TMI Blog2011 (7) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... MITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [ 2006 (1) TMI 55 - SUPREME COURT] , where it was held that even assuming that there is no provision for payment of compensation, compensation for delay is required to be paid as per the act itself recognizes in principle of the liability of the Department to pay interest when excess tax was retained and the same principle should be extended to cases where interest was retained. We, therefore, direct the AO to allow the interest to the assessee also on the interest which was payable on the amount to be refunded. - Decision in favour of Assessee. - I.T.A.Nos.396 & 397(LKW.)/2011, I.T.A.Nos.419 & 420(LKW.)/2011 - - - Dated:- 15-7-2011 - SHRI H.L.KARWA, HON'BLE VICE PRESIDENT AND SHRI N.K.SAINI, ACCOUNTANT MEMBER Assessee by: Shri Amit Shukla, Advocate Department by : Shri P.K.Bajaj, Sr. D.R. ORDER N.K. Saini, Accountant Member These cross-appeals by the assessee and the Department are directed against the separate orders each dt. 27th April, 2009 of the learned CIT(A)-I, Lucknow for the asst. yrs. 1997-98 and 2002-03. These appeals having common issue were heard together, so are being disposed of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e grievances of both the parties revolve round the interpretation of the provisions of s. 244A of the IT Act, 1961 (in short the Act ). 3. The facts of the case, in brief are, that an order under s. 254/154/143(3)/148 of the Act was passed on 17th Jan., 2006 at book profit of ₹ 36,78,90,550 and a refund of ₹ 9,94,57,031 was issued. Subsequently, the assessee moved an application under s. 154 of the IT Act, 1961 on 16th July, 2007 stating therein that interest has been short allowed by ₹ 17,99,663 under s. 244A for the period of four months i.e. from February, 2006 to May, 2006 (till the date refund received). It was stated that since the above interest of ₹ 17,99,663 was wrongfully retained, therefore, as per the decision of the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643, the interest on such interest at ₹ 1,25,976 was also payable under s. 244A of the Act. The AO did not accept the request of the assessee by stating that the refund along with interest under s. 244A of the Act was granted to the assessee by passing order on the said date. He further observed that since the refund was exceeding ₹ 25 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of refund of ₹ 21,14,604 further allowable to the appellant as on date is enclosed. The AO may kindly be directed to allow above interest short granted as on 9th May, 2006 as also interest on above amount of ₹ 17,99,663 withheld from 29th May, 2006 till the date of actual grant of above refund in view of the decision of Hon'ble Supreme Court in the case of Sandvik Asia Ltd. ( supra). Asst. yr. 2002-03 The AO has passed order dt. 17th Oct., 2007 under s. 143(3)/251/154 of the IT Act, 1961 vide which a refund of ₹ 41,86,27,727 has been determined. The above refund has actually been granted to the appellant on 14th Nov., 2007. In the above refund, interest under s. 244A has been granted upto the month of October, 2007 while such interest should have been granted till the month of November, 2007 during which the refund voucher has been prepared. A few TDS certificates aggregating to ₹ 3,40,596 have been submitted by the appellant on 19th Aug., 2004 since the same were not received by the appellant till the time of filing of the return. The AO has not granted interest on refund against such TDS certificates. The appellant submits that sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nth of January, 2006. The learned CIT(A) pointed out that the said refund was issued vide refund voucher No. 414611, dt. 29th May, 2006 and the AO did not appreciate the fact that in case of a refund, the interest on the refundable amount was allowed upto the date of grant of the said refund. According to him, the refund was granted to the assessee on 29th May, 2006 and thus, the interest on the refundable tax was also to be allowed till that date. As regards to the admissibility of the interest on interest, the learned CIT(A) was of the view that the decision of the Hon'ble Supreme Court relied upon by the assessee was delivered on the peculiar facts of that case. In the present case, the assessee did not show that there was any wilful/wrongful withholding of the grant of interest, this situation occurred only due to time factor for taking administrative approval since the refund exceeded ₹ 25 lacs. The learned CIT(A) was, therefore, of the view that the assessee was eligible to interest upto the date of grant of the refund and interest on interest was not admissible in the assessee's case. 6. Now, both the parties are in appeal. 7. The learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m is that it is entitled to interest. In the first instance : From respective dates of payment of sums aggregating ₹ 8,99,83,166 to 26th Sept., 2005 (on which date the appellant had become entitled) which is the date of the order passed by the Hon'ble Tribunal. In the second instance : It is contended that the said refund (along with interest as aforesaid) should have been allowed within a period of three months, say latest by 31st Dec., 2005 as per s. 244(1) of the Act. Although the said section has become inoperative w.e.f. 1st April, 1989, the time-limit laid down there, should be read under s. 244A also, as no specific time for issuing refund in consequence of appellate order has been prescribed there. In the third instance : Whatever refund had become due on 31st Dec., 2005 (Rs. 8,99,83,166 + interest as calculated from respective dates of payment to 31st Dec., 2005), as mentioned under the head first instance further interest should be granted from 1st Jan., 2006 onward till final refund is made, owing to delay in issuing the refund by applying the rule of harmonious constitution. In the fourth instance : The computation of further refund due as on 31st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ITOs that the date of the assessment order is to be taken as the 'date of the order granting the refund' is not correct. Thus, in cases where interest is payable by the Central Government to assessees under s. 243, such interest is to be calculated upto the date of issue of the refund voucher.-Circular No. 20-D(XXII-22), dt. 20th Aug., 1968' The said circular has got binding effect in view of the decision of Hon'ble apex Court in the case of Union of India Anr. v. Azadi Bachao Andolan Anr. [2003] 184 CTR (SC) 450 : [2003] 263 ITR 706 (SC). 4. Finally the appellant's contention was two-fold : Firstly : interest should not be restricted upto the date on which the order giving effect to the appellate order was passed, which is 17th Jan., 2006, but it should be allowed till the date on which the refund was received which is 29th May, 2006; Secondly : interest on interest should be allowed. This means that after refund had become due on 31st Dec., 2005 i.e. within a period of three months from the date when the eligibility started, interest on interest should be allowed. 5. The learned CIT(A) has accepted the firstly, vide para 6 of his order whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o refer and rely upon the following case law : (i) Chimanlal S. Patel v. CIT [1994] 119 CTR (Guj.) 293 : [1994] 210 ITR 419 (Guj.) approved by the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. v. CIT [2006] 200 CTR (SC) 505 : [2006] 280 ITR 643 (SC). (ii) CIT v. Narendra Doshi (supra); (iii) Punjab Small Industries Export Corpn. Ltd. v. IAC [2004] 192 CTR (Punj. Har.) 396 : [2005] 278 ITR 92 (Punj. Har.) wherein the decision of Hon'ble Apex Court in the case of CIT v. Narendra Doshi ( supra) has been followed. (iv) R.K. Jain Sons (HUF) v. CIT [2005] 193 CTR (Delhi) 659; (v) Garden Silk Mills Ltd. v. Dy. CIT (supra) wherein the decision of Narendra Doshi ( supra) was followed. (vi) CIT v. H.E.G. Ltd. [2010] 228 CTR (MP) 497 : [2009] 310 ITR 341 (MP) wherein the decision of Hon'ble Apex Court in the case of Narendra Doshi (supra) as also of another decision of Apex Court in the case of Sandvik Asia Ltd. v. CIT (supra ) was followed. (vii) CIT v. H.E.G. Ltd. [2010] 228 CTR (SC) 495 : [2010] 33 DTR (SC) 304 : [2010] 324 ITR 331 (SC); (viii) CIT v. Sutlej Industries Ltd. [2010] 37 DTR (Delhi) 25(copy enclosed). (ix) Tribunal (Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he interest under s. 244A of the IT Act till the date of issue of refund voucher by misinterpreting directions for payment of interest on refunds as given under s. 244A of the IT Act i.e. the interest shall be paid only till the date on which the refund is granted, i.e. upto 17th Jan., 2006 in the present case. It was further stated that the refund was granted the moment the concerned officer signed the order regarding payment of interest under s. 244A of the IT Act and the interest should have been granted till the date when the order regarding payment of interest had been signed. Reliance was placed on the judgment of the Hon'ble Rajasthan High Court in the case of Rajasthan State Electricity Board v. CIT [2006] 281 ITR 274. 9. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is not in dispute that the AO passed the order under s. 254/154/143(3)/ 148 of the IT Act, on 17th Jan., 2006 vide which a refund of ₹ 9,94,57,031 had been determined. Since the amount of refund exceeded ₹ 25 lacs, the AO sought the approval from the higher authorities and ultimately issued the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case, it appears that the delay occurred in taking administrative approval, so the delay was due to the internal working of the Department, which was not attributable to the assessee; as such, the assessee was entitled to interest upto the date on which the refund has been issued. In the present case, the refund was granted to the assessee only on 29th May, 2006 and therefore, the assessee was entitled for interest upto the said date. 9.2 (i) The aforesaid view is in consonance with the ratio laid down by the Hon'ble Delhi High Court in the case of CIT v. Sutlej Industries Ltd. (2010) 37 DTR 25 wherein it has been held as under : On an analysis of s. 244A it is seen that where 'refund of any amount' becomes due to the assessee, the assessee is entitled to simple interest thereon. The mode and manner of calculating such interest are laid down in cls. (a) and (b) of sub-s. (1) of the said section. Where the refund is out of prepaid taxes, interest is calculated in terms of s. 244A(1)(a). Where the refund is of taxes paid other than prepaid taxes covered in cl. (a), the computation of interest is for the period prescribed in cl. (b), sub-s. (1) of the said se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 384 : [2007] 294 ITR 438 (Mad.) concurred with; Sandvik Asia Ltd. v. CIT [2006] 200 CTR (SC) 505 : [2006] 280 ITR 643 (SC) followed. 9.3 In the present case also, there was statutory liability on the Revenue to pay the interest on the refund which was retained for seeking the administrative approval. As the refund was granted to the assessee only on 29th May, 2006, therefore, the assessee was entitled for the interest upto the said date and the AO was not justified in granting the interest only upto January, 2006. 10. Now another controversy to be resolved, which is agitated by the assessee relates to interest on interest. 11. On a similar issue, the Hon'ble Gujarat High Court in the case of Garden Silk Mills Ltd. v. Dy. CIT [2008] 296 ITR 517has held as under : (i) that the provisions of s. 214(1) contemplate payment of interest on the amount of advance tax paid in the financial year to the extent it exceeds the amount of assessed tax. The petitioner had paid the amount of ₹ 54 lakhs after the financial year hence it was not in the nature of advance tax. Therefore, the petitioner was not entitled to the payment of interest under the provisions of s. 214(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the decision of the appellate or other authority specified in s. 240. The expression 'amount' in the earlier part of s. 244(1A) refers not only to the tax but also to the interest; it is a neutral expression and it cannot be limited to the tax paid in pursuance of the order of assessment. Even assuming that there is no provision for payment of compensation, compensation for delay is required to be paid as the Act itself recognizes in principle of the liability of the Department to pay interest when excess tax was retained and the same principle should be extended to cases where interest was retained. 11.4 The ratio laid down by the Hon'ble Supreme Court in the aforesaid referred to case is squarely applicable to the facts of the present case. We, therefore, considering the totality of the facts as discussed hereinabove and keeping in view the ratio laid down in the aforesaid referred to judicial pronouncement, direct the AO to allow the interest to the assessee also on the interest which was payable on the amount to be refunded. Accordingly, the appeal of the assessee is allowed and that of the Department is dismissed. 12. In cross-appeals for the asst. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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