TaxTMI 
TaxTMI 
2015 (7) TMI 493
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.... giving effect to the said order of CIT(A) had made various adjustments against which the present appeal has been filed. The various issues involved in this appeal are discussed as under. 3. ITA No.1700/Bang/2003 (Assessment year 1990-91): The Revenue has raised as many as 8 grounds of appeal. Ground Nos.1, 7 and 8 are general in nature and therefore, need no adjudication. Ground of appeal No.2 is that the CIT(A) failed to appreciate that the assessee itself had added Rs. 11,37,21,520/- on account of provision for bad and doubtful debts and while computing the book profits u/s 115J of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short] therefore the same should be added back. 3. Brief facts relating to this issue are that in the regular computation of income under the Act, the assessee had added the provision for bad and doubtful debts, while in the computation u/s 115J of the Act, the assessee claimed that the above amount represented provision made for diminution in the value of an asset. However, AO added the same to the book profits u/s 115J of the Act against which the assessee preferred an appeal before the CIT(A) stating that the same cannot ....
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.... law raised in the memorandum of appeal. However, the substantial question of law which arises for consideration in this appeal is as under: 'Whether the provision for doubtful debts of Rs. 8,73,11,283/- and the provision for loss of assets of Rs. 1,20,00,000/- is required to be added back to the book profit as required under section 115JA of the Act in terms of Explanation to section 115JA of the Act, in particular clauses (c) and (g)' 4. This Court had an occasion to consider the said question in the case of Commissioner of Income-tax -vs- Yokogawa India Ltd., reported in (2012) 204 Taxman 305 wherein it was held as under:- "In the present case, the debt is an amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore it was held that Item (c) of the Explanation is not attracted to the facts of the case. Item (c) in s. 115JA and 115JB(1) are identical. In order to attract the Explanation the debt which is doubtful or bad should satisfy the requirement contemplated in Item (c) of the Explanation, It is the amount or amount....
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....debit the P&L as/c but simultaneously also reduce the loans and advances or the debtors from the assets side of the balance sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/debtors is shown as net of the provisions for the impugned bad debt. Therefore, in the first place if the bad debt or doubtful debt is reduced from the loans and advances or the debtors from the assets side of the balance sheet the Explanation to s. 115JA or JB is not at all attracted. In that context even if amendment which is made retrospective the benefit given by the Tribunal and the CIT(A) to the assessee is in no way affected. In that view of the matter, we do not see any merit in this appeal. From the aforesaid judgment it is clear if the bad debt or doubtful debt is reduced from the loss and advances from the debtors on the assets side of the balance sheet, the Explanation to section 115JA or 115JB of the Act is not at all attracted. If it is not reduced, section 115JA of the Act is attracted. It is purely a question of fact. From the material on record it is not possible to make out whether the aforesaid bad and doubtful debts are reduce....
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....e AO, while giving effect to the order of the CIT(A), had added an amount of Rs. 5 lakhs being 'provision for exchange fluctuation', while computing book profits. Before the CIT(A), assessee had submitted that the said amount represented exchange loss on account of exchange fluctuation relating to the assets and liabilities of its London branch and therefore the above loss has been incurred in the normal course of carrying on business and further that in the absence of any provision in the Explanation to sec.115J, the same cannot be added in computing the book profits. The CIT(A) holding that the addition can be made only of the items provided for under the Explanations (a) to (f) to sec.115J of the Act and that the exchange fluctuation is not provided under the Explanation, held that the same cannot be added back. Aggrieved by the relief given by the CIT(A), the revenue is in appeal before us. 6. The learned Departmental Representative supported the order of the AO while the learned counsel for the assessee supported the orders of the CIT(A) and also the decision of the Hon'ble High Court in the assessee's own case for earlier assessment year. The learned counsel for the assessee....
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....fully considered the facts of the case and the submissions made by the appellant. As submitted by the AR, I had in my order cited supra, respectfully following the decision of the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. (supra) held that the Department has to grant interest by first adjusting the refund granted against the interest due and thereafter against the tax refund due. Accordingly, the AO is directed to rework the interest due to the appellant by first adjusting the refund granted against interest and thereafter against the tax refund due. The AO for this purpose may take into consideration the working furnished by the appellant along with the grounds of appeal and a copy of which may be furnished by the appellant to the AO. 6.4 With regard to the contention of the appellant that interest is to be granted for the month of payment/adjustment of tax/granting of refund. I had in my order cited supra held that as per the provisions of Rule 119A, interest is to be granted for the month of payment/refund of tax. The AO is accordingly directed to compute the interest. This ground of appeal is accordingly allowed." 8. Aggrieved by the relief given by the CIT(A),....
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....e case of Gujarat Fluoro Chemicals (cited supra) wherein taking note of the insertion of sec.244A of the Act by the Finance Act 4 of 1988 which clarified that it was only that interest provided for under statute which may be claimed by an assessee from revenue and no other interest on such statutory interest, the Hon'ble Court held that the decision in the case of Sandvik Asia Ltd., (cited supra) was misquoted and misinterpreted by the assessees and also the revenue. It was submitted that by the learned counsel for the assessee before us that the assessee is not seeking interest on interest, but is only seeking of the adjustment of the tax refund first to the interest due and thereafter to the tax refund. He, therefore, had submitted that assessee's as well as CIT(A)'s reliance on Sandvik Asia Ltd., (cited supra) was misplaced. We agree with the above contention of the assessee. Now, the learned counsel for the assessee had placed reliance upon the judgment of the Apex Court in the case of HEG Ltd. (cited supra). Before applying the said judgment to the case before us, the provision of sec.244A is reproduced hereunder for ready reference: "244A. (1) Where refund of any amount beco....
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.... 1993 and 31st Dec., 1997 in terms of s. 244A of the IT Act. 8. Therefore, this is not a case where the assessee is claiming compound interest or interest on interest as is sought to be made out in the civil appeals filed by the Department. 9. 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 s. 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. 45,73,523 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 s. 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 s. 244A o....
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.... to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely:- (a) where the refund is out of any tax paid under section 115WJ or collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted: Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 115WE or sub-section (1) of section 143 or on regular assessment; (b) in any other case, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted. Explanation.-For the purposes of this clause, "date of payment of tax or penalty" means the date on and from which the....
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....d is payable on the date of the refund. Thus, when the Revenue does not pay full amount of refund but part amount is paid, they will be liable to pay interest on the balance outstanding amount. The balance outstanding amount may consist of the tax paid or the interest, which is payable till the payment of the part amount and interest payable on the principal amount, which remained outstanding thereafter. 10. The Delhi High Court in the case of Commissioner of Income Tax versus Goodyear India Limited, 2001 (249) ITR 527 (Delhi) had occasion to examine the earlier provisions of refund under Sections 240 and 244 of the Act and had observed as under:- "Section 244 deals with interest on refund where no claim is needed. Sub-section (2), inter alia, provides that where a refund is due to the assessee, "in pursuance of an order referred to in Section 240" and the Assessing Officer does not grant the refund within the stipulated time, the Central Government is required to pay simple interest at the stipulated rate. Section 240 deals with refund on appeal, etc. This provision clearly lays down that where as a result of any order passed in appeal or other proceedings under this Act, refu....
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....t under Section 244A was given of the excess TDS and advance tax. Again, after the orders of the Tribunal were passed and the refund became payable as a consequence thereof, the excess amount of tax was refunded along with interest payable thereupon under Section 244A of the Act. Thus, the calculations are not disputed, as observed by the Tribunal also. 21. When the refund of tax becomes payable as a result of orders passed in appeal or other proceedings under the Act, this refund is to be given along with interest, which is to be calculated as per Section 244 of the Act. If that interest is paid along with the excess tax, no further payment is to be made. It is only when the excess amount of tax is refunded but the interest is not refunded along therewith, the retention of interest amount would become unjustified and interest on interest would also become payable. The reason is simple. It is the tax which was paid in excess by the assessee which became refundable. The assessee would be compensated by paying interest thereupon. It is only when the interest is not refunded along with excess tax that the withholding of the said interest becomes unjustified and it becomes an amount ....
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....t 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 aforestated grounds, we are of the view that the assessee was entitled to interest for 57 months on Rs. 45,73,528/-. The principal amount of Rs. 45,73,528 has been paid on December 31, 1997 but net of interest which, as stated above, partook of the character of "amount due" under Section 244A." 15. A reading of the aforesaid passage from the decision of ....
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....ate of actual payment. Under Explanation to Section 140A(1), it is stipulated where the amount paid by an assessee under self-assessment falls short of the aggregate amount of tax and interest aforesaid, the amount paid shall first be adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax payable. The interpretation given by us follows the same principle, when Revenue defaults and makes part payment of the amount refundable. The aforesaid interpretation also ensures that the Assessing Officer/Revenue refund the entire amount, which is due and payable, including interest payable under Section 244A. It discourages part payment. There is no other provision under the Act under which an Assessing Officer/Revenue can be made liable to pay interest when part payment is made and the entire amount, which is refundable is not paid to the assessee. Otherwise the Assessing Officer/Revenue can refund the principal amount and not pay the interest component under Section 244A for an unlimited period with impunity and without any sanction, which would amount to granting premium to a non- compliance of law. In the present case, the interest component was wi....