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M/s. K. Lakshmanya And Company Versus Commissioner of Income Tax & Another

2017 (11) TMI 589 - SUPREME COURT

Entitlement to interest u/s 244 (A) - refund arose on account of interest that was partially waived by an order of the Settlement Commission - powers of settlement commission - Held that:- Commission cannot either waive or reduce interest which is statutorily payable unless there is express power to do so in that behalf. However, while so saying, the Court went on to clarify that the circulars issued pursuant to the powers under Section 119 of the Act, which empower the authorities under the Act .....

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peals) and the ITAT were correct in their view and that consequently, the High Court was incorrect in its view that since a discretionary power has been exercised, no concomitant right was found for refund of interest to the assessee. - Civil Appeal No. 4335 of 2012 - Dated:- 1-11-2017 - Rohinton Fali Nariman And Sanjay Kishan Kaul, JJ. For the Appellant : Mr. Preetesh Kapur, Adv. Mr. Mohit chaudhary, Adv. Mr. Ashok A.Kulkarni, Adv. Ms. Puja Sharma, Adv. MR. Kunal Sachdeva, Adv. Mr. Balwinder Si .....

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rt of Karnataka at Bangalore was correct in holding that the assessee in the present case was not entitled to interest under Section 244 (A) of the Income-Tax, 1961 Act, when refund arose to it on account of interest that was partially waived by an order of the Settlement Commission. We are concerned in the present case with the assessment years 1993-94 and 1994-95. The assessee, being a partnership firm, filed a return for these years and once the order of assessment was completed, interest und .....

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e assessee, the Assessing Officer, by his order dated 25.04.2000 refused to grant interest on the refund that was payable, and was not paid, within three months from the specified date. This was done on two grounds, namely, that the provisions of Section 244(A) do not provide for payment of interest on refund due on account of waiver of interest that is charged under Sections 234(A)-(C) of the Act and second, that the power assumed by the Settlement Commission for waiver of interest, by followin .....

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ismissed. However, in appeal to the High Court, by the impugned judgment dated 09.12.2009, the High Court of Karnataka held that, since waiver of interest was within the discretion of the Settlement Commission, no right flowed to the assessee to claim refund as a matter of right under law. In the aforesaid circumstances, the judgments of the Tribunal and C.I.T. (Appeals) were set aside and the Assessing Officer's order was restored. Mr. Preetesh Kapur, learned counsel appearing on behalf of .....

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this case. He also relied upon the judgment of this Court in Commissioner of Income Tax, Mumbai Vs. Anjum M.H.Ghaswala and Ors. 2002 (1) SCC 633 para 34 in particular, to show that when the power to waive interest payable under a substantive provision of the Act was given by a circular of the Board to the Settlement Commission, interest could be so waived and that a circular of the Board gave such power which was exercised by the Settlement Commission in the present case. According to him, the j .....

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to buttress the aforesaid submission. According to him, the judgment in Ghaswala's case (supra) would show, paragraphs 23 and 30 in particular, that the Settlement Commission was given no power to waive interest, the idea of a Settlement Commission being that the assessee pays tax promptly and that no concession can be given by the said Commission. He referred to the reasons given by the Assessing Officer in support of his order and stated that both reasons were correct in law. He also refer .....

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her proceedings under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf: Provided that where, by the order aforesaid,- (a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if nay, shall become due only on the making of such fresh assessment; (b) the assessment is annulled, .....

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assessee in the present case is covered by Section 240 of the Act. When it comes to interest on refund, Section 244, which applied to assessment years up to and including assessment year 1989-90, made it clear that it would apply where a refund is due to the assessee in pursuance of an order referred to in Section 240. It is only if the Assessing Officer does not grant the refund within three months from the end of the month in which such order is passed, that the Central Government shall pay t .....

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id by way of advance tax or treated as paid under Secttion 199, during the financial year immedaitely preceding the assessment year, such interest shall be calculated at the rate of one-half percent for every month or part of a month comprised in the period,- i) from the 1st day of April of the assessment year to the date on which the refund is granted: if the return of income has been furnished on or before the due date specified under sub-section (1) of Section 139; or (ii) from the date of fu .....

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ll be payable, if the amount of refund is less than ten percent of the tax as determined under sub-section (1) of section 143 or on regular assessment;) (b) in any other case, 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 or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted. Explanation:-For the purpose of this clause, date of payment of .....

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shall, subject to the provisions of this Section, be entitled to receive simple interest. The objects and reasons for the aforesaid amendment state: 11.2 Insertion of a new section 244A in lieu of sections 214, 243 and 244,- Under the provisions of section 214, interest was payable to the assessee 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 .....

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um. 11.3. These provisions, apart from being complicated, left certain gaps for which interest was not paid by the Department to the assessee for money remaining with the Government. To remove this inequity, as also to simplify the provisions in this regard, the Amending Act, 1987, has inserted a new Section 244A in the Income Tax Act, applicable from the assessment year 1989-90 and onwards which contains all the provisions for payment of interest by the Department for delay in the grant of refu .....

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residuary clause, namely sub-clause (b) of Section 244(A). The Madras High Court in Needle Industries Pvt. Ltd. (supra) concerned itself with the position prior to the advent of Section 244A. It found that the expression refund of any amount used by Section 240 and 244 would include not only tax and penalty but interest also. It was, therefore, held that the clear intention of Parliament is that the right to interest will compensate the assessee for the excess payment during the intervening per .....

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r the delay in paying to it any 'amount' due to it even if such 'amount' comprised of interest, as had been held by the Delhi and Madras High Courts and hence the impugned judgment was erroneous and ought to be reversed ? E. Whether the High Court ought to have held that sections 240 and 244 of the Act refer to 'refund of any amount', which phrase clearly includes any amount (including interest) due by the Income Tax department to the assessee, and hence the appellant was .....

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claimed by the appellant is for delay by the Revenue in paying of interest, and this does fall within the meaning of refund as set out in Section 237 of the Act. The relevant provision is Setion 240 of the Act which clearly lays down that what is relevant is whether any amount has become due to an assessee, and further the phrase any amount will also encompass interest. This view has been accepted by various High Courts such as the Delhi, Madras, Kerala High Courts etc. In Commissioner of Income .....

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he 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 244-A. It becomes an integral part of R. 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 .....

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for the enactment of Section 244(A), held: Interest payment is a statutory obligation and non- discretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244A is drafted and enacted. The language employed in Section 244A of the Act is clear and plain. It grants substantive right of interest and is not procedural. The principles for grant of interest are the same as under the provisions of Section 244 applicable to assessments before 01.04.1989, albeit with cla .....

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y in grant of refunds. A general right 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 assessee under the Act. The above extract would clearly show that a corresponding right exists, to re .....

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