TMI Blog2023 (11) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... being heard. - Shri Vikas Awasthy (Judicial Member) And Ms. Padmavathy S. (Accountant Member) For the Assessee : Shri. C Naresh For the Department : Shri Prashant Kumar Gupta (CIT DR) ORDER PER PADMAVATHY S (AM): These appeals of the Revenue are against the order of the Commissioner of Income-tax, National Faceless Appeal Centre, Delhi [in short, the CIT(A) ] dated 03/04/2023 for A.Y. 1997-98 and 2002-03. 2. The only issue contended in both the appeals is the direction given by the CIT(A) to the Assessing Officer with regard to the manner which the adjustment of refunds granted is carried out for computing of interest under section 244A of the Income Tax Act (the Act). 3. The brief facts pertaining to AY 1997-98 are that the assessee filed the original return of income on 28/11/1997 declaring total income of Rs. 918,92,18,700/-. Subsequently, a revised return was filed on 30/03/1999 declaring total income at Rs. 905,24,80,790/-. The case was selected for scrutiny and the assessment under section 143(3) was completed vide order dated 25/02/2000 assessing the income of the assessee at Rs. 13216,623,26,540/-. Aggrieved, the assessee filed an appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had noticed that there was delay of various periods, ranging from 12 to 17 years, in such payment by the Revenue. This Court had further referred to the several decisions which were brought to its notice and also referred to the relevant provisions of the Act which provide for refunds to be made by the Revenue when a superior forum directs refund of certain amounts to an assessee while disposing of an appeal, revision etc. 5. Since, there was an inordinate delay on the part of the Revenue in refunding the amount due to the assessee this Court had thought it fit that the assessee should be properly and adequately compensated and therefore in paragraph 51 of the judgment, the Court while compensating the assessee had directed the Revenue to pay a compensation by way of interest for two periods, namely; for the Assessment Years 1977-78, 1978-79, 1981- 82, 1982-83 in a sum of Rs. 40,84,906/- and interest @ 9% from 31.03.1986 to 27.03.1998 and in default, to pay the penal interest @ 15% per annum for the aforesaid period. 6. In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) and Delhi High Court in the case of Indian Farmer Fertilizer Cooperative (supra) are with respect to entitlement of the assessee to any amount for delayed payment of interest under section 244A, i.e. interest on interest under section 244A. However, in assessee s case, the issue is the manner in which the assessing Officer has adjusted the refund due separating tax and interest and computing interest under section 244A. The Ld.AR therefore, argued that the issue is clearly distinguishable and the ratio laid down by the Hon ble Supreme Court and Delhi High Court cannot be directly applied in assessee s case. Accordingly, the Ld.AR submitted that the CIT(A) has correctly followed the decision of the co-ordinate bench in Bank of Baroda s case which is exactly on the issue under consideration. 8. We heard the parties and perused the materials on record. The refund originally granted to the assessee as of 14.06.2001 was Rs. 294,46,70,773 which included Rs. 256,23,57,925 towards tax and interest up to 14.06.2001 of Rs. 38,23,12,848. The assessing officer reworked the refund by adjusting the refund of Rs. 8,19,70,880 (which included an interest of Rs. 1,05,36,544) while giving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting in the short grant of interest under section 244A i.e. As per assessing officer's working the amount on which interest under section 244A would be calculated is Rs. 249,09,23,589 whereas the assessee is claiming that the interest should be calculated on Rs. 256,23,57,925. Therefore in our considered view there is merit in the submission of the ld AR that the ratio laid down by the Hon'ble Supreme Court in the case of Gujarat Flouro Chemicals Ltd (supra) and Delhi High Court in the case of Indian Farmer Fertilizer Cooperative (supra) are not applicable in assessee's case. Having said that we notice that the decision of coordinate bench Bank of Baroda (supra) is squarely on the issue of manner of adjusting the refund due where the Tribunal has observed that 5. We have heard the rival submissions. We find that the Id AO had calculated interest u/s 244A of the Act for the period 1.4.95 to 4.7.97 on the refund determined at Rs 200,87,14,868/- and arrived at the interest figure of Rs 56,24,40,163/-. Hence at this stage, the assessee was entitled for entire refund of Rs 257,1 1,55,031/-. As against this figure, only a sum of Rs 148,78,12,496/- was actually granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.- 3.2 During the course of hearing before us, Ld. Counsel strongly relied upon the orders of the Tribunal in assessee's own case for A.Y. 1988-89 (ITA No. 571/Mum/2013) and A.Y. 2001-02 (ITA NO. 574/Murn/2013) disposed by the order dated 23.06.2014 and also upon the order dated 22.07.2015 in ITA No. 918/Mum/2014 for A.Y. 2005-06. It was further submitted by him that this issue stands squarely covered in favour of the assessee by the judgment of Hon'ble Delhi High Court in the case of India Trade Promotion Organisation v. CIT12014] 361 ITR 646/12013] 38 taxmann.com 233 which has been considered by the Tribunal while deciding this issue in favour of the assessee. It was also submitted that the assessee 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 followe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund clue at Rs. 2,03,99,541/'-(tax component) and Rs. 1,58,28,901/-(interest component). Reason for such calculation was that according to the Assessing Officer no interest is payable on interest due in which event, even if there is substantial delay in interest payable, the assessee can be made to wait unendingly without payment of interest. Though, before the Assessing Officer as well learned CIT (A), the assessee's claim of interest u/s. 244A is not properly focused but sum and substance of the assessee's case before us is that in the event of adjustment of refund against interest due to the assessee tax refund due shall work out to Rs. 3.62 crores on which the assessee would be entitled 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 ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the civil appeals filed by the Department. The next question which we are required to answer is -what is the meaning of the words refund of any amount becomes due to the assessee in Section 244A? In the present case, as stated above, there are two components of the tax paid by the assessee for which the assessee was granted refund, namely TDS of Rs. 45,73,528 and tax paid after original assessment of Rs. 1,71,00,320. The Department contends that the words any amount will not include the interest which accrued to the respondent for not refunding Rs. 45,73,528 for 57 months. We see no merit in this argument. The interest component will partake of the character of the amount due under Section 244A. It becomes 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. 45,73,52 S -The principal amount of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations of Hon'ble Delhi High Court, we can say that it is not a case of payment of interest on interest. Thus, in view of these facts and aforesaid judgments, Ld Counsel contended that Ld. CIT (A) had wrongly applied the judgment of Hon'ble Supreme Court in the case of Gujarat Fluoro Chemicals (supra), since it was not applicable on the facts of this case. 3.7 Further, it was also held by Hon'ble High Court that the department ought to follow the same procedure and rules while collecting tax and while issued refunds. We have gone through the provisions of section 140A(1); explanation to the aforesaid section provides as under: Explanation - Where the amount paid by the assessee 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 sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuant to an order passed under the Act, including the order passed in an appeal. In the present fact scenario, the deductor/ assessee had paid taxes pursuant to a special order passed by the assessing officer/ Income Tax Officer. In the appeal filed against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid. The amount paid by the resident/ deductor was retained by the Government till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation 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 asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o contrary provision has been provided. Under these circumstances and aforesaid discussion, we find that the judicial propriety demands that order of the Tribunal of earlier years must be followed and therefore we 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. Thus, with these directions, the appeal of the assessee is allowed. 5.1. Respectfully following the aforesaid decision of this tribunal which had elaborately considered the decision of Hon'ble Delhi High Court in the case of India Trade Promotion supra and few Apex Court cases , we are inclined to accept the plea of the assessee. Hence we hold that the assessee would be entitled for interest on the unpaid refunds in accordance with the principle laid out in the aforesaid decision of Murnbai Tribunal . of Union Bank of India supra. The Id AO is hereby -. compute the interest on refund u/s 244A of the Act as per plea of the assessee. Accordingly, the grounds raised assessee are allowed and that of the revenue are dismissed. 10. The ratio laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X
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