2018 (9) TMI 1844 - AT - Income Tax

Tribunal ruling: Interest entitlement on refund, book profits computation under Section 115JB

The Tribunal partly allowed the appeal, ruling in favor of the assessee regarding entitlement to interest on the outstanding refund, including interest on ... Interest on the outstanding refund - case of the assessee is that it is entitled to claim of interest, on the interest which is part of the outstanding refund as it also constitute “amount to be refunded” to the assessee as on 20/03/1993, on which date the demand relevant to the Assessment Year 1992-93, was set off by AO - HELD THAT:- As decided in K. LAKSHMANYA AND COMPANY VERSUS COMMISSIONER OF INCOME TAX & ANOTHER [2017 (11) TMI 589 - SUPREME COURT] the expression “due” only means that a refund becomes due if there is an order under the Act which either reduces or waives tax or interest. It is of no matter that the interest that is waived is discretionary in nature, for the moment that discretion is exercised, a concomitant right springs into being in favour of the assessee. We are, therefore of view that the C.I.T. (Appeals) and the ITAT were correct in their view and that consequently, the High Court was incorrect in its view that since a discretionary power has been exercised, no concomitant right was found for refund of interest to the assessee. Also in assessee's own case [2017 (8) TMI 237 - ITAT KOLKATA] the assessee is entitled for interest on unpaid interest and accordingly dismiss the grounds raised by the revenue in this regard. As decided in the assessee's own case for the very same assessment year 2002-03 had upheld the order of the learned Assessing Officer granting interest under section 244A of the Act. The subsequent rectification proceedings and the consequent appellate orders thereon have been reversed by the hon'ble Calcutta High Court in the assessee's own case. Hence the Revenue should not have any grievance in the impugned appeal before us as the learned Commissioner of Income-tax (Appeals) had addressed the entire issue in the same lines in which the hon'ble High Court had addressed the issue. In our considered opinion, if at all the Revenue is aggrieved against the order of the hon'ble Calcutta High Court [2015 (7) TMI 780 - CALCUTTA HIGH COURT] they should have preferred a special leave petition before the hon'ble Supreme Court. Assessee has given a computation of refund in the Annexure to his written submissions. AO is directed to verify the same and grant refund of the amount, in accordance with law Issues Involved:1. Entitlement to interest on outstanding refund including interest on refund.2. Computation of book profits under Section 115JB of the Income Tax Act.Issue 1: Entitlement to Interest on Outstanding Refund Including Interest on RefundThe primary issue in this appeal is whether the assessee is entitled to claim interest on the outstanding refund, which includes interest on the refund itself. The assessee argued that the outstanding refund amount, which includes interest, should be considered as 'amount to be refunded' under Section 244A of the Income Tax Act. The assessee relied on the Supreme Court judgment in K. Lakshmanya & Co. v. Commissioner of Income Tax and a co-ordinate bench decision in the assessee’s own case, DCIT vs. Ms. Peerless General Finance & Investment Co. Ltd.The Revenue, on the other hand, relied on the CIT(A)’s order, which referenced the Supreme Court decision in CIT vs. Gujarat Fluoro Chemicals and the Delhi High Court decision in CIT vs. Indian Farmer Fertilizer Co-operative, arguing that interest on unpaid interest cannot be granted under Section 244A.Upon reviewing the rival contentions, the Tribunal analyzed the Supreme Court's interpretation of Section 244A in K. Lakshmanya & Co. v. Commissioner of Income Tax, which held that the expression 'refund of any amount' includes tax, penalty, and interest. The Tribunal also referenced several other judgments, including Sandvik Asia Ltd. and H.E.G. Ltd., which supported the view that interest on the refund amount is an integral part of the 'amount due' under Section 244A.The Tribunal concluded that the assessee is entitled to interest on the unpaid interest, following the precedent set by the Supreme Court and other relevant judgments. The Tribunal directed the Assessing Officer to verify the revised computation of interest provided by the assessee and grant the refund accordingly.Issue 2: Computation of Book Profits Under Section 115JBThe second issue involved the computation of book profits under Section 115JB of the Income Tax Act, specifically whether the provision for diminution in the value of investments and the provision for Non-Performing Assets should be excluded.During the hearing, the assessee's representative admitted that the challenge to the retrospective amendment in Section 115JB was dismissed by the Calcutta High Court. Consequently, the Tribunal agreed with the decision of the Assessing Officer to include these provisions in the computation of book profits, thereby allowing the Revenue's grounds on this issue.Conclusion:The appeal was partly allowed, with the Tribunal ruling in favor of the assessee on the issue of interest on the outstanding refund, and in favor of the Revenue on the issue of computation of book profits under Section 115JB. The Assessing Officer was directed to verify and grant the refund in accordance with the law.