TMI Blog2016 (2) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... nt error. Nevertheless a mistake capable of being rectified u/s. 154 is not limited to clerical or arithmetical mistakes only. However it does not include any mistake which may be discovered by a complicated process of investigation, argument or proof. A decision on a debatable point of law or a disputed question of fact is not a mistake apparent from the record. The ordinary meaning of the word "apparent" is that it should be something, which appears to be so ex facie that it does not admit scope for any argument or debate. It, therefore, follows that a decision on a debatable point of law or fact or failure to apply the law to a set of facts which remains to be investigated cannot be corrected by way of rectification. Section 244A does not mandate that interest cannot be allowed on self assessment tax paid u/s 140A. As discussed earlier it cannot be said that interest u/s.244A can be allowed only in cases where excess payments of tax is made consequent to a notice of demand u/s.156. The language of the Act is clear and there is no ambiguity in it. Hence the assessee is clearly entitled to claim interest u/s.244A on refund of excess self assessment tax. Thus in the instant cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s withdrawn. In his order u/s.154 the assessing officer held that interest u/s.244A(1)(a) is not payable on refund of excess self assessment tax whereas s.244A(1)(b) is not attracted in view of the explanation appended thereto. He relied on the explanation to Clause (b) which provides that the date of payment of tax or penalty u/s.244A(1)(b) means the date on and from which the amount of tax or penalty specified in the notice of demand issued u/s.156 is paid in excess of such demand. The assessing officer, therefore held that since any tax paid after issue of notice of demand does not include self-assessment tax, the interest is not payable on excess payment u/s. 140A. The assessee preferred an appeal against the order of the assessing officer before the CIT(A). The CIT(A) reversed the order of the assessing officer by an order dated 20th November 2002 relying upon a judgement of Delhi High Court in the case of CIT -Vs- MMTC Ltd. reported in 246 ITR 725 and held that the provisions of Section 154 could not be applied to the present case. The revenue unsuccessfully appealed before the Tribunal, which also relied upon CIT -Vs- MMTC (supra) and upheld the order of CIT(A). The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t u/s.140A. He relied on the CBDT Circular No. 549 dated 30 October 1989; (III) that the provisions of s.244A(1)(b) mandate that the revenue would pay interest on the amount refunded for the period commencing from the date when the tax was paid to the date when the refund is granted; (IV) that the explanation to Section 244A(1)(b) would have no application to the instant case because the self assessment tax u/s.140A is not paid consequent to any notice of demand issued u/s.156 of the Act and (V) both the Tribunal and the CIT(A) have rightly set aside the order of the assessing officer by holding that the issue was debatable and outside the scope of Section 154. He contended that there is no clear mandate in Section 244A by which the assessing officer can deny interest to the assessee on the excess amount paid u/s.140A of the Act. Thus according to him there was no mistake apparent from the record which could have been rectified in exercise of power u/s 154. Mr. Nizamuddin learned advocate appearing for the revenue contended as follows:- (I) that the payment of interest on refund is governed by section 244A of the Act; (II) that Clause (a) of subsection (1) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign company. The assessing officer passed a special order u/s. 195(2) directing the assessee to deduct 20% of the amount payable to the foreign company before remitting the same. The assessee, accordingly made deduction and credited the amount in favour of the revenue. The assessee preferred an appeal before the CIT(A) against the aforesaid order of the assessing officer. The CIT(A) concluded that the reimbursement of expenses was not part of the income open for deduction of tax at source u/s. 195 of the Act and directed refund of the tax. The assessee thereafter claimed refund of the said amount along with the interest u/s. 244A of the Act. The assessing officer refused to grant interest on the amount of refund. CIT(A) upheld the order of the assessing officer on the following grounds:- 1. that circular number 769 and 790 issued by CBDT specifically deny the benefit of interest u/s 244A on refund to the deductor/resident; and 2. that a conjoint reading of section 156 and the explanation appended to section 244A(1)(b) would indicate that the amount refunded to the deductor/resident cannot be equated to the refund of the amount(s) envisaged u/s. 244A(1)(b) of the Act, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited. Even the Department has understood the object behind insertion of Section 244-A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/ foreign company. The Apex Court further held that refund due and payable to the assessee is debt owed and payable by the revenue. Furthermore, it was held that merely because there is no express statutory provision for payment of interest on refund of excess amount collected by the Revenue, the Government cannot evade its obligation to refund the money with accrued interest for the period of undue retention. In this regard the Apex Court held as follows:- 38. Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable in view of the explanation which only admits of interest on refund of any amount paid in excess consequent to notice of demand issued u/s. 156 was answered as follows by the Apex Court:- since the said payment is not made pursuant to a notice issued u/s. 156 of the Act, Explanation to clause (b) has no application. The Bombay High Court in Stockholding Corporation of India -Vs- N.C. Tewari, CIT reported in (2015) 373 ITR 282 (Bom.) has elaborately dealt with the question of interest on refund of excess self assessment tax and held as follows:- 7 On a bare analysis of Section 244A(1) of the Act it is clear that amount paid by the petitioner as tax on self assessment would not stand covered by Section 244A(1)(a) of the Act. This is so as it is neither the payment of tax by way of advance tax or by way of tax deducted at source. Thus tax paid on self assessment would fall u/s. 244A(1)(b) of the Act, i.e. a residuary clause covering refunds of amount not falling u/s. 244A(1) of the Act. The revenue contends that in the absence of tax on self assessment finding mention in Section 244A(1)(a) of the Act, no interest is payable u/s. 244A(1) of the Act and Section 244A( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf assessment of ₹ 2.60 crores seeks a refund of ₹ 47 lacs. According to him it has to be refund of amounts paid as tax. We find that Section 244A(1) of the Act commences with the word when refund of any amount becomes due to the assessee under this Act . . Sub-clause (b) thereof commences with the words in any other case . . The words used in Section 244A(1) of the Act are clear inasmuch as it provides that refund of any amount that become due to any assessee under the Act will entitle the assessee to interest. In any case in the present facts, the amount on which the refund is being claimed was originally paid as tax on self-assessment u/s. 140A of the Act and evidence of the same in the form of challan was enclosed to the Return of Income. In fact when the Assessing Officer passed the Assessment Order on 31 December 1996, he accepted the entire amount paid as tax on self assessment as a payment of tax. One more feature to be noticed is that when any refund becomes due to an assessee out of tax paid, it becomes so only after holding that it is not the tax payable. Thus we find no substance in the first objection of the revenue that the amount paid as tax on self ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for introduction of Section 244A was clarified by the CBDT in its circular no.549 dated 31st October, 1989. Relevant paragraphs of the circular are as follows:- 11.2 Insertion of a new Section 244-A in lieu of Sections 214, 243 and 244, under the provisions of Section 214, interest was payable to the assessees on any excess advance tax paid by him in a financial year from the 1st day of April next following the said financial year to the date of regular assessment. In case the refund was not granted within three months from the date of the month in which the regular assessment was completed, Section 243 provided for further payment of interest. U/s. 244, interest was payable to the assessee for delay in payment of refund as a result of an order passed in appeal, etc., from the date following after the expiry of three months from the end of the month in which such order was passed to the date on which refund was granted. The rate of interest under all the three sections was 15% per annum. 11.3. These provisions, apart from being complicated left certain gaps for which interest was not paid by the Department to the assessee for the money remaining with the Government. To r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 214, 243 and 244 of the Act. It is clarified therein, that, since there was some lacunae in the earlier provisions with regard to non-payment of interest by the Revenue to the assessee for the money remaining with the Government, the said section is introduced for payment of interest by the Department for delay in grant of refunds. A general right (sic duty) exists in the State to refund any tax collected for its purpose, and a corresponding right exists to refund to individuals any sum paid by them as taxes which are found to have been wrongfully exacted or are believed to be, for any reason, inequitable. The statutory obligation to refund carried with it the right to interest also. This is true in the case of the assessee under the Act. (Emphasis supplied) The question whether interest u/s.244A is payable on excess payment of self assessment tax arose before the Delhi High Court in CIT III -Vs- Sutlej Industries Ltd reported in (2010) 325 ITR 331, wherein their lordships held as follows:- 11. On an analysis of Section 244A of the Act it is seen that where refund of any amount becomes due to the assessee, the assessee is entitled to simple interest thereon. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess of the assessed tax, the assessee is entitled to refund of such tax along with interest thereon. 13. Where an assessee out of abundant caution pays selfassessment whilst staking a claim in the return, which claim is accepted, resulting in refund of self-assessment tax, the assessee should be equally entitled to interest thereon. 14. Section 244A was inserted in the statute as a measure of rationalization to ensure that the assessee is duly compensated by the Government, by way of payment of interest for monies legitimately belonging to the assessee and wrongfully retained by the Government, without any gaps. 15. Therefore, in our view where the self-assessment tax paid by the assessee u/s. 140A is refunded, the assessee should be, on principle entitled to interest thereon since the selfassessment tax falls within the expression refund of any amount . The computation of interest on self-assessment tax has to be in terms of Section 244A(1)(b), i.e., from the date of payment of such amount up to the date on which refund is actually granted. We find support for this conclusion from the decision of the Madras High Court in Cholamandalam Investment and Finance Co. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h refunds u/s. 244A. In the absence of an express provison as contained in clause (a), it cannot be said that the interest is payable from the 1st day of April of the assessment year. At the same time, as the said payment of tax was not made in pursuance of a notice of demand issued u/s. 156, Explanation to clause (b) of section 244A has no application. In such cases, as the opening words of clause (b) specifically referred to as in any other case , the interest is payable from the dates of payment of the tax. As clause (b) expressly provides in any other case the payment of tax subsequent to the first day of April of the assessment year, either before or along with filing of the return would squarely fall under clause (b) and, therefore, when the said amount is ordered to be refunded the interest is to be calculated from the date of such payment of tax. Having regard to the scheme of section 244A and the circular issued by the Board which shows how the Department has understood the section coupled with the fact that the principle underlying the said section is that, any excess payment of tax paid by the assessee is not only to be refunded but it has to be refunded with interest, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds used are clear, plain and unambiguous, there is no scope for beneficent construction since it would lead to relegislation, which is impermissible. 33. The observations of the Supreme Court in Sandvik Asia Limited (supra) must be understood in the light of clarification given in the case of Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals (supra). There is no liability of the Revenue to pay tax on refund beyond the liability created by the statutory provisions. In the case of Union of India v. Tata Chemicals (supra), the collection of the tax (through deductor) was found to be illegal, thus giving rise to the liability to pay interest on the refunded amount. 34. We, thus, conclude that there cannot be a general rule that whenever a refund of income tax paid in excess is to be made, the Revenue must necessarily pay interest on the refunded amount. The letter and spirit of the law on the subject is that the party which committed the error in proper calculation (or delay in proper assessment) must bear the burden. If the excess amount is paid due to erroneous assessment by the Revenue, having exacted such burden wrongfully and inequitably on the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or interest on excess payment voluntarily made cannot be sustained. In the result, the appeal is allowed and the impugned order passed by ITAT directing the AO to pay interest to the assessee on the refunded amount is set aside. The Delhi High Court in Engineers India Ltd (supra) relied on the judgment of the apex court in CIT v. Gujarat Fluoro Chemicals, reported in (2014) 1 SCC 126. In Gujrat Fluro Chemicals (supra) the apex court held as follows:- 1. Doubting the correctness or otherwise of the decision of this Court in Sandvik Asia Limited vs. Commissioner of Income Tax Ors., (2006) 2 SCC 508, a bench of two learned Judges has referred the following question of law for our consideration and authoritative pronouncement by order dated 23.08.2012: The question which arises in this case is, whether interest is payable by the Revenue to the assessee if the aggregate of instalments of Advance Tax /TDS paid exceeds the assessed tax? .. . 5. In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in Sandvik case (supra) this Court had directed the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 140A provides for consequences in case of omission by an assessee to pay such assessed tax u/s. 140A which is as follows:- (3) If any assessee fails to pay the whole or any part of such tax or interest or both in accordance with the provisions of sub-section (1), he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax or interest or both remaining unpaid, and all the provisions of this Act shall apply accordingly. f) The basis of the views expressed in Engineers India Ltd.(supra) is the reasoning appearing from paragraph 34 of the judgement (quoted above) which, with respect, did not take into account the import of Section 140A fully. Nor did the Division Bench contemplate a situation like the one before us. In this case, the occasion for refund arose because of the relief granted by the appellate forum. g) Restricting the scope of section 244A(1)(b) by reading the explanation as imposing a limitation thereto, the Division Bench omitted to notice the view expressed by their lordships in Tata Chemicals (supra) that the explanation to clause (b) would have effect only where payment of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, we are of the opinion that Clause (b) of Sub-Section 1 of Section 244A is residual in nature and provides for interest on refund of excess self-assessment tax paid by the assessee. Furthermore the explanation to section 244A(1)(b) would have no application since the tax in question was not paid consequent to any notice of demand u/s. 156, rather it was paid u/s 140A. Hence according to mandate of section 244A(1)(b) interest is payable on refund of excess self assessment tax from the date of payment of such tax to the date when the refund is granted. We are also supported in our view by the following judgments:- In Commissioner of Income-Tax vs. Cholamandalam Investment and Finance Co. Ltd. reported in (2007) 294 ITR 438 (Mad) (SLP bearing no. 16877/2008 dismissed vide order dated 3/12/2009) the issue was whether the assessee was entitled to interest under section 244A as per clause (1)(b) of that section when the refund had arisen on account of payment of selfassessment tax. The Court answered the question in the affirmative and held as follows:- 6. Even though the short title to section 140A reads as self-assessment, the charging phrase employed in section 140A namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt refunded to the assessee, ' In CIT v M/s. Vam Organic Chemiclas Ltd. (Income Tax Appeal No. 49 of 2007 Allahabad High Court, decided on 26th February 2015) the Court relying on Vijaya Bank (supra), Stock Holding Corporation of India (supra), Cholamandalam Investment and Finance Company (supra) and Tata Chemicals (supra) held as follows:- 5. Section 244A(1)(a) of Act, 1961 is applicable in respect to the cases where tax has been paid or collected under certain Sections mentioned therein, i.e., Section 115 WJ, 206C and 199. However, Section 244A(1)(b) applies in all remaining cases which obviously would include within its ambit Section 140A also. . . . 7 With respect to the matters governed by Section 244A(1)(a), the proviso deny interest on refund, if the amount of refund is less than ten per cent of tax determined under Section (1) of Section 143 or on regular assessment. However, in respect to matters governed by Section 244A (1)(b), there is no such restrictions. Even if the amount refunded is less than ten per cent, it would attract interest since there is no proviso unlike Section 244A(1)(a) . . . 11. The Scheme of st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the scope of section 154 does not extend to a debatable issue and hence the assessing officer in exercise of power u/s 154 could not have withdrawn the interest u/s 244A(1)(b) on the refund of excess self assessment tax. Mr Khaitan learned Senior Advocate appearing for the assessee contended that section 244A does not mandate that interest is not to be allowed on refund of excess self assessment tax and thus there was no mistake apparent from the record which could have been corrected u/s 154 of the Act. Sub -Section (1) of Section 154 of the Act reads as follows:- 154. Rectification of mistake.- (1) With a view to rectifying any mistake apparent from the record an income tax authority referred to in Section 116 may,- (a) amend any order passed by it under the provisions of this Act; (b) amend any intimation or deemed intimation under sub-section (1) of Section 143. (c) amend any intimation under sub-section (1) of Section 200-A. (1A) (2) (3) (4) (5) (6) (7) (8) U/s. 154 of the Act only a mistake apparent from the record is rectifiable. Thus the precondition to invoke section 154 is the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at by rectification it intended only to correct any mistake and amend the same accordingly. It is a settled proposition of law that rectification is a process by which a mistake is set at right. It thus means correcting an error which was apparent from record and not deciding the matter over and again on merits and that the rectified order does not supersede the original order but continues with the incorporated changes. Moreover, we have come across two judgments of the 'Hon'ble Apex Court in 'S. Nagaraj v. State of Karnataka' [(1993) Supp. 4 SCC 595] and 'Ammonia Supplies Corporation Pvt. Ltd. v. Modern Plastic Containers Pvt. Ltd.' [AIR 1998 SC 3153], by which it was held in the former judgment that rectification of an order stems from fundamental principle that justice is above all. It is exercised to remove the error and not for disturbing finality. In the latter judgment, it was held that rectification connotes something what ought to have been done but by error is not done and what ought not to have been done was done requiring rectification. Rectification, in other words, is the failure to comply with the directions under the Act. Therefore, it ..... 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