TaxTMI 
TaxTMI 
2012 (9) TMI 517
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....vocates for the appellant and the respondent, the appeal itself is taken up for final disposal. 3) The facts leading to this appeal are as under :- a) On 30/10/2002, the respondent-assessee filed its return of income for the assessment year 2002-03 declaring an income of Rs.2620,22,91,100 Crores. It claimed a refund of Rs.22,88,82,482/- in its return of income. b) On 28/2/2003, the return of income was processed under section 143(1) of the Act and refund was determined at Rs.40,52,96,970/-. However on 13.03.2003 the Assessing Officer in exercise of powers under section 154 of the Act rectified the refund payable to Rs,22,88,82,482/-. Consequent to the above, on 25/03/2003 a refund cheque for Rs.22,88,82,482/- was issued by the appellant-revenue to the respondentassessee. c) Thereafter, on 10/3/2005 the assessment was completed under section 143(3) determining the income at Rs.3031,14,54,900/- and arriving at a demand of Rs.200,39,55,005/-. Consequently a demand for interest under section 234D of the Act for Rs.2,96,63,169/- on the excess refund of Rs.22,88,82,482/- was made on the respondent-assessee. d) The Commissioner of Income Tax (Appeals) by an order dat....
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....: "Explanation 2. - For the removal of doubts, it is hereby declared that the provisions of this section shall also apply to an assessment year commencing before the 1st day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date." 5(A). The object of introducing the Explanation 2 to section 234D of the Act has been explained in the memorandum explaining the provisions of the Finance Bill 2012 inter alia as under: "Under the existing provisions of section 234D of the Income Tax Act (inserted with effect from 1st June, 2003, vide the Finance Act,2003), where any refund has been granted to the assessee under subsection( 1) of section 143 and subsequently on regular assessment, no refund or lesser amount of refund is found due to the assessee, then,the assessee shall be liable to pay simple interest at the rate of one half per cent, on the excess amount so refunded for the period starting from the date of refund to the date of such regular assessment. In a recent decision of the court, it has been held that the provisions of section 234D inserted with effect from 1st June, 2003 would be applicable from the assessment year 20....
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....ved prior to 1/6/2003 i. e. the date when section 234D was introduced so long as the proceedings in respect of the concerned assessment year for which the refund was granted is completed after 1/06/2003 ; b) The issue is not covered by the decision of this court in Bajaj Hindustan Limited (supra) as this court had no occasion to consider Explanation 2 to section 234D as the same was introduced only by the Finance Act, 2012 ; c) The Scheme of the Act provides that interest is payable whenever there is a delay in payment of tax by an assesseee or delay in payment of refund by the revenue. In support of the same he invites attention to sections 234B and 234C of the Act which levy interest for default and deferment of payment of advance tax respectively. The revenue is obliged to pay interest to the assessee under sections 243 and 244 and 244A of the said Act for any delay in grant of refunds. Section 234D of the said Act was introduced so as to provide for levy of interest on any refund received by an assessee under section 143(1) of the Act which is found not due to the extent claimed while finalizing the assessment under section 143(3) of the Act. d) In any view of the matt....
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....this view of the matter, we do not see the appeal giving rise to any substantial question of law. The appeal is, therefore, dismissed in limini with no order as to costs." The decision of the Tribunal is based on this judgment. 9) It is important to bear in mind that Bajaj Hindustan Limited (supra) was rendered prior to the introduction of Explanation-2 to section 234D by the Finance Act, 2012. The question before the Division Bench indeed was whether interest cannot be charged in respect of refunds granted prior to 1/6/2003. It is however, important to note that the Division Bench did not decide the appeal on the basis that the refund was made prior to 1/6/2003 but on the basis that "the subject provision (section 234D) came on the Statute book w.e.f. 1/6/2003". The Division Bench went on to hold that "the said provision (section 234D) does not have retrospective effect". The judgment was thus on the basis that section 234D itself did not apply prior to 1/6/2003. The Division Bench decided the question of law on the basis that section 234D itself does not operate in any manner prior to 1/6/2003. The Division Bench did not proceed on the basis that section 234D applied to the....
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.... the above case the issue was with regard to charging of interest under the said Act for the assessment year 1957-58, 1958-59 and 1959-60 when there was a delay in filing the return of income under the Indian Income Tax, 1922, particularly, when the same were filed when the said Act was in operation. The said Act provided for charging of interest for delayed filing of return of income. There was no provision for charging of interest for delayed filing of return of income under the Indian Income Tax Act, 1922. The Court held that such charging of interest as provided in the said Act not being a matter of procedure cannot apply retrospectively to a breach under the Indian Income Tax Act, 1922. This conclusion was reached as Section 297 of the said Act was made applicable to returns of income filed after the commencement of this Act only with regard to the procedure specified under the said Act. 14) The rule against retrospective operation of a statute unless so provided in the statute either expressly or by necessary implication is well settled. In fact in the matter of Ram Kumar Agarwalla and Bros. (P) Ltd. (supra) the decision of the Apex Court in the matter of Govinddas ....
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....n 2 to section 234D has been explained in the memorandum explaining the provisions of the Finance Bill 2012. It inter alia states that certain decisions of the Court holding that the provisions of section 234D of the Act would be applicable only from Assessment Year 2004- 05 were not in conformity with the legislative intent. Therefore, to clarify the position an explanation was sought to be added to the effect that section 234D would be applicable to any proceeding which is completed on/or after 1/6/2003 irrespective of the assessment year to which it pertains. The said memorandum has been extracted above and it makes it clear that the explanation was sought to be added so as to clarify doubts with regard to the correct meaning/intent of the legislature in introducing section 234D of the Act. 16) Explanation 2 according to Mr. Murlidhar does not affect the decision of this court in Bajaj Hindustan Sugar (supra). He relied upon the decision of the Apex Court in S. Sundaraman Pillai v. V.R. Pattabiraman reported in AIR 1985 (SC) 582 to submit that an Explanation added to a statutory provision is not a substantive provision but meant merely to clarify/explain the statutory provisi....
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....had entered into an arbitration agreement. The argument was that the words "is subject of an arbitration agreement." in section 8(1) postulate an agreement in existence when the parties come before the Court and not one entered into afterwards. The Apex Court construed the words "is the subject of an arbitration agreement" as follows :- "In our view, the phrase "which is the subject of an arbitration agreement" does not, in the context, necessarily require that the agreement must be already in existence before the action is brought in the court. The phrase also connotes an arbitration agreement being brought into existence while the action is pending. Black's Law Dictionary has defined the word "is" as follows: "This word, although normally referring to the present, often has a future meaning, but is not synonymous with 'shall have been'. It may have, however, a past signification, as in the sense of 'has been'." 20) Mr. Murlidharan submits that the decision in the matter of P. Anand Gajapati Raju (supra) would have no application to the present case. According to him the above decision of the Apex Court should be read in the context of the facts involved therein na....
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....vorced from the assessment year or the assessment proceeding. Consequently to hold that interest on such refund would only run from 1/06/2003 would be to curtail the plain meaning of Explanation 2 to Section 234D. 23) Section 143(4) also supports our view. It reads as under :- "Section 143 - Assessment - .......................................................................... (4) Where a regular assessment under sub section (3) of this section or section 144 is made,- a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment; b) if no refund is due on regular assessment or the amount refunded under sub section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly". It is clear therefore, that excess refund determined under section 143(3) of the Act is deemed to be tax payable by the assessee. However, as there was no provision of interest on the grant of refund under Section 143(1) of the Act it became necessary to provide for the sam....
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....ld not be open to restrict the operation of section 234D of the Act only with effect from 1/6/2003. 26) A statute could be retrospective in operation being expressly stated or by necessary implication. The case of the revenue is that section 234D as introduced on 1st June, 2003 was retrospective in operation by necessary implication. However, as doubts were raised about its retrospectivity, the same was clarified by adding an explanation to section 234D by Finance Act, 2012. Under the Act what is brought to tax is not the income of the assessee in the assessment year but the income of the assessee in the previous year. The liability to tax arises on account of the Finance Act which fixes the rate at which the tax is to be paid. The law to be applied is as existing on the 1st day of April of the previous year. In support the Counsel for the respondent relied upon the decision of the Supreme Court in Karimthuravi Tea Estate ltd. v. State of Kerala 60 ITR 262, Maharajah of Pithapurm v. CIT 13 ITR 221 (PC) and CIT v. Scindia Steam Navigation Co. Ltd. 42 ITR 539. The aforesaid decisions are not relevant for our purpose particularly, in view of the fact that Explanation 2 to section 2....