AI Drafter 
TaxTMI 
TaxTMI 
2017 (8) TMI 237
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....f the Act on the unpaid portion representing tax as well as interest, in the facts and circumstances of the case. 3. The brief facts of this issue is that the learned Assessing Officer passed an order under section 143(3) of the Act for the assessment year 2002-03 on March 18, 2005. The assessee filed an appeal against the said order and the learned Commissioner of Income-tax (Appeals) granted certain relief in his order dated May 10, 2006. The learned Assessing Officer thereafter passed an order under section 251/143(3) of the Act on July 10, 2006 in pursuance of the order of the learned Commissioner of Income-tax (Appeals) in Appeal No. 109/CIT(A)-III/AC, Circle-3/04-05 dated May 10, 2006. In the said order, the learned Assessing Officer determined the revised total income at Rs. 47,47,72,019 and determined the amount due (refundable) to the assessee at Rs. 106,01,09,259. The learned Assessing Officer while determining the amount due to the assessee did not grant any interest under section 244A of the Act in the said order. 3.1. Later the learned Assessing Officer passed an order under section 154/251/143(3) of the Act dated September 13, 2006 wherein after adjustment of re....
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....ction of the learned Assessing Officer in reducing the interest under section 244A of the Act. The learned Commissioner of Income-tax (Appeals) confirmed the action of the learned Assessing Officer vide Appeal No. 67/CIT(A)-I/Circle-3/08-09 dated November 2, 2011 which is enclosed in pages 31 to 33 of the paper book filed by the learned authorised representative. 3.3.3. The assessee preferred further appeal before this Tribunal against the order of the learned Commissioner of Income-tax (Appeals) dated November 2, 2011. The Tribunal allowed the appeal of the assessee vide order in Peerless General Finance and Investment Co. Ltd. v. Asst. CIT I. T. A. No. 1706/Kol/2011 dated July 11, 2013 (enclosed in pages 34 to 37 of the paper book filed by the learned authorised representative) wherein it was held as under : "4. In view of the above, we find the ground of interest on unpaid interest by the Assessing Officer vide his order dated April 22, 2008 is keeping in view the judgment of this Tribunal in I. T. A. No. 585/K/2006 for the assessment year 2000-01 dated February 28, 2007 in its own case even the dispute regarding grant of interest on unpaid interest is covered by the....
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....2-1-2008 Order of the Commissioner of Income-tax (Appeals) in Appeal No. 80/CIT(A)-1/Cir-3/07-08 in the context of deduction of certain provisions while computing the book profits under section 115JB of the Act 22-4-2008 Order of the Assessing Officer under section 251/154/154/251/143(3) determining finally the amount refundable at Rs. 7,42,18,259 including interest under section 244A Giving effect to the order of the Commissioner of the Income-tax (Appeals) dated January 22, 2008 30-6-2008 Order of the Assessing Officer under section 154/154/154/251/143(3) seeking to rectify the order dated April 22, 2008 passed by him. In this order, he reduced the amount refundable to Rs. 7,14,02,332. 30-9-2008 Order of the Commissioner of Income-tax (Appeals) in Appeal No. 152/CIT(A)-I/Cir.3/07-08 (impugned order before us) directing the learned Assessing Officer to grant interest on unpaid interest under section 244A. This appeal was against the order of the Assessing Officer under section 251/143(3) dated July 10, 2006 wherein interest under section 244A was denied. 2-11-2011 Order of the Commissioner of Income-tax (Appeals) in Appeal No. 67/CIT(A)-I/Circle-3/08-09 ....
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....er section 244A of the Act. 5. We have heard the rival submissions and perused the materials available on record. The learned authorised representative argued that the unpaid interest partakes of the character of the principal amount due to the assessee. In this regard, it would be pertinent to reproduce the provisions of section 244A of the Act which are as under : "244A. Interest on refunds.-(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 :- . . ." 5.1. The learned authorised representative placed reliance on the decision of the hon'ble Supreme Court in the case of CIT v. H. E. G. Ltd. reported in [2010] 324 ITR 331 (SC) wherein the phrase "refund of any amount becomes due to the assessee" found in section 244A of the Act has been explained in detail. 5.2. The learned authorised representative further placed reliance on the decision of the hon'ble Gujarat High Court in the case of D. J. Works v. Deputy CIT reported in [1992] 195 ITR 227 (Guj). This was su....
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....cess amount refunded to the assessee, on the interest amount which had become due under section 214(1). In the light of the above discussion, this petition must succeed." 5.3. We find that the learned Departmental representative placed reliance on the decision of the hon'ble Supreme Court in the case of CIT v. Gujarat Fluoro Chemicals reported in [2013] 358 ITR 291 (SC) wherein it was held that the assessee would be entitled only for interest as provided for under the statute and no other interest on such statutory interest. In response to this, the learned authorised representative defended the same by stating that the appeal in Gujarat Fluoro Chemicals was directed against the judgment of the hon'ble Gujarat High Court dated July 3, 2007. That in the said impugned order, the High Court relying on the Supreme Court decision of Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643 (SC) concluded that the assessee was entitled to compensation by way of interest on delayed refund as had been withheld by the Revenue, and on the same a running interest of nine per cent. per annum was applicable under section 244A. That, when in appeal before the Supreme Court, the Division Bench there....
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....ed the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on inter est. 8. Further it is brought to our notice that the Legislature by the Act No. 4 of 1988 (with effect from April 1, 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.'" 5.4. He stated that vide the above clarification, the hon'ble three- judge Bench of the Supreme Court had made it clear that : (a) Sandvik Asia Ltd. [2006] 280 ITR 643 (SC) had in fact been misquoted, for what Sandvik Asia Ltd. essentially holds is that in the light of the inordinate delay in refunding the due amount (that was inclusive of the incurred statutory interest), a compensation (in the form of interest) on the same was to be paid to the aggrieved assessee. (b) And that the above is in no manner a payment of interest on interest. 5.5. Accordingly, he argued that the decision of the hon'ble Supreme Court in Gujarat....
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....ther note that it is not a case of compounding of interest as understood except once, i.e., on the date when it is quantified, i.e., when part refund payment is made by the Revenue. Therefore, it will be wrong to call it and treat it as compounding of interest. . . . The words used in the section 244A are 'where refund of any amount becomes due and payable to the assessee under the Act', the assessee shall be entitled to receive in addition to the said amount simple interest calculated in the manner stipulated. The Legislature has not used the words 'tax paid' or 'the principal amount of tax paid'. The words used by the Legislature are 'any amount' and 'said amount'. The words are, therefore, much wider and broader than the tax amount, which is to be refunded. The words 'any amount' would include within its scope and ambit the interest element, which has accrued and 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 intere....
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....on 244A of the Act states "any amount due to the asses see". Accordingly he prayed for non-interference in the order of the learned Commissioner of Income-tax (Appeals) in this regard. 6. We find that the case laws relied upon hereinabove are very well founded and supports the case of the assessee. We find that the impugned dispute before us is squarely addressed by the co-ordinate Bench of the Mumbai Tribunal in the case of Union Bank of India v. Asst. CIT reported in [2016] 52 ITR (Trib) 221 (Mumbai) ; [2016] 72 taxmann.com 348 (Mumbai-Trib) dated August 11, 2016 which had duly considered the aforesaid decisions and had held as under (page 228) : "3.4 We have gone through the facts of this case and submissions made by both sides, provisions of law as well as judgments placed before us. It is noted that the only issue to be decided by us is that while granting the refund in pursuance to the appeal effect order, whether the amount of refund granted earlier should be adjusted first against the interest component of the earlier refund and thereafter the balance amount should be adjusted against the principal component of tax in the refund granted earlier order or vice ver....
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....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." A reading of the aforesaid passage from the decision of the Supreme Court in H. E. G. Ltd. reported in [2010] 324 ITR 331 (SC) indicates that it would be incorrect and improper to regard payment of interest when part payment is made as interest on interest. What has been elucidated and clarified by the Supreme Court is that when refund order is issued, the same should include the interest payable on the amount, which i....
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.... 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 first be adjusted towards the interest payable as aforesaid and the balance, if any, shall be adjusted towards the tax payable.' 3.8 Thus, from the perusal of the above, it is clear that where the amount of tax demanded is paid by the assessee then it shall first be adjusted towards interest payable and balance if any whatever tax payable. Now, if we go through section 244A, we find that no specific provision has been brought on the statute with respect to adjustment of refund issued earlier for computing the amount of interest payable by the revenue to the assessee on the amount of refund due to the assessee. Thus, the law is silent on this issue. Under these circumstances, fairness and justice demands that same principle should be applied while granting the refund as has been applied while collec....
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....ee 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 unauthorisedly by the Department. When the collection is illegal, there is corresponding obligation on the Revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/foreign company. Providing for payment of interest in case of refund of amounts paid as tax or deeme....
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....der section 244A by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component. Thus, with these directions, the appeal of the assessee is allowed. 4. In the result, the appeal filed by the assessee is allowed." 6.1. Respectfully following the aforesaid co-ordinate Bench decision of the Mumbai Tribunal which had duly considered the various decisions on the impugned issue, we hold that the assessee indeed is entitled for interest on unpaid interest and accordingly dismiss the grounds raised by the revenue in this regard. 6.2. We also find that the hon'ble Calcutta High Court vide its order dated January 16, 2015 in the assessee's own case for the very same assessment year i.e. the assessment year 2002-03 had upheld the order of the learned Assessing Officer dated April 22, 2008 granting interest under section 244A of the Act. The subsequent rectification proceedings and the consequent appellate orders thereon have been reversed by the hon'ble Calcutta High Court in the assessee's own case. Hence the Revenue should not have any grievance in the impugned appeal b....