TMI Blog2017 (8) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... ALCUTTA HIGH COURT ], they should have preferred a special leave petition before the hon'ble Supreme Court. We feel that the Revenue should not be aggrieved by preferring an appeal before us against the order of the learned Commissioner of Income-tax (Appeals) dated September 30, 2008. Hence the Revenue's appeal deserve to be dismissed on that count also. - I. T. A. No. 50/Kol/2009 - - - Dated:- 2-6-2017 - N. V. Vasudevan (Judicial Member) And M. Balaganesh (Accountant Member) For the Department : Rajat Subhra Biswas, Commissioner of Income-Tax-Departmental Representative For the Assessee : S. K. Tulsiyan, Advocate ORDER M. Balaganesh (Accountant Member) 1. This appeal preferred by the Revenue is against the order passed by the learned Commissioner of Income-tax (Appeals) (in short the learned CIT (Appeals) ) vide Appeal No. 152/CIT(A)-I/Cir-3/07-08 dated September 30, 2008 for the assessment year 2002-03 against the order of assessment determining refund under section 251/143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) dated July 10, 2006. 2. The first issue to be decided in this appeal is as to whether the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after due consideration of interest under section 244A of the Act. This order was passed in pursuance of the order of the learned Commissioner of Income-tax (Appeals) in Appeal No. 80/CIT(A)-1/Cir-3/07-08 dated January 22, 2008. 3.3.1 Later this order dated April 22, 2008 was sought to be rectified by the learned Assessing Officer vide his order passed under section 154/154/154/251/143(3) of the Act dated June 30, 2008 wherein the amount refundable (due to the assessee) was determined at ₹ 7,14,02,332 by calculating interest under section 244A of the Act only at ₹ 10,18,29,380 as against the interest under section 244A of the Act earlier granted at ₹ 10,46,45,307. The reason for this reduction as adduced by the learned Assessing Officer in his order dated June 30, 2008, among others, was that the refund of excess tax amount as well as the interest amount under section 244A has become due on giving effect to the order of Commissioner of Income-tax (Appeals) and the same are to be paid together, the question of any delay in payment of interest amount does not arise. This order is enclosed in pages 26 to 30 of the paper book filed by the learned authorised represe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the hon'ble Calcutta High Court. The hon'ble Calcutta High Court disposed of the appeal in G. A. No. 222 of 2014 dated January 16, 2015 in CIT v. Peerless General Finance and Investment Co. Ltd. (enclosed in pages 38 to 45 of the paper book filed by the learned authorised representative) held as under : We are, as such, of the opinion that the learned Tribunal was justified in reversing the order passed in exercise of section 154 by the Assessing Officer. In that view of the matter the first question is answered in the affirmative. The second question need not be answered for the purpose of disposal of the appeal. Thus, the appeal is disposed of. 3.4. Hence the entire series of proceedings could be summarised in the following sequence of events : 18-3-2005 Order of the Assessing Officer under section 143(3) 10-5-2006 Order of the Commissioner of Income-tax (Appeals) in Appeal No. 109/CIT(A)-III/AC.Cir-3/04-05 10-7-2006 Order of the Assessing Officer under section 251/143(3) giving effect to the Commissioner of Income-tax (Appeals) order dated May 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before us against the order of the learned Commissioner of Income-tax (Appeals) in Appeal No. 152/CIT(A)- I/Cir-3/07-08 dated September 30, 2008 wherein the learned Commissioner of Income-tax (Appeals) had directed the learned Assessing Officer to grant interest on unpaid interest by the Department treating the same as amount due to the assessee and thereby the assessee is entitled for interest under section 244A of the Act on the same. The Revenue has raised the following grounds before us : 1. That on the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) erred in allowing the claim of the assessee in respect of interest on interest. 2. That on the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) failed to consider the remand report inasmuch as distinction between the old provisions of sections 214, 243 and 244 and the new provision of section 244A of the Act is concerned. 3. That on the facts and in the circumstances of the case learned Commissioner of Income-tax (Appeals) failed to consider the fact that the decisions on the basis of which the claim of interest on interest was g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the year of assessment to the date of regular assessment. It would, thus, appear that the Legislature itself has considered it fair and reasonable to award interest on the amount paid in excess, which has been retained by the Government. We do not see any reason why the same principle should not be extended to the payment of interest which has been wrongfully withheld by the Assessing Officer or the Government. It was the duty of the Assessing Officer to award interest on the excess amount of tax paid by the petitioner while giving effect to the appellate order and granting refund of the excess amount. If the excess tax paid cannot be retained without payment of interest, so also the interest which is payable thereon cannot be retained without payment of interest. Once the interest amount becomes due, it takes the same colour as the excess amount of tax, which is refundable on regular assessment. Therefore, in our opinion, though there is no specific provision for payment of interest on the interest amount for which no order is passed at the time of passing the order of refund of excess amount and which has been wrongfully retained, interest would be payable at the same rate at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench opined as below : '5. Since, there was an inordinate delay on the part of the Revenue in refunding the amount due to the assessee this court had thought it fit that the assessee should be properly and adequately compensated and therefore in paragraph 51 of the judgment, the court while compensating the assessee had directed the Revenue to pay a compensation by way of interest for two periods, namely ; for the assessment years 1977-78, 1978-79, 1981-82, 1982-83 in a sum of ₹ 40,84,906 and interest at nine per cent. from March 31, 1986 to March 27, 1998 and in default, to pay the penal interest at 15 per cent. per annum for the aforesaid period. 6. 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 Asia Ltd.'s case [2006] 280 ITR 643 (SC), this court had directed the Revenue to pay interest on the statutory interest in case of delay in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to interest as a matter of course . Thus the assessee, holds the substantive right to interest under section 244A on a refund that is due to him/her, and that such a refund, encompasses an amount that would be inclusive of interest accrued due to the delay in awarding such refund. 5.7. The learned authorised representative also placed reliance on the decision of the hon'ble Delhi High Court in the case of India Trade Promotion Organisation v. CIT reported in [2014] 361 ITR 646 (Delhi) and stated that this decision best elucidates the law on point, wherein by relying on H. E. G. Ltd. [2010] 324 ITR 331 (SC), the Division Bench of the Delhi High Court, opined as follows (page 651) : The question really is in case the Revenue does not make payment of interest element, which had accrued and had become payable on the date when the tax amount is refunded, whether they would be liable to pay interest under section 244A on the said amount. One can casually or loosely call it as interest on interest but in reality payment of interest on the said amount occurs because of non-payment of the total amount refundable, which is due and payable to the assessee, inter alia, consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to payment of interest on interest. An example will clarify the situation and help us to understand what is due and payable under section 244A of the Act. Suppose the Revenue is liable to refund ₹ 1 lakh to an assessee with effect from April 1, 2010, the said amount is refunded along with interest due and payable under section 244A on March 31, 2013, then no further interest is payable. However, if only ₹ 1 lakh is refunded by the Revenue on March 31, 2013 and the interest accrued on ₹ 1 lakh 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 where part payment is made, section 244A would be still applicable in the same manner. For example, if ₹ 60,000 was paid on March 31, 2013, Revenue would be liable to pay interest on ₹ 1 lakh from April 1, 2010 till 31st March, 2013 and thereafter on ₹ 40,000. Further, interest payable on ₹ 60,000, which stands paid, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of the hon'ble Delhi High Court in the case of India Trade Promotion Organisation [2014] 361 ITR 646 (Delhi), wherein it was inter alia held that in a situation where 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 the hon'ble Supreme Court in the case of CIT v. H.E.G. Ltd. reported in [2010] 324 ITR 331 (SC) ; 189 Taxman 335 (SC), observed as under (page 655 : 'Matter was taken by the Revenue before the Supreme Court in the case of H. E. G. Ltd. reported in [2010] 324 ITR 331 (SC) and the special leave petition was granted and civil appeal was registered. The Supreme Court thereupon answered the question against the Revenue in the following words (page 333) : Therefore, this is not a case where the assessee is claiming compound interest or interest on interest as is sought to be made out in the civil appeals filed by the Department. The next question which we are required to answer is-what is the meaning of the words 'refund of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A 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 where part payment is made, section 244A would be still applicable in the same manner. For example, if ₹ 60,000 was paid on March 31, 2013, the Revenue would be liable to pay interest on ₹ 1 lakh from April 1, 2010 till March 31, 2013 and thereafter on ₹ 40,000. Further, interest payable on ₹ 60,000, which stands paid, will be quantified on March 31, 2013 and on this amount, i.e., interest amount quantified, the Revenue would be liable to pay interest under section 244A 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 the hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or following the same method which was followed by the Department while making collection of taxes. Under these circumstances, we find that judgment of the hon'ble Supreme Court in the case of Gujarat Fluoro Chemicals [2013] 358 ITR 291 (SC) is not applicable on the facts of the case before us and thus the learned Commissioner of Income-tax (Appeals) committed an error in not following the decisions of the Tribunal of earlier years in the assessee's own case as well as the judgment of the hon'ble High Court in the case of India Trade Promotion Organisation [2014] 361 ITR 646 (Delhi). 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 reported in [2014] 363 ITR 658 (SC) ; 822 Taxman 225 (SC) ; 43 taxmann.com 240 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 taxpayers which was more than the amount actually due as per law, along with interest. Some of the useful observations are reproduced hereunder for the sake of better clarity in deciding the issue before us (page 675) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Supreme Court that it has been observed that 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 the principles of what is fair and just. A decision-maker who is authorised 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 adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds 1 to 4 deserve to be dismissed for more than reason as stated above. 7. The next issue to be decided in this appeal is as to whether the learned Commissioner of Income-tax (Appeals) was justified in directing the learned Assessing Officer to exclude the provision for dimunition in value of investments amounting to ₹ 29,81,59,433 and the provision for non-performing assets amounting to ₹ 19,57,60,485 while computing the book profits under section 115JB of the Act, in the facts and circumstances of the case. 7.1. During the course of hearing, the learned authorised representative fairly admitted that the assessee had challenged the retrospective amendment in this regard brought in section 115JB of the Act by way of a writ petition before the hon'ble Calcutta High Court in W. P. No. 1069 of 2010 and the same was dismissed by the hon'ble court vide its order dated May 3, 2017. Accordingly, he fairly agreed with the decision of the learned Assessing Officer in this regard. Hence ground Nos. 5 to 7 raised by the Revenue are allowed. 8. The ground Nos. 8 and 9 raised by the Revenue are general in nature and does not require any specific adjudication. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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