TaxTMI 
TaxTMI 
2016 (2) TMI 171
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....ing an integrated steel plant at Bhandara entered into an agreement with M/s. Mannesmann Demag (MDH) Germany (hereinafter referred to as "the German company") on 8.11.1985 for transfer of technical knowhow. As per the said agreement, the petitioner company was required to make the payment of technical knowhow fee in three instalments of Rs. 25,48,333/DM, totalling to Rs. 76,45,000/. 3] That the petitioner Company in pursuance to the said agreement deducted tax at source (TDS) and paid/deposited the same with respondent as detailed below : Amount paid to MDH (Germany) in D.M. TDS in Rs. Date of payment Of TDS. 2548333 27,72,600.00 29.03.1986. ------ 1,48,126.00 22.05.1986 2548333 36,56,000.00 16.12.1987 ------ 10,666.00 11.08.1988 53,70,567.00 26.05.1990 That the petitioner Company on 26.5.1990 deducted tax at source of Rs. 53,70,567/for the third and final instalment and deposited the same in advance with the Assistant Commissioner of Income Tax, Survey CircleII, Permanent Account No. S14/ Special Range2 in accordance with the provisions of Section 195 of the Act. 4] Subsequently, since the German co....
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....equest for grant of interest, the petitioner moved Delhi High Court seeking a direction to the respondents to pay the interest. However, the Division Bench of Delhi High Court was of the view that it did not have territorial jurisdiction to entertain the petition and it is the Nagpur Bench of the Bombay High Court which had a territorial jurisdiction and, as such, dismissed the petition for want of territorial jurisdiction, reserving the right of the petitioner to approach this Court. After the orders were passed by the Delhi High Court on 2.7.1998, the present petition has been filed. Rule was granted in the matter on 22.12.1998. Thereafter the respondents have also filed on record their submission on affidavit. 6] Shri V.R. Thakur, learned Counsel for the petitioner, submits that in view of the provisions of Clause (7) of Section 2 read with provisions of Sections 195, 200, 201 of the Income Tax Act, petitioner would be "assessee" as provided under the said Act. The learned Counsel in any case submits that in view of provisions of Sections 160 & 163 of the said Act, the petitioner would be a representative assessee of the German company and as such, the application for refund ....
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.... He submits that though the German company had not made an application for refund and it was made by the petitioner, the CBDT gratuitously granted the prayer for refund. He submits that the same was done independent of the provisions of the Act. The learned Counsel submits that the provisions of Section 244A shall be applicable only when the refund was made under the provisions of the Act and not independent of the provisions of the Act. The learned Counsel, therefore, submits that the respondents have rightly rejected the claim of the petitioner for interest. The learned Counsel relies on the judgment of the Apex Court in the case of Commissioner of Income Tax, Gujarat .vs. Gujarat Fluoro Chemicals reported in 2013(12) SCALE 281. 8] For appreciating the rival submissions, it will be relevant to refer to certain provisions of the Income Tax Act. Clause (7) of Section 2 which is a definition clause reads thus : "(7) "assessee" means a person by whom any tax or any other sum of money is payable under this Act, and includes - (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or assessment of fringe be....
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..... (1) For the purposes of this Act, "agent", in relation to a nonresident, includes any person in India- (a) ...........................................; or (b) who has any business connection with the nonresident; or (c) from or through whom the nonresident is in receipt of any income, whether directly or indirectly; or (d) ..........................................; and includes also any other person who, whether a resident or nonresident, has acquired by means of a transfer, a capital asset in India : It will also be relevant to refer to the provisions of Section 244A which reads thus : Interest on refunds. "244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely :- (a) .............. (b) in any other case, such interest shall be calculated at the rate of onehalf 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 paymen....
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....titled to receive was directly through the present petitioners. In that view of the matter, we find that the present petitioner would squarely fall within subclause (b) of Section 2(7) of the said Act. 11] The perusal of Section 195 would reveal that any person responsible for paying to a foreign company any sum chargeable under the provisions of the said Act, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, whichever is earlier, is required to deduct income tax thereon at the rate in force. Subsection (1) of Section 200 would further reveal that any person deducting any sum in accordance with the foregoing provisions of the said Chapter is required to pay within the prescribed time the sum so deducted to the credit of the Central Government as the Board directs. Subsection (1) of Section 201 would show that where any person including the Principal Officer of a company, who is required to deduct any sum in accordance with the provisions of the said Act, does not deduct or after so deducting fails to pay the whole or any part of the tax as required under the said A....
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....ect view in law. 15] It will be relevant to refer to the judgment of Their Lordships of the Apex Court in the case of Union of India .vs. Tata Chemicals (cited supra). The facts in the present case are almost similar to the facts which fell for consideration before Their Lordships of the Apex Court. In the said case, during the assessment year 199798, Tata Chemicals Limited (hereinafter to be referred to as "the resident/deductor") had commissioned its naphtha desulphurisation plant and to oversee the operation of the said plant it had sought assistance of two technicians from a Denmark company. The said company had raised invoice partly towards service charges of the technicians and partly for reimbursement of the expenses. The resident/deductor had approached Income Tax Officer under Section 195(2) of the Act requesting him to provide information/determination as to what percentage of tax should be withdrawn from the amount payable from the foreign company. On request so made the Assessing Officer determined and passed special order under Section 195(2) of the Act directing certain amount to be deducted and credited the same in favour of Revenue. 16] The resident/deductor d....
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....of the Circular dated 20.4.2000. "33. We would begin our discussion by referring to Circular No. 790, dated 20.04.2000, issued by the Board. Omitting what is not necessary, the material portion of the circular is extracted : "........ 6. Refund to the person making payment under Section 195 is being allowed as income does not accrue to the nonresident. The amount paid into the Government account in such cases, is no longer 'tax'. In view of this, no interest under section 244A is admissible on refunds to be granted in accordance with this Circular or on the refunds already granted in accordance with Circular No. 769." 18] It will be appropriate to refer to following observations of Their Lordships in paragraph nos. 36, 37, 38 and 39, which read as under :" 36. Section 240 of the Act provides for refund of any amount that becomes due to an assessee as a result of an order in appeal or any other proceedings under the Act. The phrase "other proceedings under the Act" is of wide amplitude. This Court has observed that, the other proceedings under the Act would include orders passed under Section 154 (rectification proceedings), orders passed by the High....
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....eimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course." "39. In the present case, it is not in doubt that the payment of tax made by resident/depositor is in excess and the department chooses to refund the excess payment of tax to the depositor. We have held that the interest requires to be paid on such refunds. The catechise is from what date interest is payable, since the present case does not fall either under clause (a) or (b) of Section 244A of the Act. In the absence of an express provision as contained in clause (a), it cannot be said that the interest is payable from the 1st of April of the assessment year. Simultaneously, since the said payment is not made pursuant to a notice is....
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.... Lordships further held that even if there is no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, the Government cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The Hon'ble Apex Court further holds that the State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be in the like circumstances. It has further been held that the obligation to refund money received and retained without right implies and carries with it the right to interest. 22] It can thus clearly be seen that the contention of the Revenue that the petitioner is not an assessee, in view of what has been discussed by us hereinabove, is not sustainable in law. In any case, the contention of the Revenue that the resident/deductor was not entitled to apply for refund of the TDS deposited by it, in excess of the liability on the basis of circular dated 20.4.2000 is specifically negated by Their Lordships of the Apex Court. 23] We further find that the contenti....
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....n be said to mitigate the hardships of assessee. On the contrary, the reliance is sought to be placed on a communication by CBDT to the Commissioner of Income Tax, Pune in support of the contention that the refund is only made gratuitously and independent of the provisions of the Act. 25] At the cost of repetition, we have no hesitation in holding that the refund made by the respondents would squarely fall within the ambit of Section 240 of the said Act, inasmuch as Their Lordships in the case of Tata Chemicals (cited supra) have clearly held that the provisions of Section 240 are wide enough and they include all sorts of proceedings. Undisputedly, the tax which was deducted and paid by the assessee was under the provisions of Sections 195 and 201 of the said Act. Undisputedly, the advance tax which was paid was more than the liability to pay the tax. The tax was deducted and paid on an anticipation that the third instalment was to be paid to the nonresident German company. However, after the agreement with the nonresident German company, whereby it had waived the third instalment, the TDS on account of the payment of the third instalment was required to be refunded by the respo....