TMI Blog2021 (10) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... mean aggregate amount of disputed tax and the term disputed tax is defined to mean the tax payable by petitioner as if the appeal is decided against petitioner. So, the explanation only refers to the amount paid in respect of tax arrear which is refunded under the VSV Act and not any other refund amount. This implies that the reference in which the restriction of interest under section 244A of the Act is made is towards any excess payment of tax in respect of the tax arrears which is the disputed tax - VSV Act clearly envisages that no interest under section 244A of the Act is payable on the amount of tax paid towards the disputed tax which is in excess of the amount determined payable as per Section 3 of the VSV Act. The amount payable towards disputed tax will only arise post the assessment order is passed. In the case at hand, petitioner has not made any payment post the assessment order, in fact, respondent no.2 has determined a refund to petitioner in the revised assessment order after adjusting all the disputed tax. The refund determined by respondent no.2 in the assessment order is out of tax deducted at source and taxes paid prior to filing of the return of income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 6th February 2018 under section 143(3) read with section 144C (13) of the Act read with rectification order dated 30 March 2018 under section 154 of the Act for the assessment year 2015-16, holding that petitioner is not entitled to the benefit of the India Cyprus DTAA as petitioner is not the beneficial owner of the interest income. Respondent No. 2, accordingly, held that the interest income of petitioner would be chargeable to tax at the rate of 20% under section 115AD(1)(a)(i) of the Act. Respondent No. 2, computed the total refund of ₹ 2,37,34,523/- and interest on the said amount under section 244A of the Act at ₹ 42,72,210. Out of the total refund of ₹ 2,80,06,730, refund of ₹ 2,62,11,376 was received through cheque dated 11th April 2018. The balance refund of ₹ 17,95,354 was not received by way of cash or by way of credit of tax deducted at source before filing the application in Form No. 1. However, vide rectification order dated 28 December 2020 passed under section 154 of the Act for assessment year 2019-20, respondent No. 2 granted the refund of ₹ 17,95,354 by way of TDS credit. D) On 17th March 2020, the Government of India p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the revised assessment order dated 30th March 2018 is to be returned to respondent. 4. Shri Vyas further submitted that if the interest was allowed to be repaid by petitioner, it would amount to discrimination between assessees who have been granted interest under Section 244A and other assessees who have a net refund amount under the VSV Act without 244A interest. Mr. Vyas added that the Government forgoes interest and penalty and assessee pays tax and forgoes interest or forgoes amount equivalent to interest received under Section 244A. 5. Referring to Explanation to Section 7 of the VSV Act, Shri. Pardiwalla submitted that the restriction on payment of interest under Section 244A of the Act is only when an assessee is eligible for a refund pursuant to making an application under the VSV Act, that is, when the tax paid by the assessee exceeds the amount payable under Section 3 the assessee would be entitled to refund, but without interest. Shri. Pardiwalla submitted that in the present case interest under Section 244A of the Act of ₹ 42,72,210/- was not determined as payable under the VSV Act but was paid as per the assessment order passed for the said assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner decided to settle the appeal by paying the disputed tax of ₹ 3,29,78,793/-. When we say decided to pay, it does not mean that petitioner had to pay that additional amount, but this amount was already paid to the Government by way of TDS deducted and petitioner was seeking a refund. Petitioner decided to forego that refund claim of ₹ 3,29,78,793/-. After considering petitioner s declaration/application respondent issued Form No. 3 being form for certificate under Sub-Section (1) of Section 5 of the VSV Act read with VSV Rules, 2020, accepting that the tax arrear payable was ₹ 3,29,78,793/-. Respondents, however, sought return of the amount of ₹ 42,72,203/- being interest which it had granted on the undisputed amount of refund of ₹ 2,37,34,523/-. 9. The provisions of VSV Act relevant for this Petition, Section 2(1)(j)(A), Section 2(1)(o), Section 3(a) and Section 7 read as under:- 2. (1) In this Act, unless the context otherwise requires,- (a) . (j) disputed tax , in relation to an assessment year or financial year, as the case may be, means the income-tax, including surcharge and cess (hereafter in this clause referred to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is hereby clarified that where the declarant had, before filing the declaration under sub-section (1) of section 4, paid any amount under the Income-tax Act in respect of his tax arrear which exceeds the amount payable under section 3, he shall be entitled to a refund of such excess amount, but shall not be entitled to interest on such excess amount under section 244A of the Income-tax Act. 10. Under the VSV Act, Section 3(a) provides that where a declarant files a declaration to the designated authority in accordance with the provisions of Section 4 in respect of tax arrear , the amount payable by the declarant shall be, where the tax arrear is the aggregate amount of disputed tax, the amount of the disputed tax, if it is paid before the date mentioned or extended and if it is paid beyond such a date, the amount of disputed tax plus 10% of the disputed tax. In the case at hand, the question of interest chargeable or charged on disputed tax or penalty does not arise because the disputed tax relates to the excess TDS deducted or paid on behalf of petitioner. Tax arrear is defined to mean the aggregate amount of disputed tax , interest chargeable or charged on such disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rears which is the disputed tax. Therefore, the VSV Act clearly envisages that no interest under section 244A of the Act is payable on the amount of tax paid towards the disputed tax which is in excess of the amount determined payable as per Section 3 of the VSV Act. The amount payable towards disputed tax will only arise post the assessment order is passed. In the case at hand, petitioner has not made any payment post the assessment order, in fact, respondent no.2 has determined a refund to petitioner in the revised assessment order after adjusting all the disputed tax. The refund determined by respondent no.2 in the assessment order is out of tax deducted at source and taxes paid prior to filing of the return of income and not on account of any amount paid towards tax arrear prior to applying under the VSV Act which has resulted in excess payment of the tax arrear (disputed tax) determined as per Section 3 of the VSV Act. The interest on refund that was paid was on the undisputed part of the excess tax paid and not on the disputed tax. 12. In the circumstances, Form - 3 dated 11 th December 2020 issued by respondent No. 1 is hereby set aside. Respondent No. 1 is directed to i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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