TaxTMI 
TaxTMI 
2016 (6) TMI 1218
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....ea of 33,000 sq.ft. on 3rd and 4th and part of 5th Floor in the commercial building to be constructed under the project. As per the terms of the agreement, for reservation of the super built-up area in its name, LIFL paid ` 10 crore as margin money to be adjusted against final consideration payable by them against allotment of the specified area. Subsequently, the plan of project for construction of the shopping and commercial office was changed for some reason and it was decided to construct a shopping mall in its place. Due to change in plan as well as delay in carrying out the construction activity, the agreement with LIFL was terminated on 23rd March 2005 and as a consequence, the margin money paid by LIFL was returned back to them. As per the terms of agreement interest on margin money was provided and the assessee had deducted tax at source on such interest payment as per the prescribed rate during the relevant financial year and credited to the Central Government on 9th June 2005. In the return of income filed for the impugned assessment year, assessee claimed deduction towards interest payment. Assessee also filed TDS return. Subsequently, realising that there was no requir....
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....ommissioner (Appeals). 3. The learned Commissioner (Appeals), after considering the submissions of the assessee, however, confirmed the order of the Assessing Officer. The learned Commissioner (Appeals) observed, as the assessee had deducted TDS voluntarily and deposited to the Government account no interest under section 244A on refund can be given in view of the CBDT circular no.769 dated 6th August 1998 and circular no.790 dated 2nd April 2000. Though, the assessee relied upon the decision of the Hon'ble Supreme Court in Union of India v/s Tata Chemicals Ltd. [2014] 363 ITR 658, however, the learned Commissioner (Appeals) observed that in the case before the Hon'ble Supreme Court deduction of tax by the assessee was not voluntary as in the case of the assessee. Accordingly, he upheld the order of the Assessing Officer. As far as the additional ground raised by the assessee, claiming interest on interest, learned Commissioner (Appeals) refused to entertain the additional ground observing that unless the additional ground raised during the appeal has arisen solely due to the developments after filing of appeals and it was not available to the assessee at the time when app....
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....k Asia v/s ACIT, [2008] 280 ITR 643 (SC). As far as the decision of the learned Commissioner (Appeals) in rejecting the additional ground raised by the assessee claiming interest on interest, the learned Authorised Representative submitted, as per the decision of the Hon'ble Supreme Court in National Thermal Power Co. Ltd. v/s CIT, 229 ITR 383 (SC), the learned Commissioner (Appeals) was not justified in rejecting the additional ground as all facts relating to such ground are available on record. Learned Authorised Representative also relied upon the following decisions in support of its claim of interest on interest. i) D.J. Works v/s DCIT, 195 ITR 227; and ii) CIT v/s Narendra Gosi, 254 ITR 606. 5. The learned Departmental Representative on the other hand relied upon the observations of the learned Commissioner (Appeals). 6. We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon. As far as the factual aspect is concerned, there is no dispute that the assessee was not required to deduct tax on the interest paid on margin money to LIFL, however, under misconception assessee deducted tax at s....
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....upra) after taking note of object for which section 244A was brought into the statute held as under:- "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 interest inasmuch as they hav....
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....as the opening words of clause (b) specifically referred to 'as in any other case', the interest is payable from the date of payment of tax. The sequel of aforesaid discussion is the resident/deductor is entitled not only the refund of tax deposited under section 195(2) of the Act, but has to be refunded with interest from the date of payment of such tax." 7. On careful reading of the aforesaid judgment of the Hon'ble Supreme Court, the principle which emerges is, the assessee is entitled to interest on refund of excess deduction or even erroneous deduction of tax at source. The Hon'ble Supreme Court has observed that interest on delayed refund is a kind of compensation for use and retention of money collected unauthorizedly by the Department. The Hon'ble Supreme Court has observed that refund due and payable to assessee is debt owed and payable by the Revenue. The Hon'ble Supreme Court has observed even in the absence of any express statutory provisions for payment of interest on refund of excess amount collected by the Revenue, the government cannot shrug-off its obligation to reimburse the deductor's lawful money with the accrued interest for the period....