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AJANTA MANUFACTURING LIMITED Versus DEPUTY COMMISSIONER OF INCOME TAX AND 1

2016 (8) TMI 165 - GUJARAT HIGH COURT

Interest under Section 244A on principal claim of refund of tax - Held that:- Sub-section (2) of section 244A provides that the assessee shall not be entitled to interest for the period of delay in issuing the proceedings leading to the refund that is attributable to the assessee. In other words, if the issue of the refund order is delayed for any period attributable to the assessee, then the assessee shall not be entitled to interest for such period. This is of course an exception to clauses (a .....

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d ordering exclusion of such periods for the purpose of granting interest to the assessee under section 244A(1) of the Act. In this case, there was no decision by the Commissioner or Chief Commissioner on this issue and so much so, we do not think the Assessing Officer made out the case of delay in refund for any period attributable to the assessee disentitling for interest. So much so, in our view, the officer has no escape from granting interest to the assessee in terms of section 244A(1)(a) o .....

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he Principal Commissioner and further, an order dated 16.3.2016 passed by the Assessing Officer giving effect to the order of the Commissioner. The petitioner has also challenged a demand notice dated 16.3.2016 under which the Assessing Officer has determined the demand of ₹ 2,15,73,710/- towards interest already paid to the petitioner. 3. These challenges arise in following factual background. The petitioner is a Company registered under the Companies Act,1956. For the Assessment Year 200 .....

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fore, not exigible to tax. The assessee, therefore, sought to reduce its total income for the said assessment year to ₹ 17.67 crores (rounded off). The Assessing Officer, however, did not accept such revised claim on the ground that without revising the return, the assessee could not make a claim contrary to the declaration in the return. 4. The assessee carried the matter in appeal. The Commissioner (Appeals) allowed the appeal by order dated 28.3.2013 and directed the Assessing Officer t .....

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244A of the Act on the principal claim of refund of tax. According to him, the assessee was not entitled to interest on the refund for a period from 1.4.2008 till 31.3.2013 i.e. from the beginning of the year till the date on which the Commissioner (Appeals) allowed the petitioner s appeal. Since the said interest was erroneously granted, he proposed to rectify his order in exercise of powers under Section 154 of the Act. For such purpose, he issued a notice dated 31.7.2015 to the petitioner in .....

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7,67,05,584/-. In the revised statement of income the receipt from Kutch Incentive Scheme in the form of Excise and VAT refunds were reduced from the total income treating the same as capital receipts. Again vide order u/s. 154 of the IT Act dated 22.3.2014, the total income was passed and the total income further revised to Rs.(-) 3,02,98,318/- due to set off of loss granted for earlier years. Finally an order 154 of the IT Act was passed on 12.6.2014 granting you refund of ₹ 4,36,72,050/ .....

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attributable to you. As per the provisions of section 244A(2) of the IT Act interest is not allowable for the period for which the delay is attributable to the assessee. Therefore interest u/s. 244A of IT Act granted to you for the period from 1.4.2007 to 5.5.2009, is required to be withdrawn as the delay for this period was attributable to you as discussed above. It is also noticed that in the revised return of income dated 7.11.2009 liability for MAT u/s.115-JB was computed at ₹ 9,68,25 .....

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tire period. However such interest was required to be withdrawn for the period from 1.4.2008 to 31.3.2013 (date of CIT(A) order). 4. An order u/s.154 of the IT Act is therefore proposed to be passed for rectifying the aforesaid mistake apparent from records which resulted in excess grant of interest u/s 244A of the IT Act on refunds issued. 5. You are requested to furnish your submission on rectification of aforesaid mistakes apparent from records u/s.154 of the I.T.Act, within 7 days of the rec .....

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r giving the effect to the order of the Appellate Commissioner did not suffer from any error apparent on the face of the record. 7. The Assessing Officer referred the issue to the Commissioner, who, by the impugned order dated 18.2.2016, held that the petitioner was not entitled to interest on the refund for the entire period from 1.4.2008 till the date of order giving effect to the appellate order. Likewise, for the Assessment Year 2007-08, he denied interest to the petitioner for the period fr .....

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entions; (i) The Commissioner had no authority to pass the said order advising Assessing Officer to withdraw the interest since the reference in a rectification proceedings would not be maintainable; (ii) In any case, this was not an issue which could have been examined in the rectification proceedings since no error apparent on the records was committed by the Assessing Officer while giving effect to the order of the Appellate Commissioner; (iii) On merits also, the revenue authorities have com .....

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essing Officer. He has given cogent reasons why the petitioner was not entitled to interest on delayed refund. The petitioner had raised the claim before the Assessing Officer contrary to the return filed. It was only that the Appellate Commissioner accepted such a claim and therefore, the entire period till the Assessing Officer passed the order giving effect to the appellate order, would, therefore, fall under sub-section (2) of Section 244A of the Act. 11. Facts are not in dispute. As noted, .....

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and directed that such receipts be deleted from the total income of the assessee. This resulted into assessee s claim for refund. 12. Section 244A of the Act pertains to interest of refund. Relevant portion of which reads as under : 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) w .....

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ate specified under sub-section(1) of Section 139; (ii) from the date of furnishing of return in income to the date on which the refund is granted, in a case not covered under sub-clause (i) ; (aa) where the refund is out of any tax paid under section 140A, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period, from the date of furnishing of return of income or payment of tax, which ever is later, to the date on which the re .....

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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. (1A) xxx xxx xxx (2) If the proceedings resulting in the refund are delayed for reasons attributable 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 paya .....

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interest would not be payable to the petitioner if the proceedings which resulted into refund are delayed by reasons attributable to the assessee, whether wholly or in part. In such a case, the period of delay so attributable to the assessee would be excluded from the period for which interest is payable. This sub-section also provides that where any question arises as to the period to be excluded, it shall be decided by the Principal Chief Commissioner or the Chief Commissioner or the Principa .....

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e referred to the authority mentioned therein, whose decision shall be final. The Assessing Officer was, therefore, correct in making the reference to the Commissioner. The Commissioner was competent to decide the question. 15. However, we do not find that such a question could have been examined in the rectification application in the first place. The issue was not one where it can be stated that there was an error apparent on the record which can be corrected in exercise of limited powers of r .....

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had raised a belated claim during the course of the assessment proceedings which resulted into delay in granting of refund and therefore, the assessee was not entitled to interest for the entire period from the first date of assessment year till the order giving effect to the appellate order was passed. We cannot uphold the view of the Commissioner. First and foremost requirement of sub-section (2) of Section 244A is that the proceedings resulting into refund should have been delayed for the rea .....

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not change this position. In essence, what the Commissioner (Appeals) did was to allow a claim which in law, in his opinion, was allowable by the Assessing Officer. In other words, by passing order in appeal, he merely recognized a legal position whereby, the assessee was entitled to claim certain benefits of reduced tax. Surely, the fact that the assessee had filed the appeal which ultimately came to be allowed by the Commissioner, cannot be a reason for delaying the proceedings which can be a .....

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the Kerala High Court in case of Commissioner of Income-Tax V/s. South Indian Bank Ltd., reported in (2012) 340 ITR (Ker) in which the assessee had raised a belated claim for deduction which was allowed by the Commissioner (Appeals). The Revenue, therefore, contended that for such delay, interest should be declined under Section 244A of the Act. In the said case also, the assessee had not made any claim for deduction of provision of bad debts in the original return. But before completion of the .....

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