TaxTMI 
TaxTMI 
2011 (2) TMI 1232
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....fund till ast June, 2003. 3. When s. 234D was introduced into the IT Act, 1961 (for short hereinafter referred to as 'the Act'), the assessment was completed under s. 143(3) for the assessment year in question 1999-2000 on 20th Dec., 2004 determining the income-tax at Rs. 5,41,47,331 wherein interest under s. 234D was calculated only from ast June, 2003 onwards and not from the date of issue of refund which was in March 2002. The AO treated this as a mistake apparent from the record and accordingly, issued a notice under s. 154 of the Act. The assessee contested the said proceedings by contending that since s. 234D was inserted into the statute w.e.f. ast June, 2003, no interest under the said section is leviable from any earlier da....
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....ellate authorities. 6. In this background, s. 234D came to be inserted by the Finance Act, 2003 w.e.f. ast June, 2003. It reads as under: "(1) Subject to the other provisions of this Act, where any refund is granted to the assessee under sub-s. (1) of s. 143, and:- (a) no refund is due on regular assessment; or (b) the amount refunded under sub-s. (1) of s. 143 exceeds the amount refundable on regular assessment, the assessee shall be liable to pay simple interest at the rate of one-half per cent on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment. (2) Where, as a result of an ....
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....made its intention clear and unambiguous. In other words, it is not retrospective. It comes into effect from only ast June, 2003. The liability to pay interest on such a refund arises from the date of refund and not from the date of the assessment order. When the assessment order quantifies the tax payable and if at such a time, it is found that the assessee has been paid a refund, which he is not entitled to in law, he is liable to refund the said amount. Therefore, merely because the order of assessment was passed subsequent to the insertion of the said provision in the Act, would not make the said provision retrospective. The provision providing for imposition of interest is a substantive provision. In the absence of a contract or a usag....
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....arging section which fixes the liability is strictly construed but that rule of strict construction is not extended to the machinery provisions which are construed like any other statute. The machinery provisions must, no doubt, be so construed as would effectuate the object and purpose of the statute and not defeat the same. [See Whitney us. IRC (1926) AC 37, CIT vs. Mahaliram Ramjidas (1940) 8 ITR 442 (PC), India United Mills Ltd. vs. CEPT (1955) 27 ITR 20 (SC) : (1955) 1 SCR 810 and Gursahai Saigal vs. CIT (1963) 48 ITR 1 (SC) : (1963) 3 SCR 893.] But it must also be realised that provision by which the authority is empowered to levy and collect interest, even if construed as forming part of the machinery provisions, is substantive law f....
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.... to conflicts and creates certain anomalies which could never have been intended by the legislature." 10. Therefore, in the absence of any express words used in the provision making the levy of interest retrospective, it is only prospective i.e. from the day it came into force i.e., ast June, 2003. In fact, this view also finds support from the judgment of the Delhi High Court, in the case of Director of IT vs. Jacobs Civil Incorporated and Mitsubishi Corporation (2010) 235 CTR (Del) 123 : (2010) 45 DTR (Del) 163 : (2011) 330 ITR 578 (Del). 11. Yet another judgment of the Constitution Bench of the apex Court in the case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala (1966) 60 ITR 262 (SC) where it has held as under : &n....