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2015 (12) TMI 109 - ITAT MUMBAI

2015 (12) TMI 109 - ITAT MUMBAI - TMI - Eligibility for interest on refund - Held that:- Identical issue has been deliberated upon and decided by the Tribunal in other group cases, following the order of the Special Bench, that the Honí ble Gujarat High Court had upheld the order of the Special Bench in Punitaben K. Patel OSFDT (2008 (6) TMI 576 - GUJARAT HIGH COURT refund should be granted with interest. We are in full agreement with the order of the Special Bench of the Tribunal. We repeat tha .....

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d 17/06/2014, of CIT(A)-23, Mumbai. Grounds of appeal in all these appeals are identical and read as under: 1) In law and in facts and circumstances of the Appellant s case, the learned CIT(A) has grossly erred in the points of law and facts. 2) In law and in facts and circumstances of the Appellant s case, the learned CIT(A) has grossly erred in holding that appellant is not entitled to interest on refund of ₹ 4, 170/-. 3) In law and in facts and circumstances of the Appellant s case, the .....

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to mention here that while arguing the lead appeal i. e. ITA/5864/Mum/2014, it was stated by the representatives of both the sides that facts are identical in respect of each of the appeals. Therefore, for the sake of convenience, a consolidated order is being passed to adjudicate the above appeals. Brief Facts-(ITA No. 5864/Mum/2014): 2. The assessees are beneficiaries of K. Kacharadas Patel Specific Family Trust(KKPSFT), having 0. 5% interest in parent Trust . For AY. under appeal, return was .....

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Samadhan Scheme(KVSS). In that background, the income in the hands of the assessee-trust were deleted by the AO vide order, dated 29/09/2000, passed u/s. 155 of the Act. While computing the income of the assessee at Rs. NIL, the AO allowed the refund as under: Total taxes paid ₹ 6, 660/- Less: Refunded to assessee ₹ 4, 170/- Bal. refund due ₹ 2, 430/- The assessee vide application, dated 15/01/2001, sought refund of ₹ 4, 170/-, transferred in the case of the main-trust al .....

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S by the main-Trust, refund had arisen in case of beneficiary Trust, that the main Trust had not been paid interest on the disputed income, that the beneficiary Trust could not be allowed on consequential refund, that no claim for the said refund was made in the return of income, that the claim of refund was made only after the KVSS declaration was filed and accepted, that in view of the specific provisions of section 244A of the Act the assessee was not entitled to interest under that section. .....

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al Nos. 1514 to 1795of 2006(Punitaben K. Patel OSFDT and 284 other cases), Nos. 573-618 and1216-1233of 2007 (Manjulaben Pramodbhai & Ors)and Nos. 182, 204 of 2002, No. 27-30 of 2004(Janak Pramodbhai Patel & Ors). Dimissing the appeals filed by the Revenue, the Hon ble High Court observed as under : As regards grant of interest on refund, we find that Tribunal was justified in holding that refund should be granted with interest. We are in full agreement with the order of the Special Bench .....

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he assessee is entitled to get interest on the said refund under the provisions of section 244(1A) of the Act. It is the case of the assessee that on similar facts and circumstances in the cases of other beneficiaries there is decision of Special Bench, which is dated 7/7/2006, copy of which is filed at pages 33 to 63 of the paper book and it was decided by the Special Bench that the beneficiaries are entitled to get the interest. The Special Bench while deciding this issue in favour of the asse .....

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the different benches of the Tribunal on the subject and the plethora of materials placed before us along with assessment, appeal and revision orders. 28. the first issue that came up for consideration is whether the dispute regarding the issue involved in these appeals were continued to exist at that point, of time. We find that this question is quite academic. The Main Trusts have sought settlement of their substantive assessments under KVSS which have been accepted and acted upon by the depar .....

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r Vivad Samadhan Scheme, 1998. We have already seen the relevant question and answer to the question. The CBDT has stated in unequivocal terms that declarations are to be made in respect of substantive assessments. The Board has clarified that the protective demand is not subject to recovery unless it is finally upheld. The Board has further explained that once the declaration in a substantive case or year is accepted, the tax arrear in protective case / year would no longer be valid and will be .....

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al trusts would fade away and the demand raised in those protective assessment would no longer be valid. When the assessment is not subsisting and the demand is not valid, the amount paid by the assessee along with the return subject to protective assessment becomes refundable to the assessee. Therefore, we are of the considered opinion that the assessing officer has rightly accepted the prayers of the assessees and passed appropriate orders excluding the incomes which have already been consider .....

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to settle the pending litigations at different levels and collect the tax once for all and reach finalities in the matters connected thereto. Even though KVSS was a special scheme, the KVSS did not propose to tax any income twice. Whether under the regular provisions of the Income-tax Act or under the scheme of KVSS what is to be assessed and subjected to tax is the real income once for all. KVSS does not create any artificiality. A case of double taxation of the same income cannot be endorsed u .....

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Trusts. In abundant precaution protective assessments have been made in the hands of the respective beneficiary trusts. Suppose the proposition made out by the department was acceptable to the assessee and the substantive assessments made in the hands of the Main Trusts have been accepted by the assessee, what would be the Position of the corresponding protective assessments made in the hands of the beneficiary trusts? The protective assessments would have become invalid as a result of which th .....

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e of the whole process is not different from the substantive assessments having been accepted by the assessees as such or having been settled under an available scheme known as Kar Vivad Samadhan Scheme, 1995. In either case the protective assessments become invalid whereby no demand can be enforced against those protective assessments. The consequence is that if the assessees have paid any amount of tax along with their returns considered for protective assessments, such taxes have to be refund .....

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been assessed substantively in the hands of the Main Trusts and the demand subsequently settled under KVSS. It is quite unnecessary to repeat that the income has already been assessed in the hands of the Main Trusts. Therefore, nothing remains thereafter to be assessed in the hands of the beneficiary trusts, as far as the income of Main Trust is concerned. Moreover, a case of assessment can be contemplated in the pre5ent cases because the stand taken by the assessees is that the, income of the .....

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proof of such payment of tax proof of such payment of tax shall be accompanied alongwith the return of income. This is called self-assessment. When an assessee files a return with positive income and remits tax thereon u/s 140A, in fact, an assessment is being contemplated even though it is a self-assessment . Later on, when it is found that the income covered by the said return is not taxable the tax paid by the assessee in pursuance of that return has to be returned by the Revenue. Therefore, .....

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e refund was caused because of the conduct of the assessees. In fact, the assessee was questioning the proposition of the Revenue to assess the income in the hands of the Main Trusts. That is why the beneficiary trusts have filed their individual returns of income disclosing the benefits received from the main trusts also. But when KVSS was pronounced by the Government of India, it was for the assessees to decide whether to take benefit out of that or not. Therefore, it is only when KVSS was pro .....

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by the Revenue and said grant of interest has not been reversed. Reference in this regard was made to the case of M/s. Vruti Discretionary Family Trust, in respect of which AO disallowed the application of the assessee for grant of interest and Ld. CIT(A) restored the matter back to the file of AO to allow the interest as per law and AO vide his order dated 11/2/2010 has allowed such interest. Reference in this regard was made to the papers filed in the paper book as follows: (1. ) Rectificatio .....

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ranted to the assessee. In this manner ground No. 2 and 3 were argued by Ld. AR. 4. So far as it relates to Ground No. 4, it was submitted by AR that since Revenue has deprived the assessee for long time for granting the interest or refund without any just cause, assessee should also be held entitled for receiving interest on interest. 5. On the other hand, after narrating the facts, it was submitted by Ld. DR that AO has rightfully denied interest to the assessee and referring to the order pass .....

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not liable to the demand on the income of the main Trust. Since the assessee has disclosed the income as its own and had paid the tax on its own volition, and in order to protect interest of Revenue the AO only made the protective assessment. No enforceable demand was created on the assessee. According to well settled position of law, in protective assessment demand is only contingent demand and not legally enforceable and thus, in reality assessee did not pay tax in pursuance of any order of as .....

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ent. In this manner Ld. DR pleaded that interest has rightly been denied by Ld. CIT(A). 6. So far as it relates to ground No. 4, it was submitted by Ld. DR that according to decision of Hon ble Supreme Court in the case of CIT vs. Gujarat Flouro Chemicals, 358 ITR 291 (SC)w. e. f. 1/4/1989 the interest which can be granted to the assessee on refund as per section 244A would be the interest provided in that section and no other interest on such statutory interest can be provided. Thus, it was ple .....

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nvoked by the CIT to deny these assesses benefit of interest which was already granted by the AO. Special Bench has decided this issue in favour of the assessee and relevant observation of Special Bench have already been reproduced above. 7. 1. The Revenue challenged the aforementioned order of Special Bench before Hon ble Gujarat High Court and Gujarat High Court has not only upheld the decision of Special Bench on the issue regarding grant of interest but Hon ble High Court has also directed R .....

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h Court are pari-materia and this fact was not disputed by the Revenue. The AO has adopted a view which is contrary to the decision of Special Bench and the decision of the Hon ble Gujarat High Court and as he has again made the disallowance by rejecting the rectification application of the assessee. Thus, the conduct of the AO is against the decision rendered by Special Bench. Similarly, Ld. CIT(A) has disregarded the Special Bench by simply holding that the same would not be applicable. Accord .....

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