TaxTMI 
TaxTMI 
2014 (1) TMI 447
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....tances of the case, the Appellate Tribunal is correct in law; in refusing to accept the contention of the applicant that interest on the refund accrued from the previous year relevant to the assessment year 1982-1983 and interest is chargeable to tax in the respective years for which interest is paid?" 2) The undisputed questions as recorded by the Tribunal are that for the assessment year 1982-1983, assessment was completed with substantial additions raising a huge demand. The assessee paid the demanded tax and thereafter availed the appellate remedies and in that process the Appellate Tribunal had finally passed an order granting substantial relief to the assessee on 16.06.1989. Thereafter, Assessing Officer gave effect to the order of the Tribunal by Orders dated 18.09.1989, thereby refunding the excess amount paid along with interest worked out upto 31.10.1995. In that process, the assesse received interest of Rs.79,950/- for the period 30.10.1985 to 31.08.1989. The Assessing Officer brought to the tax the amount in the assessment year 1990-1991 ignoring the claim of the assessee to spread over the said amount for the assessment years starting with assessment orders 1985-1986 ....
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....submit that the right to claim interest by the assess is dependent on an order being passed under Section 240 and 244 of the Income Tax and in that view of the matter, the right to claim interest would accrue to the assesse only on the date of consequential order passed pursuant to the order of the Appellate Authority. In that view of the matter, the interest income assessable was received by the assessee for the accounting year 1989-1990 in the assessment year 1990-1991. He would rely on the judgments of the three judgments by placing reliance on the judgments of Orissa, Kerala and Allahabad High Courts reported in Commissioner of Income-Tax Vs. Sri Popsingh Rice Mill (1995) 212 ITR 385 (Orissa), Smt. K. Devayani Amma Vs. Deputy Commissioner of Income-Tax and Another (2010) 328 ITR 10 (Ker) and J.K. Spinning and Weaving Mills Co., Vs. Additional Commissioner of Income-Tax, Kanpur (1976) 104 ITR 695 (Allahabad). 5) For the purpose of answering the questions referred, it is necessary for us to notice the statutory provisions with respect to refund of taxes paid in excess and the interest that is required to be paid. Section 237 Chapter XIX of the Income Tax Act, deals with refund. ....
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....Commissioner of Commissioner whose decision thereon shall be final." 11) Section 244(A) (3) of the Act is omitted as not relevant for the purpose of this case. 12) Section 244(A) (4) of the Act, reads as under: "The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years. Provided that in respect of assessment of fringe benefits, the provisions of this sub-section shall have effect as if for the figures "1989", the figures "2006" had been substituted." 13) A close scrutiny of the Sections 237 and 240 of the Act would reveal that the statutory right is conferred on the assessee to get refund of the excess tax paid and such refund shall be made to the asssessee even without his having to make any claim in that behalf. Section 244(A) of the Act entitles the assesse to get interest on the refund amount and such interest is payable from the date of payment of tax or payment of penalty from the date till refund is granted. It is clear from the statutory provisions as applicable to the relevant assessment years there i....
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....upra), the same is a short judgment, which simply approved the judgment of the Madras High Court reported in T.N.K. Govindarajulu Chetty Vs. Commissioner of Income-tax (1973) 87 ITR 22 (Mad.). In the Madras Judgment after thoroughly analyzing the various legal principles with regard to system of accounting and also the concepts of accrual the Court held.- "11. In this case the liability to pay interest would arise when the compensation amount due to the assessee had not been paid, in each of the relevant years. Therefore, the accrual of interest has to be spread over the years between the date of acquisition till it was actually paid. We are not in a position to accept the contention of the revenue that even if the accrual has taken place earlier, the Income-tax Officer can proceed to assess the income on the basis of receipt notwithstanding the earlier accrual as he has an option to assess the income by way of interest either on the basis of accrual or on the basis of receipt, and that the decision of the Mysore High Court in Commissioner of Income-tax v. Sampangiramaiah, in so far as it proceeds that the accrual alone ....
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....ood law. In all the above cases, the principle which can be culled out is that once the income has legally accrued to the assessee, i.e. the assessee has acquired a right to receive the same, though its valuation may be postponed to future date, the determination or quantification of the amount does not postpone the accrual. In other words, if the right has legally accrued to the assessee, the right should be deemed to have accrued in the relevant year even though the dispute as to right is settled in the later year, by the one or the other of the authorities in the hierarchy. 17) Now, coming to the judgments referred to above, the learned counsel for the department may be looked into. Firstly, the case referred is the judgment of the Kerala High Court reported in Smt. K. Devayani Amma Vs. Deputy Commissioner of Income Tax And Another (2010) 328 ITR 10 (Ker). In the said judgment, though the Kerala High Court referred the case of Rama Bai (3rd Supra), there was no discussion about the principles as approved in the judgment of the Supreme Court. Further, though the provisions of 240 and 244(1A) of the Act were mentioned, the Court had observed that interest on refund arises only wh....
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....h respect to the provisions contained in Indian Income Tax Act, 1922, and there is a difference in the statutory scheme with the Indian Income Tax Act, 1961. Further, in the process of interpreting the provisions in 1922 Act, the Court had taken into consideration that interest became payable to the assessee only when the assessments for the years in dispute were made which were in fact made in 1956, though the assessments were 1951-1952 and 1952-1953. As a matter of fact, the Court while agreeing with the law laid down in Sapangai Ramayya's case (12th supra) had recorded "it is the date of accrual and not the receipt which is material in cases where mercantile system of accounting is followed. The date of accrual in the Mysore case was the date of possession while the date of accrual in the present case is the date of assessment. In another judgment of the Orissa High Court reported in Sri Popsingh Rice Mill case (4th Supra), the question considered by the Orissa High Court is "Whether, on the facts and in the circumstances of the case, the income received by the assessee by way of interest under Section 244 of the Income-tax Act, 1961, on refund determined and quantified under S....