9911796707
TMI Blog2007 (7) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... that the provisions of Section 244A(1) of the Act were not applicable since those provisions were brought into force only from the assessment year 1989-90; and, (3) the order dated April 19, 1993 passed by the Government of India by which the claim for interest advanced by the petitioner was refused on the ground that the refund was not issued in pursuance of order of assessment or penalty and, therefore, provisions of Section 244(1A) of the Act were not applicable to the facts of the case. The petitioner has further prayed to issue a writ of mandamus directing the respondents to award compensation by way of interest on the amount of refund for the period from July 1, 1987 to November 13, 1990. 2. The petitioner is a company incorporated under the provisions of the Companies Act, 1956 and is manufacturing Anhydrous Hydrogen Fluoride and Chloroflurocarbon Refrigerant Gases. For this purpose, the promoters of the petitioner company had entered into a technical collaboration agreements with a company based at U.S.A. Necessary approval was granted by the Reserve Bank of India to above mentioned collaboration agreement. On June 19, 1987, the petitioner had paid a sum of Rs.23,96,032/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26, 1993. The petitioner reiterated its submissions made before the Chief Commissioner of Income Tax. However, the CBDT also by order dated April 19, 1993 refused to accept the claim made by the petitioner for awarding interest on the amount of excess tax paid by it. A copy of the said letter is produced by the petitioner at Annexure-R to the petition. 4. According to the petitioner, the petitioner is entitled to refund of tax with interest as the amount of tax was paid to the treasury as per the direction of the Income Tax Officer. According to the petitioner, excess amount was wrongfully detained by the respondents and, therefore, the petitioner is entitled to interest thereon. After explaining that interest is the return of compensation for use of another's money and asserting that Article 265 of the Constitution and Section 72 of the Indian Contract Act should be read conjointly, the petitioner has prayed to direct the respondents to pay interest on the excess amount, which was retained by them. Under the circumstances, the petitioner has filed the instant petition and claimed the reliefs to which reference is made earlier. 5. On service of notice, Mr. R. B.Goswami, Deputy C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the petitioner, and Ms. Mona M. Bhatt, learned advocate for M/s. M. R. Bhatt & Company, for the respondents. 8. The question whether an assessee is entitled to compensation by way of interest for the delay in the payment of amounts lawfully due to the assessee, which are withheld wrongly and contrary to law, stands concluded in favour of the petitioner by the judgment of the Supreme Court rendered in Sandvik Asia Limited vs. Commissioner of Income-Tax & Ors., [2006] 280 ITR 643 (SC). In the said case, for the assessment year 1977-78 for which the assessee had paid advance tax, the assessee was granted refund of tax on the basis of the assessment order and was asked to pay additional tax after rectification. The Commissioner (Appeals) gave substantial relief and the assessee received refund only of the excess amount paid as advance tax. The assessee was not granted interest on the amounts found refundable. For the assessment year 1978-79, the assessee was granted refund of tax on the basis of the assessment order but no interest was paid on the refund. After the Commissioner (Appeals) gave substantial relief, the assessee received refund only of the excess amount paid as advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. Hence, as per the stand that the Department takes they are liable to pay interest only up to the date of refund of tax while they take the benefit of the assessees funds by delaying the payment of interest on refunds without incurring any further liability to pay interest. The stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to lakhs and lakhs of assessees. Very large number of asessees are adversely affected inasmuch as the Income-tax Department can now simply refuse to pay to the assessees amounts of interest lawfully and admittedly due to them as has happened in the instant case. It is a case of the appellant as set out above in the instant case for the assessment year 1978-79, it has been deprived of an amount of Rs.40 lakhs for no fault of its own and exclusively because of the admittedly unlawful actions of the Income-tax Department for periods ranging up to 17 years without any compensation whatsoever from the Department. Such actions and consequences, in our opinion, seriously affect the adminis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the Act, varying from 12 per cent to 15 per cent, which would be on the high side. Though we hold that the Department is solely responsible for the delayed payment, we feel that the interest of justice would be amply met if we order payment of simple interest at 9 per cent per annum from the date it became payable till the date it is actually paid. Even though the appellant is entitled to interest prior to March 31, 1986, learned counsel for the appellant fairly restricted his claim towards interest from March 31, 1986 to March 27, 1998 on which date a sum of Rs.40,84,906 was refunded." 9. In view of the abovequoted authoritative pronouncement by law of the Supreme Court, there is no manner of doubt that the petitioner is entitled to compensation by way of interest for the delay in payment of amounts lawfully due to the assessee which were withheld wrongly and contrary to law. During the course of hearing of the instant petition, Mr. R. K. Patel, learned counsel for the petitioner, has brought to the notice of the Court Instruction No.2 of 2007 dated 28th March 2007 issued by the Central Board of Direct Taxes, which is reproduced in [2007] 209 CTR (St.) 17 and [2007]160 Taxma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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