TMI Blog2016 (8) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... respect, honesty and fairness as it expects from its citizens.It is further noted by us that assessee is not asking for payment for interest on interest. It is simply requesting for proper method of adjustment of refund and for following the same method which was followed by the department while making collection of taxes. Whatever money has been received by the department, it ought to be refunded ex aequo et bono. It is a Latin phrase which means ‘what is just and fair’ or ‘according to equity and good conscience’. Something to be decided ex aequo et bono is something that is to be decided by principles of what is fair and just. A decision-maker who is authorized to decide ex aequo et bono is not bound by legal rules but may take account of what is just and fair. Thus, if we decide the issue before us ex aequo et bono, then it would be decided by the principles of what is fair and just and not necessarily as per strict rule of law. Thus, since the statute itself has already prescribed a particular method of adjustment in explanation to section 140A(1), then justice, fairness, equity and good conscience demands that same method should be followed while making adjustment for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered in the above decision without appreciating that the said decision is not applicable to the facts of the appellant's case. The CIT (A) ought to have appreciated that the method followed by the appellant is in the same manner as followed by the department in computing interest since the refund granted is first adjusted against the interest first and then the balance, if any, towards tax amount. 2. During the course of hearing, arguments were made by Shri C. Naresh, Authorised Representatives (AR) on behalf of the Assessee and by Shri G.M. Doss, Departmental Representative (DR) on behalf of the Revenue. 3. The solitary ground taken up before us was with regard to granting lesser amount of interest u/s 244A by the AO while computing refund arising as a result of passing impugned order for giving effect to CIT(A) s order (i.e. appeal effect order) for ₹ 64,53,58,824/- as against the correct amount of ₹ 65,73,42,440/- as claimed by the assessee. The discrepancy pointed out by the Ld. Counsel in the computation made by the AO was that the AO ought to have adjusted the refund granted to the assessee first against interest refund due and thereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 18,51,43,880/- and the balance of ₹ 23,16,79,010/- should be adjusted against the tax refund due. Therefore the tax refund due would amount to ₹ 223,69,06,058/- on which the AO should have granted further interest. However the AO had granted further interest only on Ps. 205,17,62,178/- excluding the interest of ₹ 18,51,43,8801. The AO had neither refunded the said amount of ₹ 18,51,43,880/- nor granted interest on the said amount for the period from July 2009 to March 2010 when it was refunded. The appellant submits that there is no reason for the AO not granting interest for the period for which the interest was withheld. This issue has been decided in favour of the appellant by ITAT in ITA no. 571/Mum/2013 dated 23.06.2014. Copy of the said decision is enclosed in annexure 2. 3.1. Ld. CIT(A) considered the submissions of the assessee and also the orders passed by the Tribunal in assessee s own case wherein claim of the assessee was accepted, but he did not follow the orders passed by the Tribunal for the earlier year on the ground that judgment of Hon ble Supreme Court in the case of CIT vs Gujarat Fluoro Chemicals 358 ITR 291 was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23.06.2014 and also upon the order dated 22.07.2015 in ITA No.918/Mum/2014 for A.Y. 2005-06. It was further submitted by him that this issue stands squarely covered in favour of the assessee by the judgment of Hon ble Delhi High Court in the case of India Trade Promotion Organization vs CIT 361 ITR 646 (Del) which has been considered by the Tribunal while deciding this issue in favour of the assessee. It was also submitted that the assessee is not claiming interest on interest; and the only prayer of the assessee is to make adjustment of the refund issued earlier in the same manner as tax paid by the assessee to the department is treated in view of explanation to section 140A(1) of the Act, wherein it has been provided that the tax paid by the assessee shall first be adjusted against the interest payable and the balance if any shall be adjusted against tax payable, and the same procedure needs to be followed in respect of refund to the assessee. 3.3. Per Contra, Ld. DR fairly submitted that u/s 140A (1), the procedure prescribed is clear that amount paid by the assessee shall first we adjusted against interest payable and then balance amount shall be adjusted the tax payable. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l delay in interest payable, the assessee can be made to wait unendingly without payment of interest. Though, before the Assessing Officer as well learned CIT(A), the assessee's claim of interest u/s 244A is not properly focused but sum and substance of the assessee's case before us is that in the event of adjustment of refund against interest due to the assessee tax refund due shall work out to ₹ 3.62 crores on which the assessee would be entitled to get interest u/s. 244A of the Act. In this regard the assessee relied upon the order of Hon'ble Delhi High Court in the case of India Trade Promotion Organisation Vs. CIT (361 ITR 646) wherein the Court observed that under Explanation to section 140A(1) of the Act, when an assessee is duty bound to pay the outstanding tax, amount paid by the assessee shall first be adjusted against interest payable and the balance shall be adjusted against tax payable, the same procedure needs to be followed in respect of refund due to the assessee i.e., the amount shall first be adjusted towards interest payable and balance, if any, shall be adjusted towards lax payable (in the instant case tax refundable to the assessee). 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax paid by the assessee for which the assessee was granted refund, namely TDS of ₹ 45,73,528 and tax paid after original assessment of ₹ 1,71,00,320. The Department contends that the words any amount will not include the interest which accrued to the respondent for not refunding ₹ 45,73,528 for 57 months. We see no merit in this argument. The interest component will partake of the character of the amount due under Section 244A. It becomes an integral part of ₹ 45,73,528 which is not paid for 57 months after the said amount became due and payable. As can be seen from the facts narrated above, this is the case of short payment by the Department and it is in this way that the assessee claims interest under Section 244A of the Income-Tax Act. Therefore, on both the afore-stated grounds, we are of the view that the assessee was entitled to interest for 57 months on ₹ 45,73,528/-. The principal amount of ₹ 45,73,528 has been paid on December 31, 1997 but net of interest which, as stated above, partook of the character of amount due under Section 244A. 15. A reading of the aforesaid passage from the decision of the Supreme Court in HEG Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) had wrongly applied the judgment of Hon ble Supreme Court in the case of CITvs Gujarat Fluoro Chemicals, since it was not applicable on the facts of this case. 3.7. Further, it was also held by Hon ble High Court that the department ought to follow the same procedure and rules while collecting tax and while issued refunds. We have gone through the provisions of section 140A(1); explanation to the aforesaid section provides as under: 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. 3.8. Thus, from the perusal of the above, it is clear that where the amount of tax demanded is paid by the assessee then it shall first be adjusted towards interest payable and balance if any whatever tax payable. Now, if we go through section 244A, we find that no specific provision has been brought on the statute with respect to adjustment of refund issued earlier for computing the amount of interest payable by the revenue to the assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid. The amount paid by the resident/ deductor was retained by the Government till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, 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. 38. Providing for payment of interest in case of r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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