TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 688
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....eciated that the AO in the computation of interest assumed that the balance to be refunded is always the interest portion and the tax portion is presumed to have been refunded which is untenable since while charging interest from the assessees, the department first adjusts the amount paid towards interest so that the principal amount of tax payable remains outstanding and they are entitled to charge interest till the entire outstanding is paid. But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. The CIT (A) erred in distinguishing the decision of the Hon'ble ITAT in appellant's own case in ITA. 571,574/Mum/2013 on the ground that the decision of the Apex Court in 358 ITR 291 was not considered in the above decision without appreciating that the said decision is not applicable to the facts of the appellant's case. The CIT (A) ought to have appreciated that the method followed by the appellant is in the same manner as followed by the department in computing interest since the refund granted is first adjusted against the interest first and then the balance, if any, towards ....
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.... section provides that where, as a result of an order under 250 or section 254 or section 260 the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly. In the present context interest u/s 244A was calculated by the AO as a first step upto June 2009 which amounted to Rs. 18,51,43,880/-. The refund due at that point of time was arrived at Rs. 246,85,85,068/- and together with interest of Rs. 18,51,43,880/- the total refund due was Rs. 265,37,28,948/-. The refund made at that point of time was Rs. 41,68,22,890/-. it is our submission that the said refund should be adjusted first against the Interest due of Rs. 18,51,43,880/- and the balance of Rs. 23,16,79,010/- should be adjusted against the tax refund due. Therefore the tax refund due would amount to Rs. 223,69,06,058/- on which the AO should have granted further interest. However the AO had granted further interest only on Ps. 205,17,62,178/- excluding the interest of Rs. 18,51,43,8801. The AO had neither refunded the said amount of Rs. 18,51,43,880/- nor granted interest on the said amount for the period from Ju....
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....y 1TAT, Mumbai while delivering the decision dated 23/06/2014 in the case of assessee for AY 1988-89 and AY 2001-02. Therefore, reliance placed by the assessee on ITAT, Mumbai decision dated 23/06/2014 for AY 1988-89 'and AY 2001-02 is misplaced and erroneous in facts of the case, in law and in light of Supreme Court decision in 358 ITR 291 (SC). In nutshell, second part of ground no.2 in appeal is also rejected in facts of the case, on merits and in law." 3.2. During the course of hearing before us, Ld. Counsel strongly relied upon the orders of the Tribunal in assessee's own case for A.Y. 1988-89 (ITA No.571/Mum/2013) and A.Y. 2001-02 (ITA NO.574/Mum/2013) disposed by the order dated 23.06.2014 and also upon the order dated 22.07.2015 in ITA No.918/Mum/2014 for A.Y. 2005-06. It was further submitted by him that this issue stands squarely covered in favour of the assessee by the judgment of Hon'ble Delhi High Court in the case of India Trade Promotion Organization vs CIT 361 ITR 646 (Del) which has been considered by the Tribunal while deciding this issue in favour of the assessee. It was also submitted that the assessee is not claiming interest on interest; and the only pra....
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....ng Officer and the assessee is with regard to adjustment of refund; according to the assessee refund should first be adjusted against interest payable and only the balance amount shal l be adjusted against tax refundable and in this process the balance refund due would work out to Rs. 3,52,28.442/- on which the assessee is entitled to interest u/s. 244A of the Act whereas the Assessing Officer calculated the balance refund clue at Rs. 2,03,99,541/-(tax component) and Rs. 1,58,28,901/- (interest component). Reason for such calculation was that according to the Assessing Officer no interest is payable on interest due in which event, even if there is substantial delay in interest payable, the assessee can be made to wait unendingly without payment of interest. Though, before the Assessing Officer as well learned CIT(A), the assessee's claim of interest u/s 244A is not properly focused but sum and substance of the assessee's case before us is that in the event of adjustment of refund against interest due to the assessee tax refund due shall work out to Rs. 3.62 crores on which the assessee would be entitled to get interest u/s. 244A of the Act. In this regard the assessee relie....
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....atter was taken by the Revenue before the Supreme Court in the case of HEG Limited and the SLP was granted and civil appeal was registered. The Supreme Court thereupon answered the question against the Revenue in the following words:- "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. 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 Section 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. 45,73,528 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 an....
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....erest under Section 244A till payment is made...................." 3.6. The facts of the case before us are similar in the sense that here also only part amount was refunded in the first phase by the department and when the balance amount was paid by the department in the second phase, the assessee was entitled for interest on the balance amount of refund due. Thus, from the aforesaid observations of Hon'ble Delhi High Court, we can say that it is not a case of payment of interest on interest. Thus, in view of these facts and aforesaid judgments, Ld Counsel contended that Ld. CIT(A) had wrongly applied the judgment of Hon'ble Supreme Court in the case of CITvs Gujarat Fluoro Chemicals, since it was not applicable on the facts of this case. 3.7. Further, it was also held by Hon'ble High Court that the department ought to follow the same procedure and rules while collecting tax and while issued refunds. We have gone through the provisions of section 140A(1); explanation to the aforesaid section provides as under: "Explanation- Where the amount paid by the assessee under this sub-section falls short of the aggregate of the tax and interest as aforesaid, the amount so paid shall f....
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....st. Some of the useful observations are reproduced hereunder for the sake of better clarity in deciding the issue before us: "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 of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interes....