TMI Blog2015 (9) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... nder. 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 there-under, if any, along with the interest to date. How could it, even where not unambiguously worded, be otherwise, i.e., follow as it does the scheme of the Act. Any amount paid over and above the said shortfall cannot be regarded as tax, which, by definition, is that chargeable under the Act. [ss.2(43) r/w s. 4]. To regard any amount 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. 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, then, is the earliest point of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e covering refund of, besides penalty, any tax, i.e., other than by way of tax collected at source, advance tax or tax deducted at source, which are covered u/s.244A(1)(a). The matter is by now well settled by series of decisions and, therefore, admits of no debate, 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-assessment tax, to be the date of actual payment, i.e., after considering Explanation thereto. 3.2 The Revenue s case, on the other hand, made with reference to the Explanation to section 244A(1)(b), is of absence of any specific provision for the grant of interest on self-assessment tax. The Explanation clearly specifies the date of payment of tax or penalty in a case covered there-under, up to the date on and from which the tax (or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; it holding as under: 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), relied upon in Stockholding Corporation of India (supra), clarified that the residuary clause (section 244A(1)(b)) shall cover all payments of tax, so that whenever tax is found to have been paid in excess of the amount which the assessee was obliged or otherwise required to pay under any provision of the Act, he shall be entitled to interest, being compensatory, there-under. However, the decision in Gujarat Fluoro Chemicals (supra) was also rendered in the context of s. 244A, even as the propositions 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 larg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble 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 decided by the Chief Commissioner or Commissioner whose decision thereon shall be final. 4.4 Discussion Section 244A(1)(b), i.e., the provision allowing interest on refund, clearly provides for payment of interest on tax paid in excess of 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. Is the payment, one may ask, besides being made de hors any demand or obligation to pay, for the purpose of seeking its refund? The said Explanation, thus, refers to a payment, though subsequent to the raising of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded 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 refundable, and is to be allowed there-under, i.e., in its terms; c) Section 244A, where-under interest is to be allowed by the Revenue under the Act, is a complete provision, bearing both the grant of right to interest as well as the manner of its working; d) Refund of tax or penalty under the Act is contemplated only along with upto date interest. It is not open to the Revenue to appropriate the refund granted only against principal amount (of tax or penalty), i.e., where interest is exigible thereon 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 244A(1)(b). The Revenue s third argument, i.e., the tax being not paid in accordance with the section 140A, it does not therefore qualify to be self-assessment tax, however, cannot be faulted with. 4.6 Self Assessment Tax Section 140A, in it s relevant part, reads as under: Self-assessment. 140A. (1) Where any 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 proof of payment of such tax and interest. Explanation.-Where the amount paid by the assessee under this sub-section falls short of the aggregate of the tax and interest as aforesaid, the amount so paid shall first be adjusted towards the interest payable as aforesaid and the balance, if any, shall be adjusted towards the tax payable. [emphasis ours] The same, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough 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 deduct or, as the case may be, the payee collect tax at source. Similarly, the payment of advance tax is on the basis of an estimation of current income (section 209), which provision, as well as s. 210, stand noted in Engineers India Ltd.(supra), which could therefore be in excess, i.e., without attracting the disqualification of being advance tax. Without doubt, the Assessing Officer (A.O.) can u/s.210 call for the estimation of the assessee s income for the year, as also the tax for the immediately 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. Reference here is made to illustrate the manner whereby an amount paid changes its character on assessment, i.e., on being allowed credit against the 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 tax from the date of payment of sum, i.e., in excess of that payable on the basis of the return, the delay in its refund, i.e., up to the date of processing/assessment, is attributable to the assessee and, as such, no interest would stand to be allowed for the period commencing from the date of payment to the date of adjustment as income tax in respect of income for the relevant previous year. This, then, provides the second, alternate reason for allowing interest on the excess payment (of ₹ 2.61 crores) only from the date of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable per the return of income. 4.8 Decision in Stockholding Corporation of India (supra) We, next, consider the decision in Stockholding Corporation of India (supra), which was pleaded before us as concluding the matter in the assessee s favour. On the different aspects arising in the present case being pointed out to the ld. counsel; it being no doubted in principle that the interest u/s.244A is exigible on the refund of tax paid as self assessment tax, he would take us to paras 8, 9, 10 and 12. A careful reading of the same does not reveal anything 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 Industries Ltd. (supra) and Gujarat Fluoro Chemicals (supra), even as noted by the Hon ble High Court in Engineers India Ltd. (supra), be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest 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 excess amount, paid voluntarily, de hors any provision of law, could be regarded as payment of tax is on its adjustment against the tax payable by the assessee, i.e., after the filing of the return, on its processing, mandatory w.e.f. 01.04.1989. The Revenue cannot, rather, take cognisance of this sum prior thereto; c) Para 8 The Hon be Court rejects the contention that tax paid cannot be disregarded merely because it is ultimately found as not payable. How could, it wonders, payment of tax be not 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) and Gujarat Fluoro Chemicals (supra) and, thus, not bind us in-as-much as the latter would prevail. In fact, the apex court in Tata Chemicals Ltd. (supra), has clearly held the tax refund as being a refund when tax liability is less than the tax paid, and which part of it therefore stands reproduced at para 9 of the decision by the Hon ble Court. The amount deposited would therefore 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, therefore, not tax, and can neither be considered as self assessment tax. The excess amount would only stand to be regarded as tax on its adjustment against the tax liability for the year on the processing of the return for that year, i.e., as per the scheme of the Act, and as further explained in Modi Industries L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any excess payment and, further, has to be only of excess tax paid to the Revenue, for the period provided by the specific provision of law. The same can supply the termini points, which could either be actual or artificial. For prepaid taxes, it is, irrespective of the date of payment, the first day of the relevant assessment year. In all other cases, it is the date of payment of tax as provided for, i.e., the date of payment in excess of the amount thereof as specified in the notice of demand. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The interest being allowed in the present case, i.e., on the excess amount paid with reference to the return, is only tax and not of self assessment tax, i.e., paid on self assessment on the basis of the return, so that 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 subsequently found illegal (para 33). As such, there was no general rule that whenever a refund of income tax paid in excess is to be made, the Revenue must necessarily pay interest on the refund amount. It is the Revenue or the assessee, whoever is responsible for the excess payment, which must bear the interest burden or, as the case may be, loss of interest (para 34). The assessee having paid to in excess, as found per Intimation u/s. 143(1), was not entitled to interest t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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