TMI Blog2019 (6) TMI 1707X X X X Extracts X X X X X X X X Extracts X X X X ..... quer should never be deprived of its legitimate dues payable by the assessee in time. The same analogy would equally apply when the refund is to be granted to the assessee with interest u/s 244A / In the instant case, the entire confusion had arose due to the fact that the full amount of refund as determined by the ld AO was not actually granted to the assessee, thereby making the assessee eligible for further interest for the future periods As decided in Union Bank of India .[ 2016 (8) TMI 688 - ITAT MUMBAI] wherein held that since the statute itself has already prescribed a particular method of adjustment in explanation to section 140A(1), then justice, fairness, equity and good conscience demands that same method should be followed while making adjustment for refund of taxes, especially when no contrary provision has been provided - direct the AO to re-compute the amount of interest u/s. 244A by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component. Decided in favour of assessee. - SHRI PAWAN SINGH, JM AND SHRI M. BALAGANESH, AM For the Revenue : Shri Santanu Kumar S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. We find that the ld CITA had merely directed the ld AO to calculate the interest u/s 244A of the Act correctly as per law without really getting into the dispute . Against this action of the ld CITA,both the assessee as well as the revenue are in appeal before us. 5. We have heard the rival submissions. We hold that as against the original refund figure of Rs 200.87 crores determined by the ld AO, only a sum of Rs 148.78 crores was actually granted to the assessee. Hence at this stage, a sum of Rs 52.09 crores ( 200.87-148.78) becomes due to the assessee by the revenue. Hence this sum of Rs 52.09 crores automatically partakes the character of principal portion of amounts payable by the revenue to the assessee on which interest is eligible. There is no need to segregate the refunds granted into tax portion and interest portion and subsequently reduce the tax portion of the refund alone from the refund originally granted for calculation of interest u/s 244A of the Act for the period subsequent to 4.7.1997. This action of the ld AO in our considered opinion, is against the spirit of the provisions of the scheme of taxation. The provisions of section 140A of the Act specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is not claiming interest on interest; and the only prayer of the assessee is to make adjustment of the refund issued earlier in the same manner as tax paid by the assessee to the department is treated in view of explanation to section 140A(1) of the Act, wherein it has been provided that the tax paid by the assessee shall first be adjusted against the interest payable and the balance if any shall be adjusted against tax payable, and the same procedure needs to be followed in respect of refund to the assessee. 3.3 Per Contra, Ld. DR fairly submitted that u/s. 140A (1), the procedure prescribed is clear that amount paid by the assessee shall first be adjusted against interest payable and then balance amount shall be adjusted with the tax payable. It was contended that similar procedure has not been prescribed u/s. 244A. It was also contended that in view of judgment of Hon'ble Supreme Court in the case of Gujarat Fluoro Chemicals (supra), Ld. CIT (A) has rightly declined to follow the order of the Tribunal for earlier years. 3.4 We have gone through the facts of this case and submissions made by both sides, provisions of law as well as judgments placed before us. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee that ii does not amount to payment of interest on interest but only adjustment of the refund from the Revenue against interest component first and thereafter against tax component, in which event u/s. 244A assessee is entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an integral part of Rs. 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 Rs. 45,73,528/-. The principal amount of Rs. 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 is that when refund order is issued, the same should include the interest payable on the amount, which is refunded. If the refund does not include interest due and payable on the amount refunded, the Revenue would be liable to pay interest on the shortfall. This does not amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee 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 demands that same principle should be applied while granting the refund as has been applied while collecting amount of tax. The revenue is not expected to follow double standards while dealing with the tax payers. The fundamental principle of fiscal legislation in any civilized society should be that the state should treat its citizens (i.e. tax payers in this case) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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