TMI Blog2023 (6) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, the expression tax would include interest also and the definition of tax under Section 2(43) meaning income tax cannot be applied in the context of Section 244(1A) - Court also held that consequently, the interest paid in pursuance of the order of Assessment has to be regarded as forming part of income tax or an adjunct to income tax and the result would be that Assessee is entitled to interest on the interest refunded also. We are in respectful agreement with the view expressed by the Madras High Court in Needle Industries Pvt. Ltd [ 1998 (6) TMI 84 - MADRAS HIGH COURT] This has been followed by the Gujarat High Court in Gujarat State Warehousing Corporation (supra) and later Delhi High Court followed Gujarat State Warehousing Corporation [ 2001 (8) TMI 24 - GUJARAT HIGH COURT] in the Modipon Ltd. [ 2004 (4) TMI 38 - DELHI HIGH COURT] . We should also add that Section 240 of the Act makes no distinction between refund of tax or penalty paid and refund on other amount collected. The case of Respondent is totally off target because Petitioner is not claiming interest on interest which is due to Petitioner but what Petitioner has claimed is interest on amount wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Appeal was dismissed by an order dated 22nd February 1989. 4. Impugning order passed by the CIT(A), Petitioner filed an appeal before the ITAT on 11th May 1989 (Appeal No. 1). 5. Upon the CIT(A) dismissing the Appeal, A.O. proceeded further with the penalty proceedings and vide order dated 4th August 1989 levied penalty of Rs. 6,37,411/- under Section 271(1)(c) of the Act. Against this order, on 15th September 1989, Petitioner preferred an appeal before CIT(A). This Appeal came to be dismissed by an order dated 3rd January 1991 which was impugned in Appeal (Appeal No. 2) filed before the ITAT. 6. The ITAT while dealing with quantum appeal, i.e., Appeal No. 1, impugning order passed by CIT(A) on 22nd February 1989, by its order dated 31st March 1999, restored the matter to the file of the A.O. with a direction to re-consider the issue regarding the allegations made under Section 68 of the Act. Consequent to the remand by the ITAT, the A.O. in his order dated 6th December 1995, came to the conclusion that the partners were assesseed to tax and, therefore, investment in the Petitioner firm were proved beyond doubt and, therefore, deleted the additions made in the origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p.a. accordance with the amendment in the provision of section 244A from time to time) Rs. Rs. 1,65,519 (Collected by TRO on 25-01-93) Rs. 1,45,000 (Collected by TRO on various dates in installment in 1991) 1,96,405 Rs. 7,082 Refund of A. Y. 90-92 adjusted on 29-0993 Rs. 14,478 Refund of A. Y. 93-94 adjusted on 25-02-94 2,03,407 Rs. 3,05,332 Refund of various year adjusted on 18-08-99 1,78,217 --------------- Rs.6,37,411 Total Interest --------------- Rs.5,78,029 ======= (C) Principal amount of interest recovered u/s. 220(2) refunded without interest Rs.7,07,115 ------------- Total (A+B+C) Rs.19,22,555 ======= 12. It is Petitioner s case that interest on refund was not calculated correctly, because no interest was granted on the amount recovered as interest under Section 220(2) of the Act. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the assessee as a result of any amount having been paid by him after 31st March 1975 in pursuance of order of penalty and such amount or any part thereof having been found in appeal or other proceedings under the Act to be in excess of the amount which such an assessee is liable to pay as penalty under the Act, Central Government should pay to such assessee simple interest at the rate specified in sub-section 1 on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted. Mr. Agrawal states that expression used in this subsection is any amount having been paid and on the amount so found to be in excess . Sub-section does not say on the tax having been paid . If the sub-section had to be read that way then law makers would have worded it or used the expression on any amount of tax paid and not any amount having been paid. Therefore, the Act does not permit the segregation of the amount paid as tax and interest component separately. 16. Mr. Agrawal further submitted that the claim of Petitioner is not interest on interest as incorrectly stated in the impugned order but only interest on the entire amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, not interest on interest. 20. Therefore, the two issues which require to be answered in this Petition are:- (A) whether in the facts and circumstances of the case, Section 244 of the Act will apply or Section 244A of the Act will apply? and (b) whether Petitioner is entitled to interest on refund of the interest paid by Petitioner under Section 220(2) of the Act? 21. In view of what we have recorded earlier as conceded by Mr. Suresh Kumar, the first issue does not arise. We will proceed on the basis that, in the facts and circumstances of this case, Section 244 of the Act would apply. 22. On the second issue, undoubtedly, Petitioner had paid the penalty amount of Rs. 6,37,411/- together with interest thereon. Section 244 (1) of the Act reads as under:- 244. (1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Assessing Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at fifteen per cent per annum on the amount of refund due from the date immediately follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and section 244(1) refers to the order spoken of on such excess amount refundable to the assessee; it clearly means that the interest payable under section 244(1) is on such excess amount refundable to the assessee under section 240, and both the amounts are to be paid simultaneously. 24. The provisions of law comprised under section 244(1)ex facie discloses that if the Department fails to repay the excess amount within three months from the date it becomes due and payable to the assessee, then the assessee should be paid interest on such amount at the rate of 15 per cent per annum. In other words, on the failure to refund the amount within the specified time, and without there being any demand, the Department is bound to pay along with such refund, the interest thereon as specified in section 244(1). Even the subtitle of the section reads Interest on refund where no claim is needed . It is thus clear that the obligation to pay interest in terms of section 244(1) is also without any need for claim of interest, while performing its obligation under section 240 of the said Act. 25. It is also necessary to take note of section 244(1A) of the Act. It reads thus: 244. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax paid in pursuance of the order of assessment. We are of the opinion that the expression tax or penalty found in the later part of the section 244(1A) would not qualify or restrict the scope of the expression amount found in the earlier part to mean only tax or penalty . As already seen, the function of the later part of section 244 (1A) of the Act is to find out the excess of the amount which the assessee paid by way of tax or penalty and that is the reason the expression tax or penalty has been employed. However, to determine the amount on which the Revenue is liable to pay interest, section 244 (1A) gives emphasis on the amount paid by the assessee in pursuance of the order of assessment and the amount, in our opinion, cannot be limited to the amount of tax or penalty, but would encompass the amount of interest paid by the assessee. The clear intention of Parliament is that the right to interest will compensate the assessee for the excess payment during the intervening period when the assessee did not have the benefit of use of such money paid in whatsoever character. In addition, if a literal meaning is given to the expression, tax found in the later part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty paid by Petitioner as well as the interest thereon paid under Section 220(2) of the Act. The amount of interest paid by Petitioner under Section 220(2) of the Act, in our view, thus became part of refund envisaged under Section 240 of the Act. Therefore, Petitioner is entitled to interest on the said amount under the provisions of Section 244(1A) of the Act. 30. In the circumstances, in our view, the Rule that was granted on 14th January 2005 has to be made absolute in terms of prayer clauses (a) and (b) which read as under:- (a) that this Hon ble Court may be pleased to issue a writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ, Order or Direction under Article 226 of the Constitution of India, calling for the records of the Petitioner s case insofar as they relate to the impugned order dated 30- 04-2004 passed under section 264 of the Act being Exhibit G hereto, and, after going through the same and examining the question of the legality thereof, to quash, cancel and set aside the same; (b) that this Hon ble Court may also be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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