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TMI Blog2014 (2) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... -banking financial company, which is engaged in the business of providing loans and advances to industrial units, leasing and hiring transactions and also providing financial services. 4.2 The respondent-assessee for the assessment year under question filed its return of income on October 29, 2002, disclosing total income at Rs. 21.11 lakh (rounded off). On processing such return under section 143(1) of the Act, on January 10, 2003, the refund order was passed on January 10, 2003, for an amount of Rs. 32.84 lakh (rounded off), inclusive of interest under section 244A of the Act. 4.3 The assessee filed revised return on August 13, 2003, on the ground that the claim under section 36(1)(viia) of the Act in respect of bad debts was erroneously claimed and declared the income at the rate of Rs. 22.16 lakh (rounded off). The assessment case was taken under scrutiny and statutory notice was issued under section 143(2) of the Act, availing fresh opportunity of hearing to the assessee. 4.4 The Assessing Officer on finalising the assessment under section 143(3) of the Act issued demand notice as also charged interest under section 234D of the Act. 4.5 This was carried by the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date." 5.3 Explanation (2) which has been added with effect from June 01, 2003, is declaratory and clarificatory in nature which states that the provision of this section shall also apply to the assessment year commencing before June 01, 2003, if the proceeding in respect of such assessment year is completed after the said date. In other words, any assessment completed after the 1st day of June, 2003, regardless of the year of assessment, this provision shall be made applicable to such assessment year. 5.4 Decision of the Kerala High Court in the case of CIT v. Kerala Chemicals & Proteins Ltd. [2010] 323 ITR 584, considered the scope of section 234D of the Act in respect of its introduction by Finance Act, 2003 with effect from June 01, 2003 and has taken a view that demand or levy of interest has to be from 1st June, 2003 only. Kerala High Court has held that "this provision on interest is not introduced with reference to any assessment year which is obvious from the fact that it is not effective from the beginning of the financial year. On the other hand, this provision on int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 143(3) for the assessment year 1999-2000 on December 20, 2004. It held that the interest under section 234D could be calculated only from June 01, 2003 onwards and not from the date of issuance of refund which was in March, 2002. In the words of Karnataka High Court : "There is no indication in the language employed in the entire s.234D that the Parliament intended to make this levy of tax on excess refund retrospectively. On the contrary after inserting this provision in the Act, it is specifically stated that it comes into effect from 1st June, 2003. Though the amendment is by insertion, the Parliament has expressly stated that the amendment comes into effect from 1st June, 2003. The Parliament has made its intention clear and unambiguous. In other words, it is not retrospective. It comes into effect from only 1st June, 2003. The liability to pay interest on such a refund arises from the date of refund and not from the date of the assessment order. When the assessment order quantifies the tax payable and if at such a time, it is found that the assessee has been paid a refund, which he is not entitled to in law, he is liable to refund the said amount. Therefore, mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a past signification. The Legislature was obviously aware that refunds must have been made in respect of previous assessment years. Despite this, the amendment did not exclude such cases from the operation of the section. A grant of refund under section 143(1) is in the nature of a provisional refund and is subject to the final determination under section 143(3). This grant of refund is pending the conclusion of the final assessment under section 143(3) in respect of the year for which the refund is granted. The classification done in section 234D is on the basis of the date of the completion of assessment proceedings prior to 1/06/2003 on the one hand and post 1/06/2003 on the other. The classification is not on the basis of the date of grant of refund under section 143(1) of the Act. The classification on the basis of the completion of assessment proceedings is not a subject matter of challenge before us. Therefore, the date of grant of refund is immaterial to determine the applicability of section-234D of the Act. In the circumstances the submission of the respondent that section 234D of the Act only applies to refunds granted prior to 1/06/2003 is not acceptable. (22) I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut-off date of 1/06/2003. This submission ignores the fact that Explanation 2 which is declaratory in nature clarifies that the section would apply to an assessment year even before 1/06/2003 provided the proceedings in respect of such assessment years are not completed by the cut off date i.e. 1/06/2003. ** ** ** (26) A statute could be retrospective in operation being expressly stated or by necessary implication. The case of the revenue is that section 234D as introduced on 1st June, 2003 was retrospective in operation by necessary implication. However, as doubts were raised about its retrospectivity, the same was clarified by adding an explanation to section 234D by Finance Act, 2012. Under the Act what is brought to tax is not the income of the assessee in the assessment year but the income of the assessee in the previous year. The liability to tax arises on account of the Finance Act which fixes the rate at which the tax is to be paid. The law to be applied is as existing on the 1st day of April of the previous year. In support the Counsel for the respondent relied upon the decision of the Supreme Court in Karimthuravi Tea Estate Ltd. v. State of Kerala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2 to section 234D of the Act when is being held declaratory amendment, what would be relevant for the purpose of charging interest on the refund granted under section 143(1) of the Act is the date of completion of assessment. If the assessment is framed after June 01, 2003, the said provision shall have applicability. 5.8 The Bombay High Court has extensively dealt with the explanation 2 and has interpreted the provisions keeping in mind the principles of interpretation of statutes. We have respectfully chosen to follow the aforesaid decision of the Bombay High Court and, therefore, the order of the Tribunal in the instant case following the decision the case of Ekta Promoters (P.) Ltd. (supra) holding the provision of section 234D of the Act applicable only with effect from 2004-2005 and further holding that the interest under this section is not chargeable for earlier assessment years, even though the assessment has been framed after June 01, 2003, is not held to be a correct law and, accordingly, the Revenue's appeal deserves to be allowed. 6. In view of the discussion held hereinabove, the Tax Appeals are allowed. The order dated January 21, 2011 passed by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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