date of grand of refund. While the commencement period of interest is fixed at the first day of the April of the relevant assessment year for refund of prepaid tax, the residuary clause (b), governing refund of tax in any other case, is the date on .....

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) and Gujarat Fluoro Chemicals (supra), settling the law that there is no right to get interest on refund except as provided by the statute. In sum, we may at this stage recapitulate what stands discussed and found by us on the basis of a review of law as settled by the Hon ble Apex Court: Qua Interest a) Interest under the Act, though compensatory, is to be paid in terms of the statute, i.e., is in pursuance of a statutory right granted thereby; b) Interest u/s.244A is only on tax or penalty re .....

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ereon u/s.244A(1); Qua Section 244A e) Section 244A(1) covers various contingencies for the grant of refund of tax (or penalty), with clause (b) thereof being the residuary clause which covers all cases of refund of tax paid under any provision of the Act, other than by way of prepaid tax, i.e., paid toward tax liability during the relevant year. Cl. (b) stands caste separately only, as it transpires, for determining the period from which interest is to be granted, being April 1 of the assessmen .....

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emicals Ltd. (supra); g) These essential attributes, as gathered, are: • refund is of tax, paid either voluntarily or in pursuance to a demand, so long as it is under the provision of the Act; • the amount being refunded could be paid both anterior or subsequent to the date of demand as long as it stands paid in discharge of a statutory obligation; • the interest on refund of tax paid other than by way of prepaid tax, i.e., in any other case, is from the date of payment of tax, as .....

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ound as not payable, its refund shall attract concomitant interest, i.e., from the date of payment of tax to that of its refund. This would also answer the Revenue s argument of the interest u/s.244A arising only where refund is of prepaid tax or of that specified in the notice of the demand. Surely, self-assessment tax, being only paid prior thereto, would not stand to be specified in the notice of demand. We have, however, read the provision holistically to mean that as long as tax stands paid .....

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y tax is payable on the basis of any return required to be furnished under section 139 or section 142 or, as the case may be, section 148, after taking into account, the amount of tax, if any, paid under any provision of this Act, the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return and the return shall be accompanied by pro .....

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lacs could be said to be payment u/s.140A in the instant case. Under which provision of law, we wonder, is the excess payment made? The assessee explains the same to be to avoid payment of interest u/s.234B. But, then, the said explanation would be valid for and up to the payment of ₹ 4.02 lacs, i.e., the amount of shortfall in tax after deducting prepaid taxes. In fact, the actual sum may be little higher in-as-much as the payment of interest u/s.234B would require to be, in terms of sec .....

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ive sum (s.140A(1)). Further, as the break-up of the prepaid tax of ₹ 2057.84 lacs in the present case would show, the volume of the tax payable as well as the shortfall in advance tax (Rs.4.02 lacs), clearly suggests no interest u/s. 234B being leviable, which is only where the advance tax fall short of 90% of the assessed tax. The payment of the excess ₹ 260.98 lacs (i.e., ₹ 265 lacs - ₹ 4.02 lacs), adjusted downward for the amount of interest, if any, u/s.234B, cannot .....

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he same are, thus, provisions toward collection and recovery of tax, already charged. One could argue that even the same could be paid in excess, i.e., of the tax chargeable under the Act and, thus, strictly speaking, not tax under the Act. The argument, though attractive, is misplaced. Firstly, TDS and TCS provisions oblige the deductor (or collector) to deduct or collect the tax, so that unless the deductee, following the prescribed procedure in its respect, seeks waiver, the payer is bound to .....

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diately preceding year, and where found to be in excess of the amount payable in terms of the clear provision, claim the same to be not advance tax. In fact, section 4(2) of the Act, clearly brings the tax deducted at source or paid in advance within the purview of section 4(1). But for the said provision, the Central Act providing for the charge of income tax and, at a prescribed rate, being applicable from an assessment year, the tax charged could not be recovered during the relevant previous .....

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x. The same does not fall under any other provision as well. Being not chargeable u/s. 4(1), it cannot be regarded as payment of tax, which cannot be so merely for the reason that the assessee has chosen to pay it. The same simply represents the deposit, made on an ad hoc basis, without any basis in fact or in law. 4.7 Refund of tax The next question that arises is, that being so, how could the same be refunded in-as-much as the refund under the Act could only be of tax (or penalty), or even of .....

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x, that the same assumes the character of a tax paid, entitled to refund u/s.143(1) r/w s. 237. Even so, it would be tax paid on processing (or assessment), and not as self assessment tax. Reference in this regard may be made to the decision in the case of Modi Industries Ltd. (supra). It was explained therein that once the amount of advance tax is treated as payment of tax in respect of income of the relevant previous year and credit as such for the amount has been given in the assessment order .....

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tax on income for the relevant previous year. The amount of excess, paid, thus, de hors any provision of law, would, nevertheless, come to be regarded as toward tax on the adjustment afore-said. The Intimation u/s.143(1) determining the amount payable is deemed notice of demand u/s.156, vide proviso thereto. As explained earlier, prior to the processing/assessment, the A.O. is not empowered to take cognizance of this amount, much less refund it. In fact, even if therefore regarded as payment of .....

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77; 2.61 crores) only from the date of processing of the payment of the return, and not from the date of actual payment. Further, the date of payment is to be given the meaning specified under the Act, and cannot, in view thereof, be read de hors the same, i.e., giving its plain meaning. When the statute gives a particular meaning to a particular set of words, interpretation has to be made accordingly. The apex court in West Bengal State Warehousing Corporation vs. Indrapuri Studio Pvt. Ltd. (in .....

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of the material on record, we consider the argument as invalid. Doing so would be in complete disregard of the clear language of the said provision as well as the scheme of the Act. The assessee is obliged under law to make its claims only per its return of income. It is, therefore, not open for him to, while doing so, act inconsistent therewith by making an admitted excess payment, de hors any provision in law. The tax as assessed by the A.O. is only tax on regular assessment. In fact, any tax .....

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rise to a claim of interest, which has necessarily to be in terms of law. In the present case also, irrespective of the acceptance or otherwise of its claims made per the return, the assessee stands to save interest u/s.234B, i.e., the purported purpose of the excess payment (refer: Ground of Appeal No. 1©), admitting tacitly to the excess payment being deliberate, which is even otherwise apparent from it being in excess of the tax payable per the return of income. 4.8 Decision in Stockhold .....

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inconsistent to what has been stated by us. No doubt, the Hon ble Court relied on Tata Chemicals Ltd. (supra), wherein it stood held that whenever an amount is refunded to the assessee, the liability to interest by the Revenue arises as it is a kind of compensation for use and retention of the money collected by the Revenue (refer para 9). The same, however, with respect, cannot be regarded as the correct position in law in view of the decisions by the larger bench of the Apex Court in Modi Ind .....

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Revenue. Further, as clarified in the subsequent para 10, the payment of self assessment tax was only in discharge of an obligation under the Act, so that the Hon ble Court proceeded on the basis that the tax being paid was in terms of an obligation cast on the assessee u/s. 140A of the Act, as was the case in Tata Chemicals Ltd. (supra). Per the said decision, the Hon ble jurisdictional Court has decided the issue of grant of interest on refund arising out of self assessment tax, and from the d .....

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payment of tax made on self-assessment. Or that the amount paid in excess of that payable u/s.140A is yet to be regarded as payment of tax u/s.140A, and interest granted de hors the Explanation to section 240A(1)(b). Coming specifically to different paragraphs, we may state our understanding of the reading of the different paragraphs, as under: a) Paragraph 10 - The Hon ble Court was, thereby, addressing the case of payment of self assessment tax, non payment of which would visit the assessee wi .....

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ue counsel s contention of interest under Explanation to section 244A(1)(b) being allowed from the date of notice of demand. In fact, the said Explanation nowhere states so. Reference to demand notice u/s.156 therein is not for any date but for the tax specified there-under. The Hon ble Court rightly rejected the same, clarifying the starting point for the interest to be the date of payment of tax. We have, relying on the Modi Industries Ltd. (supra), opined that the earliest point where the exc .....

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t considered as so merely because it becomes refundable later - nothing more and nothing less. The argument by the Revenue, equally applicable for advance tax and TDS, only needs to be stated to be rejected in-as-much as the subsequent refund cannot alter the character of the amount paid earlier, which can only be as per the provisions of the Act, as for example, the apex court explaining the change of character of advance tax to tax on regular assessment on being adjusted against the income tax .....

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is only to make good the shortfall in the payment of tax. Clearly, in every case of refund, as pointed out by the Hon ble Court, the refund would only be of the tax found not payable, so that the said argument cannot hold and, as pointed out by us earlier, would apply equally to advance tax/TDS. This in fact, is also apparent from the delineation of the issue vide para 1 of the Judgment, which clarifies of the refund as being of self assessment tax u/s.140A of the Act. The Hon ble Court, thus, .....

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oodyear India Ltd. v. State of Haryana [1991] 188 ITR 402 (SC); Blue Star Ltd. vs. CIT [1996] 217 ITR 514 (Bom); Lachman Dass Bhatia Hingwala (P.) Ltd. vs. Asstt. CIT [2011] 330 ITR 243 (Del.) (FB)). The issue of interest of tax paid other than as per s. 140A was not before the Hon ble Court, for it to be regarded as laying down any legal proposition in its regard. Further, even if regarded as holding of interest u/s.244A as payable on an amount, howsoever paid, and from the date of it s payment .....

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refore have to be firstly regarded as tax under the Act. It needs to be appreciated and borne in mind that what was paid in Tata Chemicals Ltd. (supra) was tax deducted at source, i.e., was, without doubt, tax and, further, only at the instance of the Revenue. In the present case, on the other hand, the excess amount stands paid admittedly without any obligation cast either by law, which clearly requires the payment to be on the basis of the return, purely on its own by the assessee. The same is .....

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return by the assessee, mandatorily provided by law (section 143(1)(a)). What is binding is the ratio decendi of a decision, i.e., the pronouncement of law, and which we have already delineated hereinbefore referring also to, among others, paragraph 1 of the decision in the case of Stockholding Corporation of India (supra). Further, it is trite law that the decision is valid for what it actually decides. We may toward the said preposition refer to the following case law: CIT vs. Girish Kumar Kot .....

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upra) and Gujarat Fluoro Chemicals (supra) settled that there is no right to get interest of refund except as provided by the statute. The proposition of the interest being exigible on any amount paid, irrespective of either any obligation to pay or even its character under the Act, and from the date of its payment (i.e., except in the case of prepaid tax), cannot, in view thereof, be countenanced; b) Section 244A covers the allowance of interest on refund arising on payment of tax or penalty un .....

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s assigned a particular meaning shall have to be interpreted strictly (refer: Indrapuri Studio Pvt. Ltd. (supra)); d) The tax refund is, by definition, refund of tax paid under whatsoever provision in excess of the tax liability under the Act, as finally determined (Tata Chemicals Ltd. (supra)). The amount, however, ought to be paid by way of tax, in discharge of an obligation cast or required to be paid under any provision of law; e) Interest, though compensatory, may not necessarily follow for .....

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. The same is to be given a strict meaning. As such, it refers to the actual date of payment provided that what is paid is tax. As a natural corollary, it is the date on which the amount assumes the character of tax; f) Where an amount is paid with reference to or in violation of the provision, it cannot be said to be paid there-under. Section 140A requires payment of tax on the basis of the return, where-under only the assessee is to prefer his claims under the Act. The same, thus, contemplates .....

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nt deposited as self assessment tax would be to do violence to the clear language of the provision of the Act, as well as its scheme; g) The said case excess, however, on being allowed credit for against the tax payable, assumes the character of tax, i.e., upon the processing of the return for the relevant year, filed subsequently by the assessee, which constitutes a notice of demand u/s.156, vide proviso thereto. Prior thereto, the A.O. cannot take cognizance thereof, much less refund it. This, .....

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rn of income resulting in the refund. Even otherwise, the delay in the grant of refund, i.e., for the intervening period between the date of payment and date of processing of return, is to be necessarily ascribed to the assessee, disentitling him for the interest for the said period. As such, even regarding it as payment of tax from inception, i.e., for the sake of argument, would be of little moment; i) Our decision is consistent with the said law as explained by the apex court per its decision .....

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hat it would not be from the anterior in time to it being regarded as tax; j) We are fortified in our stand by the decision in Engineers India Ltd. (supra), rendered after considering other decisions in the matter. The Hon ble Court, firstly, observes with reference to Gujarat Fluoro Chemicals (supra) that there was no liability on the Revenue to pay interest on refund beyond the liability created by the statutory provisions, noting that in Tata Chemicals Ltd. (supra) the collection of tax was s .....

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