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2016 (8) TMI 688 - ITAT MUMBAI

2016 (8) TMI 688 - ITAT MUMBAI - [2016] 52 ITR (Trib) 221 - Interest u/s 244A - 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)ís order - Held 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 t .....

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principle of fiscal legislation in any civilized society should be that the state should treat its citizens (i.e. tax payers in this case) with the same 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 .....

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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 refund of taxes, especially when no contrary provision has been provided. Under these circumstances and aforesaid discussion, we find that the jud .....

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ant Member Assessee by Shri C. Naresh (AR) Revenue by Shri G.M. Doss (DR) ORDER Per Ashwani Taneja (Accountant Member) This appeal has been filed by the assessee against order of Ld. Commissioner of Income Tax(Appeals)-24, Mumbai, {(in short CIT(A) }, dated 25.09.2014 passed against assessment order u/s 143(3) of the Act, dated 14.03.2015 for the A.Y.2002-03 on the following grounds: The learned CIT (A) erred in not directing the AO to grant interest u/s 244A on the interest due to the appellant .....

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funded is always the interest portion and the tax portion is presumed to have been refunded which is untenable since while charging interest from the assessees, the department first adjusts the amount paid towards interest so that the principal amount of tax payable remains outstanding and they are entitled to charge interest till the entire outstanding is paid. But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance tow .....

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rest 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 pa .....

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pal (tax) refund due and keeping the interest amount aside. In this regard, the assessee made detailed submissions before the Ld. CIT(A). The relevant part of the same is reproduced hereunder for the same of ready reference: 1.Short granting of interest v/s 244A The AO in the order had granted interest at ₹ 64,53,58,824/- as against the correct amount of ₹ 65,73,42,4401-. The difference in the interest granted to the appellant on account of the AO adjusting the part refunds granted a .....

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unt of interest or tax. Reliance is placed on the decision of Apex Court in the decision in CIT v HEG Ltd (324 ITR 331). Further, when part refund is granted, the same is to be first adjusted against the interest refund due and thereafter against the tax refund due as is done in the case of payment of tax made u/s 140A. Reliance is placed on the decision of Delhi High Court in the case of India Trade Promotion Organisation vs CIT (361 ITR 646). The AO over looked the provisions of the sec 244A w .....

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r with interest of ₹ 18,51,43,880/- the total refund due was ₹ 265,37,28,948/-. The refund made at that point of time was ₹ 41,68,22,890/-. it is our submission that the said refund should be adjusted first against the Interest due of ₹ 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 .....

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13 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 considered which provides that while issuing the refund no i .....

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ion 244A as well as section 245 of I.T. Act, 1961 especially when there is no specific method prescribed in section 244A and/or 245 of I.T. Act, 1961. Section 244A/245 of I.T. Act, 1961 does not prescribe any such method and reliance cannot be placed on section 140A of IT. Act, 1961 while interpreting section 244A/245 of IT, Act, 1961 and even otherwise, interest u/s 244A of I.T. Act, 1961 was quantified and granted vide order dated 25/06/2013 and therefore cannot be said to have become due and .....

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ch is directly on the issue of grant of interest u/s. 244A of I.T. Act, 1961 on interest and which was not considered and examined by 1TAT, Mumbai while delivering the decision dated 23/06/2014 in the case of assessee for AY 1988-89 and AY 2001-02. Therefore, reliance placed by the assessee on ITAT, Mumbai decision dated 23/06/2014 for AY 1988-89 'and AY 2001-02 is misplaced and erroneous in facts of the case, in law and in light of Supreme Court decision in 358 ITR 291 (SC). In nutshell, se .....

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vour 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 t .....

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djusted the tax payable. It was contended that similar procedure has not been prescribed u/s 244A. It was also contended that in view of judgment of Honb le Supreme Court in the case of CIT vs Gujarat Fluoro Chemicals (supra), Ld. CIT(A) has rightly declined to follow the order of the Tribunal for earlier years. 3.4. We have gone through the facts of this case and submissions made by both sides, provisions of law as well as judgments placed before us. It is noted that the only issue to be decide .....

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01-02 & 2005-06. Copies of the orders were placed before us and it was contended by the Ld. Counsel that the Tribunal had already decided this issue in favour of the Tribunal therefore, before proceeding further we find it appropriate to first reproduce and discuss the reasoning given by the Tribunal in earlier years. The relevant part of order dated 23.06.2014 is reproduced hereunder for the sake of ready reference: 4. Undisputedly for A.Y. 1988-89 the assessee is entitled to refund of S .....

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und due would work out to ₹ 3,52,28.442/- on which the assessee is entitled to interest u/s. 244A of the Act whereas the Assessing Officer calculated the balance refund clue at ₹ 2,03,99,541/-(tax component) and ₹ 1,58,28,901/- (interest component). Reason for such calculation was that according to the Assessing Officer no interest is payable on interest due in which event, even if there is substantial delay in interest payable, the assessee can be made to wait unendingly witho .....

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gh 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 .....

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t first and thereafter against tax component, in which event u/s. 244A assessee is entitled to interest on the tax component, learned Departmental Representative could not place any decision contrary to the decision of Hon'ble Delhi High Court cited by learned counsel for the assessee 6. We have carefully considered the rival submissions. As rightly pointed out by the assessee Hon'ble Delhi High Court rightly explained that the amount refunded by the Revenue has to be adjusted towards in .....

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only part amount is refunded by the department, then payment of interest on the balance amount due from the department to the assessee, on a particular date, does not amount to payment of interest on interest. Their lordships, taking support from the judgment of Hon ble Supreme Court in the case of CIT vs HEG Ltd, observed as under: .......14. Matter was taken by the Revenue before the Supreme Court in the case of HEG Limited and the SLP was granted and civil appeal was registered. The Supreme .....

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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 pai .....

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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 Limited (supra) indicates that it would be incorrect and improper to regard payment of interest when part payment is made as interest on interest. What has been elucidated and clarified by the Supreme Court is that when refund order is issued, the same should include the interest payable on the amount, which is refunded. If the re .....

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arch, 2013, then no further interest is payable. However, if only ₹ 1 lac is refunded by the Revenue on 31st March, 2013 and the interest accrued on ₹ 1 lac under Section 244A is not refunded, the Revenue would be liable to pay interest on the amount due and payable but not refunded. Interest will not be due and payable on the amount refunded but only on the amount which remains unpaid, i.e, the interest element, which should have been refunded but is not paid. In another situation w .....

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4A till payment is made.................... 3.6. The facts of the case before us are similar in the sense that here also only part amount was refunded in the first phase by the department and when the balance amount was paid by the department in the second phase, the assessee was entitled for interest on the balance amount of refund due. Thus, from the aforesaid observations of Hon ble Delhi High Court, we can say that it is not a case of payment of interest on interest. Thus, in view of these f .....

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er: 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 t .....

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he revenue is not expected to follow double standards while dealing with the tax payers. The fundamental principle of fiscal legislation in any civilized society should be that the state should treat its citizens (i.e. tax payers in this case) with the same respect, honesty and fairness as it expects from its citizens. It is further noted by us that Hon ble Delhi High Court has already decided this issue in clear words which has been followed by the Tribunal in assessee s own case in the earlier .....

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g the decisions of the Tribunal of earlier years in assessee s own case as well as judgment of Hon ble High Court in the case of India Trade Promotion Organisation (supra). 3.9. Before parting with, we are reminded of a recent judgment of Hon ble Supreme Court in the case of Union of India v. Tata Chemicals Ltd. 363 ITR 658 (SC) wherein Hon ble Supreme Court has discussed at length about moral and legal obligation of the department to refund the amount of tax collected from the tax payers which .....

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e deductor/assessee had paid taxes pursuant to a special order passed by the assessing officer/Income Tax Officer. In the appeal filed 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 .....

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nment 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 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 be .....

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monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex aequo et bono ought to be refunded, the right to interest follows, as a matter of course. 3.10. It is noted from the observations of the Hon ble S .....

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