TMI Blog2017 (11) TMI 1597X X X X Extracts X X X X X X X X Extracts X X X X ..... se are the appeals filed by the Revenue against the order of CIT(A)-5, Mumbai dated 20/08/2015 for A.Y. 1999-2000, 2007-08 2000-01 respectively in the matter of order passed by AO to give effect to the order of ITAT. 2. The only grievance of Revenue relates to the direction given by the CIT(A) for computing the interest u/s.244A while granting the refund. 3. At the outset, learned AR placed on record the order of the Tribunal in assessee s own case for the A.Y.2008-09 dated 27/10/2017, wherein exactly similar issue was dealt by the Tribunal. 4. We have gone through the orders of the authorities below and also the order of the Tribunal dated 27/10/2017. From the record we found that the assessee was in appeal before CIT(A) against the computation of interest while granting interest u/s.244A. 5. By the impugned order, CIT(A) directed as under:- ( 3) The appellant claimed that adjustment of refund granted should be first - adjusted against the interest and thereafter against the tax refund due. In support of its claim, the appellant relied on the decision of the Delhi High Court in the case of India Trade Promotion Orgainisation vs CIT (361 ITR 646). Following the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s CIT (361 ITR 646). Following the order of the Delhi High Court, AC is directed to compute part of the refund granted first against the refund due and then tax due. Hence, ground of appeal is allowed. Aggrieved, now Revenue is in second appeal before Tribunal. 4. Before us, the learned Counsel for the assessee stated that the issue is squarely covered in favour of assessee and against Revenue by the decision of Hon'ble Supreme Court in the case of Union of India Vs. Tata Chemicals Ltd. (2014) 363 ITR 658 (SC) and also by Delhi High court decision in the case of India Trade Promotion Organization vs. CIT (2014) 361 ITR 646 (Del.) and the same was followed by the Co-ordinate Bench decision in the case of Union Bank of India Vs. ACIT (2016) 72 taxmann.com 348 (Mumbai-Trib.) wherein it is held that while granting refund in pursuance to appeal effect order, the amount of refund granted earlier should be adjusted first against interest on earlier refund and thereafter balance amount should be adjusted against principal component of tax in refund granted earlier, on which assessee is entitled to get interest under section 244A of the Act. The Tribunal has considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 v. 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. Learned counsel, appearing on behalf of the assessee, pleaded accordingly. On the other hand learned Departmental Representative submitted that the assessee is not entitled to interest on interest. However with regard to the plea of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;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 the amount of refund due to the assessee. Thus, the law is silent on this issue. Under these circumstances, fairness and justice remands that same principle should be applied while granting the refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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