TaxTMI 
TaxTMI 
2016 (2) TMI 470
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....nation to Section 244A(1)(b) of Income Tax Act, 1961 bars payment of interest upon refund of excess payment on selfassessment? (III) Whether grant of interest to the assessee on refund arising due to excess payment on self assessment is contemplated by the Income Tax Act, 1961? (IV) Whether in the facts and circumstances of the case the Tribunal was justified in granting the aforesaid relief to the assessee on the ground that the issue was debatable? The facts and circumstances briefly stated are as follows:- The assessee paid tax in respect of the relevant assessment years including self-assessment tax u/s.140A of the Act. Subsequently, the assessment u/s.143(3) was completed for both the assessment years 1992-93 and 1993-94 and certain additions were made. The assessee preferred an appeal before the Commissioner of Income Tax (Appeals) (hereinafter referred to as 'CIT(A)') who allowed certain relief resulting in an order for refund. While giving effect to the said order of the learned CIT(A), an order for refund along with interest was allowed to the assessee for both the years under consideration. Subsequently, the assessing officer issued a no....
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....er cent of the tax as determined under sub-section (1) of Section 115-WE 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 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 amount of tax or penalty specified in the notice of demand issued u/s. 156 is paid in excess of such demand. (2)... (3)... (4)..." Mr. J. P. Khaitan learned senior advocate appearing for the assessee contended as follows: (I) that the interest is payable on the refund of the excess selfassessment tax under Clause (b) of Sub-Section (1) of Section 244A which should be construed liberally and in favour of the assessee. He relied on the case of Union of India -Vs- Tata Chemicals Ltd. reported in (2014) 6 SCC 335; (II) that section 244A(1)(a) provides for interest on refunds out of Advance tax and tax ....
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....ot provide for any such interest. He relied on CIT v. Engineers India Ltd. reported in [2015] 373 ITR 377 (Delhi) and (V) that the Act envisages the circumstances where interest may be granted on refund of excess tax and interest cannot be granted otherwise than in accordance with the statutory scheme. Hence there can be no debate as regards the question whether in a given situation interest can be granted on a refund of excess selfassessment tax. Thus the learned tribunal has erred in holding that the issue is debatable and beyond the scope of s.154 of the Act. We have heard the rival contentions advanced by the learned counsel for the parties and carefully perused the record. In the case of Tata Chemicals (supra) the issue before the Supreme Court was whether the resident/deductor is also entitled to interest on refund of excess deduction or erroneous deduction of tax at source u/s. 195 of the Act. In this case, the assessee was an Indian Company engaged in manufacture of fertilizer. The assessee engaged the services of two technicians from a foreign company. The said foreign company raised an invoice for the services rendered by the technicians, which included rei....
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....ate authority to refund the same, therefore, it should carry interest as a matter of course. Furthermore, it was held that interest was in the nature of compensation for use and retention of money collected unauthorisedly by the department. In this regard, the Apex Court held as follows:- "37. A "tax refund" is a refund of taxes when the tax liability is less than the tax paid. As per the old section an assessee was entitled for payment of interest on the amount of taxes refunded pursuant to an order passed under the Act, including the order passed in an appeal. In the present fact scenario, the deductor/assessee had paid taxes pursuant to a special order passed by the assessing officer/Income Tax Officer. In the appeal filed against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid. The amount paid by the resident/deductor was retained by the Government till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention o....
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.... of Section 244A will not be applicable where payment is not made pursuant to any notice u/s.156. Furthermore, Clause (b) of Section 244A(1) is residual in nature and prescribes interest on refund from the date of payment of tax in cases which are not covered by Clause (a) of Section 244A (1). In this regard the Apex Court held as follows:- "39. In the present case, it is not in doubt that the payment of tax made by the 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 244-A 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 issued under Section 156 of the Act, Explanation to clause (b) specifically referred to as "in any other case", the interest is payable from the date of payment of tax. The sequel of our discussion is the....
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....f grant of the refund. No interest shall, however, be payable, if the amount of refund is less than 10 per cent of the tax determined on regular assessment; (b) if the refund is out of any tax, other than advance tax or tax deducted at source or penalty, interest shall be payable for the period starting from the date of payment of such tax or penalty and ending on the date of the grant of the refund. (Refer to example III in para 11.8)." (Emphasis supplied) The inferences to be drawn from the Board's circular is clear that if refund is out of any tax other than out of advance-tax or tax deducted at source, interest shall be payable from the date of payment of tax and ending on the date of the grant of refund. It is to be noted that nowhere does the CBDT even remotely suggest that interest is not payable by the Department on self-assessment tax. Moreover, the amount paid u/s. 140A of the Act on self assessment is an amount payable as and by way of the tax after noticing that there is likely to be shortfall in the taxes already paid. Thus this payment is considered to be a tax under the aforesaid provision. 8. The contention of revenue is that ....
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....he aforesaid provision could only be in respect of refund of excess payment made u/s. 156 of the Act. The aforesaid interpretation was negatived in the second appeal by the Tribunal as well as by the High Court and the Apex Court. 12. Similarly, the next contention urged on behalf of the revenue that the payment of interest should only be made from the date of notice u/s. 156 of the Act is issued to the petitioner in terms of Explanation to Section 244A(1)(b) of the Act cannot be accepted for two reasons. Firstly, as held by the Supreme Court in Tata Chemicals (supra), the Explanation would have effect only where payments of tax have been made pursuant to notice u/s. 156 of the Act. In this case, the payment has not been made pursuant to any notice of demand but prior to the filing of the return of income in accordance with Section 140A of the Act. Secondly, the provisions of Section 244A(1)(b) very clearly mandate that the revenue would pay interest on the amount refunded for the period commencing from the date the payment of tax is made to the revenue upto the date when refund is granted to the revenue. Thus, the submission of Mr. Pinto that the interest is payable not f....
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....ducted at source, advance tax paid, self-assessment tax paid and tax paid on regular assessment exceeds tax chargeable for the year as a result of an order passed in appeal or other proceedings under the Act. When refund is of any advance tax (including tax deducted/collected at source), interest is payable for the period starting from the first day of the assessment year to the date of grant of refund. No interest is, however, payable if the excess payment is less than 10 per cent of tax determined under Section 143(1) or on regular assessment. No interest is payable for the period for which the proceedings resulting in the refund are delayed for the reasons attributable to the assessee (wholly or partly). The rate of interest and entitlement to interest on excess tax are determined by the statutory provisions of the Act. Interest payment is a statutory obligation and non-discretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244-A is drafted and enacted. The language employed in Section 244-A of the Act is clear and plain. It grants substantive right of interest and is not procedural. The principles for grant of interest are the same as und....
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....n of this Act for any delay in furnishing; the return", makes it clear that there is no difference between: (i) the tax paid u/s. 115WJ, which deals with advance tax in respect of fringe benefits; or (iii) the tax collected at source u/s. 206C; or (iii) any tax paid by way of advance tax or any tax treated as paid u/s. 199, which deals with credit for tax deducted, which are provided u/s. 244A(1)(a). 12. The tax due on the returned income has to be paid by way of tax deducted at source (Section 199), advance tax (Section 209) or by way of self-assessment tax (Section 140A). In addition, where the assessment is completed at an income higher than the returned income, the tax payable by the assessee is specified in the notice of demand issued u/s. 156 of the Act. Where there is a shortfall in payment on tax vis-a-vis the tax finally due on the assessed income, the assessee is liable to pay interest u/s. 234B of the Act. Conversely, where the Revenue makes a high-pitched assessment which is subsequently reduced/modified in appeal, any payment of taxes made, which are subsequently refunded as a consequence of relief obtained in appeals, etc., are monies legitimately belonging t....
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....ed that the date of payment of tax referred to in clause (b) means the date on and from which the amount of tax is paid in excess of the notice of demand u/s.156 of the Act. Hence in a case where tax is paid prior to the demand, interest is payable from the date of the assessment order when the tax liability is determined. It is at that stage that the adjustment of tax paid actually takes place. Thus it cannot date back to the actual date of payment of tax. The Karnataka High Court rejected this contention of the revenue and held as follows:- "13. Therefore, the object behind the insertion of section 244A, as understood by the Department, is that an assessee is entitled to payment of interest for money remaining with the Government which would be ordered to be refunded. Therefore, if that is the object behind the insertion of section 244A, the contention of the Revenue that if the case does not fall under either of the clauses in section 244A, no interest is payable, is without any substance. 14. Clauses (a) and (b) specifically refer to the instances where interest is paid under the Act. It is not exhaustive. It is possible, in a given case, that after the expiry....
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....lcoholic liquor, forest produce, scrap, etc.) or Section 207 (Liability for payment of advance tax) have no connection with the liability to pay selfassessment tax. Therefore, clause (a) of sub-section (1) of Section 244A would not apply to refund out of the amount paid as self-assessment tax. Clause (b), on the other hand, is residuary provision. It opens with the expression "in any other case". Naturally, therefore, the liability of Revenue towards interest on refund from out of amount paid as self-assessment tax would fall under this clause. 32. Noticeably, for purposes of calculating the liability of the Revenue towards interest on the amount being refunded u/s. 244A(1)(b), the beginning point is prescribed as the "date of payment of tax (or penalty)". This expression is defined in the explanation appended to the clause to be indicative of the date of payment of the amount "specified" in the demand notice u/s. 156. Thus, the legislation makes it clear that for the residuary clause, the amount paid by the assessee (from which refund is to be made) must have been deposited pursuant to demand notice issued by the assessing authority. To put it conversely, the clause would....
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....n the case of Commissioner of Income Tax v. Sutlej Industries Ltd. (supra), the question had been examined in the facts and circumstances indicative of "high-pitched assessment" made by the Revenue and the refund of the self-assessment tax resulting from a claim to such effect being made by the assessee in the return. In the case at hand, the Revenue had not made the excessive assessment so as to impel the deposit of self-assessment tax in excess. The assessee did not make a claim for refund in the return. Such claim appears to have come later. 37. For the very same reasons as set out above, we are not inclined to endorse the view taken by Madras High Court in the case of CIT v. Cholamandalam Investment & Finance Co. Ltd. (supra) wherein in our view, the proposition of law on the subject was expounded in too broad terms. As clarified by the Supreme Court in the case of Commissioner of Income Tax, Gujarat v. Gujarat Fluoro Chemicals (supra), there is no general principle obliging the Revenue to pay interest on all sums wrongfully retained. It is trite that a fiscal statute is to be construed strictly. The claim of interest on refund of income tax has to be pegged on the sta....
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....sation for the same not an interest on interest. 7. Further it is brought to our notice that the Legislature by the Act No. 4 of 1988 (w.e.f. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest." The dissenting note struck in Engineers India Ltd. (supra) by the Division Bench of Delhi High Court does not commend to us for the following reasons:- a) The judgment in the case of Gujarat Fluro Chemicals is not even remotely connected with the issue which came up for consideration before the Division Bench. The issue was already covered by a judgement, in the case of Sutlej Industries (supra) of a co-ordinate bench. b) Apropos to the question one can argue on the basis of Gujrat Fluro Chemicals (supra) that "it is only that interest provided for under the statute which can be claimed by an assessee." c) The Apex Court in the case of Tata Chemicals (supra) opined, in paragraph 38 quoted above, that "providing for p....
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....t 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." The aforesaid right is, we admit, subject to provisions of Section 244A. Section 244A does not deny payment of interest in case of refund of amount paid under Section 140A. On the contrary Clause-(b) being a residuary clause necessarily includes payment made u/s. 140A. j) And finally in the instant case the CIT(A) found that the income tax liability as assessed earlier was erroneous and hence he directed that the excess amount of tax including self assessment tax be refunded to the assessee. In these circumstances the principle of restitution would be squarely attracted and the revenue is also statutorily bound to pay interest u/s.244A(1)(b) to the assessee. The apex court in South Eastern Coalfield - Vs- State of M. P. reported in 2003 (8) SCC 648 has categorically held that once the doctrine of restitution is attracted, the interest is often a normal relief given. Restitution sometimes refers to "disgorging of something which has been taken" ....
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....are provided under section 244A(1)(a). 7.The proviso to section 244A(1)(a) makes it clear that no interest shall be payable if the amount of refund is less than 10 per cent, on regular assessment with regard to the refund of advance tax paid under section 115WJ in respect of fringe benefits; (ii) tax collected at source under section 206C; and (iii) advance tax or any tax treated as paid under section 199. But, with respect to other tax as per section 244A(1)(b), the interest shall be payable even if the amount is less than 10 per cent, of the tax as determined under section 143(1) or on the regular assessment, because there is no proviso to section 244A(1)(b) as provided under section 244A(1)(a). 8. That apart, the law is well-settled that even for the refund of tax paid under section 140A on self-assessment, the assessee is entitled to interest as held by this court in CIT v. Ashok Leyland Ltd., [2002] 254 ITR 641. 9. It is also trite law that wherever the assessee is entitled to refund, there is a statutory liability on the Revenue to pay the interest on such refund on general principles to pay the interest on sums wrongfully retained. ....
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....ess of assessed tax, Assessee is entitled for refund of excess tax along with the interest. 12. Then comes the question as to from which date interest is payable. On this question also, we find that matter has been examined by Karnataka High Court in Commissioner of Income Tax Vs. Vijaya Bank (supra) and Bombay High Court in Stock Holding Corporation of India Limited (supra). The contention of Revenue that the interest should be paid from the date of notice under Section 156 in terms of Explanation in Section 244A(1)(b) was rejected by observing that Explanation would have effect only where payment of tax has been made pursuant to notice under Section 156 but where payment has been made prior to filing of return of income in accordance with Section 140A, it has been said that the Revenue would pay interest on the amount refunded for the period commencing from the date, payment of tax is made to the Revenue, upto the date when refund is granted. The Bombay High Court in Stock Holding Corporation of India Limited (supra) said: Thus, the interest is payable not from the date of payment but from the date of demand notice under section 156 cannot be accepted as otherwise the le....
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....empted to substitute the original order which is not permissible u/s.154. An error, which is by no means self-evident, cannot be called an apparent error. Nevertheless a mistake capable of being rectified u/s. 154 is not limited to clerical or arithmetical mistakes only. However it does not include any mistake which may be discovered by a complicated process of investigation, argument or proof. Reference in this regard may be made to T.S. Balaram, ITO v Volkart Bros (1971) 82 ITR 40 (SC). A decision on a debatable point of law or a disputed question of fact is not a mistake apparent from the record. The ordinary meaning of the word "apparent" is that it should be something, which appears to be so ex facie that it does not admit scope for any argument or debate. It, therefore, follows that a decision on a debatable point of law or fact or failure to apply the law to a set of facts which remains to be investigated cannot be corrected by way of rectification. Reference in this regard may be made to CIT v MMTC Ltd (supra). Section 244A does not mandate that interest cannot be allowed on self assessment tax paid u/s 140A. As discussed earlier it cannot be said that interest u/s....