AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2004 (1) TMI 45
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....id Act, then the same shall be ordered to be paid in exercise of writ jurisdiction since the amount of interest payable under section 214(1) read with sections 214(1A) and 244(1A) of the said Act was illegally and wrongfully withheld by the respondents for a long period as stated in the petition. The facts not in dispute in Writ Petition No.5841 of 2001 are that for the assessment year 1978-79 the petitioners paid advance tax of Rs. 1,11,81,844. By the assessment order dated March 27,1981, the petitioners' income for the said period was assessed at Rs. 1,54,17,090 and the tax liability was determined at Rs. 89,03,368. The excess advance tax of Rs. 22,78,476 was refunded. In appeal, by order dated August 23, 1985,the income of the petitioners was reduced to Rs. 93,93,108 and the tax liability was determined at Rs. 54,24,561. Accordingly, further refund of Rs. 34,78,807 was granted on April 30,1986. As against the petitioners' claim of interest to the tune of Rs. 42,58,766, it was allowed only to the extent of Rs. 1,73,940 on November 28,1986, and the claim for the balance amount was rejected. The revision filed by the petitioners was rejected on February 28,1990. However, the ape....
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....981, to September 30,1984, totalling to Rs. 3,34,924 and at the rate of 15 per cent., per annum from October 1,1984, to April 30,1998, totalling to Rs. 16,24,794 ; (b) a sum of Rs. 1,73,940 was paid to the petitioners on November 28,1986, when the Department ought to have paid the same on April 30,1986. Thus, there was a delay of six months in the payment of interest amount and therefore the petitioners are entitled for interest on the said amount of at the rate of 15 per cent. per annum from April 1,1986 to October 30,1986 amounting to Rs. 15,220 ; (c) a sum of Rs. 32,87,466, i.e., the amount calculated after deducting the sum of Rs. 7,97,440 out of the total sum of Rs. 40,84,906 was paid to the petitioners on April 2,1998, when the Department ought to have paid the said amount to the petitioners on April 30,1986, and thus there was a delay of 12 years in payment of the said interest amount and therefore the petitioners are entitled for interest on the said amount at the rate of 15 per cent. per annum from April 1,1986, to April 30,1998, amounting to Rs. 59,58,532. In Writ Petition No.5841 of 2001, therefore, the claim of the petitioners on account of delay in payment of ....
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.... ITR 419 (Guj); CIT v. Ambat Echukutty Menon [1988] 173 ITR 581 (Ker); Suresh B. Jain v. P.K.P. Nair [1992] 194 ITR 148 (Bom); Jwala Prasad Sikaria v. CIT [1989] 175 ITR 535 (Gauhati); Poddar Projects Ltd. v. Asst. CIT [1999] 240 ITR 572 (Cal); CIT v. Needle Industries Pvt. Ltd. [1998] 233 ITR 370 (Mad). It was also sought to be contended that the apex court in the case of CIT v. Narendra Doshi [2002] 254 ITR 606 and the Gujarat High Court in D.J. Works v. Deputy CIT [1992] 195 ITR 227 as also in CIT v. Chimanlal J. Dalal and Co. [1965] 57 ITR 285 (Born) have clearly laid down the law on the point in issue and while arguing about the doctrine of merger and the binding nature of the decision of the apex court, reliance is sought to be placed on the decision in the matter of V. M. Salgaocar and Bros. Pvt. Ltd. v. CIT [2000] 243 ITR 383 (SC). Referring to the decision of the apex court in Modi Industries Ltd. v. CIT [1995] 216 ITR 759, it was sought to be contended that it is in the nature of declaration of law and therefore it relates back to the date of enforcement of the enactment itself. Reliance is placed on the decision in the matter of Mysore Cements Ltd. v. Deputy Commr. of Co....
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....v. ITO [1985] 151 ITR 389 (Guj) [FB]. Upon hearing the learned advocates for the parties and perusal of the records, the following points arise for consideration: (i) Whether the provisions of law comprised under section 240 read with section 244(1) of the said Act entitle the assessee to claim interest on interest in case of failure on the part of the Revenue Department to pay to the assessee the refund amount within the period of three months from the date of the refund becoming due and payable to the assessee? (ii) As a prelude to the above question, it would be necessary to know what does the expression "refund of any amount" in section 240 of the said Act mean? (iii) What is the decision of the apex court in Narendra Doshi's case [2002] 254 ITR 606 and whether it is a complete answer to the above questions? (iv) Whether the respondents had wrongfully withheld the interest amount payable to the petitioners for the period as stated by the petitioners and, that therefore, the petitioners are entitled for interest on interest as claimed by the petitioners even in the absence of any specific provision in that regard in the said Act? Chapter XIX of the said Act dea....
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....ection 240 relates to " . . . refund of any amount becomes due . . ." Considering the difference in the phraseology in the two sections under reference, at first sight it may appear that while section 237 refers strictly to the amount paid in excess by the assessee to be refundable, whereas section 240 relates to any amount becoming due and payable to the assessee pursuant to an order in appeal or other proceedings and that, therefore, the obligation of the Department to refund under section 240 is not restricted to the amount which was paid in excess by the assessee but would also include the amount of interest becoming due and payable on such excess amount which was paid by the assessee. However, before arriving at any conclusion on the point in issue, it is necessary to take note of some other provisions of law in the said Act including the proviso to section 240. Clause (a) of the proviso to section 240 of the said Act speaks of postponement of right to refund till the finalisation of fresh assessment in a case where the assessment is set aside or cancelled in appeal or other proceedings. Clause (b) relates to situation on annulment of assessment. The proviso reads thus: ....
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....e tax component alone, and would not include even the amount of interest or penalty, if any, paid by the assessee? The word "tax" has been defined in section 2(43) of the said Act to mean income tax chargeable under the provisions of the said Act. The term "income-tax" has not been defined under the said Act. However, on a perusal of the various sections of the said Act and the scheme of taxation, it is apparent that any amount payable or becoming due as tax under the said Act in relation to any income of a person or persons during a financial year or any part thereof would be Income tax. Once it is clear that any amount payable as tax would be tax under the said Act, it would obviously include any amount payable to the Government over and above the amount of tax on account of either delay in paying the amount of tax or for similar such reason, and therefore it would also include even interest or penalty amount payable by the assessee either on account of delay in payment of actual amount of tax or default in payment of tax. This is evident from the provision of law contained in section 229 of the said Act which provides that any sum imposed by way of interest, fine, penalty, or an....
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...., it relates to the payment of an amount made by an assessee over and above the amount becoming chargeable or due and payable under the said Act and that is the amount which is repayable as the refund to the assessee. It is, therefore, difficult to accept the contention of the learned advocate for the petitioners that those words or expressions would include even the amount payable by the Department over and above the amount "paid" by the assessee either as the tax or an interest or penalty. A word in a statute though not defined therein may have different dictionary meanings, yet the meaning which suits to the word in the context in which it has been used in the statute, has to be accepted. Considering the context in which the word "refund" or the expression "any amount" has been used in section 240, it is to be held that it would not include" an amount of interest" payable by the Department to the assessee. Referring to section 244(1) of the said Act, it was sought to be argued on behalf of the petitioners that both the sections are to be read together and that such reading is inescapable in view of the contents of the said sub-section of section 244(1) itself, and it would re....
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....omplied with along with the compliance of the provisions of section 240. However, sub-section (1) of section 244 nowhere speaks of interest on interest. On the contrary, it refers to the simple interest on the amount of refund due in pursuance of the order referred to in section 240. Once it is clear that section 240 does not relate to any interest amount but speaks of the repayment of the excess amount paid by the assessee and section 244(1) refers to the order spoken of under section 240 for refund of such excess amount, and provides for interest on such excess amount refundable to the assessee, it clearly means that the interest payable under section 244(1) is on such excess amount refundable to the assessee under section 240, and both the amounts to be paid simultaneously, without there being any need for demand of such refund or payment of interest thereon in terms of section 244(1) of said Act. The provisions of law comprised under section 244(1), ex facie disclose that if the Department fails to repay the excess amount within three months from the date it becomes due and payable to the assessee, then the assessee should be paid interest on such amount at the rate of 15 pe....
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....er was set aside in appeal, no interest was payable from the date of payment of tax pursuant to the assessment order to the date of the appellate order. The situation prior to the introduction of section 244(1A) was summarised by the apex court in Modi Industries [1995] 216 ITR 759 as under "Prior to the introduction of sub-section (1A) in section 244, if any refund was payable pursuant to the order of regular assessment, that had to be paid in accordance with the provisions of section 243 of Chapter XIX of the Act. If the payment was delayed beyond the period mentioned in section 243 of the Act, interest had to be paid from the date of expiry of the aforesaid period to the date of the refund order. If as a result of any of the appellate or other proceedings mentioned in section 240 the refund amount was enhanced, then the enhanced amount had to be paid within the period prescribed by section 244 failing which interest had to be paid from the first day after the expiry of the stipulated period till the date of the order of refund. This position was drastically altered by sub-section (1A) of section 244, which was inserted by the Taxation Laws (Amendment) Act, 1975, with effect f....
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....tment is liable to pay interest twice on interest on interest and law in that regard is very clear from the third proviso to subsection (1A) thereof. The said proviso clearly states that where any interest is payable to the assessee under sub-section (1A), then no interest should be paid under sub-section (1) thereof. Hence, irrespective of the fact, that section 240 merely refers to the amount of refund, i.e., the amount paid by the assessee in excess of the chargeable amount, to be paid without there being demand made by the assessee, at the same time, the provisions of law comprised under section 244(1) and section 244(1A) make it clear that such refund should be along with the interest at the rate of 15 per cent. per annum on such refund, and that such interest has to accompany the refund amount. In other words, such interest would also be payable without there being any need or demand for the same. It is also necessary to note sub-section (3) of section 244 as well as section 244A(1) and (4). The sub-section (3) of section 244 reads thus: "(3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of ....
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....s liability of the Department to pay interest on interest. We are not persuaded to read the terms and expressions referred to above in the context different from the one we have read as stated above. In interpreting a taxing statute, equitable considerations are entirely out of place as has been held in CST v. Modi Sugar Mills Ltd., AIR 1961 SC 1047; [1961] 12 STC 182 (SC). Simultaneously logic or reasons cannot be of much avail, as has been held in H.H. Prince Azam Jha Bahadur v. Expenditure-tax Officer [1972] 83 ITR 92 (SC); AIR 1972 SC 2319, and that the strict interpretation rule essentially applies to charging sections, and not to machinery or procedural provisions, as was ruled in Gursahai Saigal v. CIT [1963] 48 ITR (SC) 1; AIR 1963 SC 1062. Before arriving at any final conclusion on the point in issue, it would be necessary to take note of the decisions relied upon, more particularly the one in Narendra Doshi's case [2002] 254 ITR 606 (SC). Undoubtedly, when the Supreme Court decides a question of law, its decision is binding on all. Every such decision is an authority for what its actually decides. It was ruled by the apex court in B. Shama Rao v. Union Territory of Pon....
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....hen it is clear what it was, is binding. It is only the principle laid down in the judgment that is binding law under article 141 of the Constitution. With the above ruling it was held that in order to understand and appreciate the binding force of a decision it is always necessary to ascertain the facts in the case in which the decision is given and what is the point which has been decided and no judgment can be read as if it were a statute nor a word or a clause or a sentence in the judgment be regarded as a full exposition of law. In a recent decision of the apex court in the matter of Islamic Academy of Education v. State of Karnataka [2003] AIR SCW 4240; [2003] 6 SCC 697, it has been held that the ratio decidendi of a judgment is to be found out only on reading the entire judgment. It was also held that an answer to a question formulated in a judgment for the purpose of its consideration has necessarily to be read in the context of what is set out in the judgment, and not in isolation, and in case of any doubt as regards any observations, reasons and principles, the other part of the judgment has to be looked in to, and that by reading a line here and there from the judg....
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....llowing that principle, the question has, as we find, been rightly answered in the affirmative and in favour of the assessee." Apparently, the reason for refusal to interfere in the order of the High Court of Madhya Pradesh related to failure on the part of the Revenue to dispute the correctness of the judgment of the Gujarat High Court in the said decisions and consequently the same had attained finality and had resulted in being binding upon the Revenue. Considering those judgments of the Gujarat High Court which were binding upon the Tribunal as well as the Revenue Department, the Tribunal would not have been justified in setting aside the order of the Deputy Commissioner (Appeals) which was in consonance with the said two binding decisions, and therefore there was no illegality committed by the High Court of Madhya Pradesh in answering in the affirmative, the question which was referred to it. It is to be noted that the matter before the apex court was relating to the correctness of the answer of the High Court of Madhya Pradesh in the facts and circumstances of that case and not relating to the correctness of the decisions of the Gujarat High Court on the point of liability....
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....ir and reasonable to award interest on the amount paid in excess, which has been retained by the Government. We do not see any reason why the same principle should not be extended to the payment of interest which has been wrongfully withheld by the Assessing Officer or the Government." Further while ruling that once the interest amount becomes due, it takes the same colour as that of the excess amount of tax which is refundable on regular assessment, it was held that: "Therefore, in our opinion, though there is no specific provision for payment of interest on the interest amount for which no order is passed at the time of passing the order of refund of the excess amount and which has been wrongfully retained, interest would be payable at the same rate at which the excess amount carries interest." It was further clarified in the judgment that: "On general principles, we are of the opinion that the Government is liable to pay interest, at the rate applicable to the excess amount refunded to the assessee, on the interest amount which had become due under section 214(1) of the Act" The decision clearly refers to the absence of provision of law for payment of interest on interest ....
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....act remains that even while introducing the said provision, the Legislature thought it fit not to provide for any interest on interest even in case of delay in payment of interest on refund amount. To read the liability to pay interest on interest in the provisions of law contained in section 244(1) read with section 240 of the said Act would virtually amount to legislate upon the said Act, and that is not the function of the court. In Chimanlal's case [1994] 210 ITR 419 (Guj), no law as such was laid down and the court had merely followed its earlier decision in D.J. Works' case [1992] 195 ITR 227 for the grant of interest on interest in the facts of that case. The decision of the Delhi High Court in Goodyear's case [2001] 249 ITR 527 was on the assumption that the term "any amount" in section 240 would include all amounts payable to the assessee, including interest, and therefore, the assessee was held to be entitled for interest on interest. For the reasons stated above and with respect, it is difficult to agree with the said proposition. In any case, the facts of the matter also disclose that the interest which was included in the amount due as refund was the one payable ....
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.... of the apex court in an appeal against the order of a High Court would result in superseding the decision of the High Court and would attract the doctrine of merger. However, it is well-settled that the doctrine is not of universal or unlimited application and therefore while applying the said doctrine and weighing the effect thereof, the nature of jurisdiction exercised by the superior forum and the content or subject matter of the challenge laid or which could have been laid should be meticulously considered. In that respect, it would be necessary to take note of the decision of the apex court in Kunhayammed v. State of Kerala [2000] 245 ITR 360, wherein it was held that: "Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before a superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. The doctrine of merger is not a doctrine of universal or unlimited application. It will depend on t....
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....60 amending the Madras City Tenants' Protection Act, 1921, is under challenge in these appeals. The State of Tamil Nadu was not made a party before the trial court. However, the State was impleaded as a supplemental respondent in appeal as per orders of the High Court. When the appellants lost the appeal, they sought leave to appeal to this court. The State of Tamil Nadu was not made a party in the said leave petition. In the S.L.P. before this court also the State of Tamil Nadu was not made a party. A challenge to the constitutional validity of the Act cannot be considered or determined, in the absence of the concerned State. Learned counsel now prays for time to implead the State of Tamil Nadu. This appeal is of the year 1973. In our view it is neither necessary nor proper to allow this prayer at this distance of time. No other point survives in these appeals. Therefore, we dismiss these appeals, but without any order as to costs." While referring to the said order in the appeal, it was observed by the apex court in S. Shanmugavel Nadar's case [2003] 263 ITR 658 that: "It is clear that this court did not go into the question of constitutional validity of Act 13 of 1960 nor ....
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.... of the subordinate forum; otherwise there would be an apparent contradiction. However, in certain cases, the reasons for the decision can also be said to have merged in the order of the superior court if the superior court has, while formulating its own judgment or order, either adopted or reiterated the reasoning, or recorded an express approval of the reasoning, incorporated in the judgment or order of the subordinate forum." The said decision was followed in Justice P. Venugopal v. Union of India [2003] 7 SCC 726; [2003] AIR SCW 4472. Considering the doctrine of merger, and the law laid down by the apex court on the subject, certainly "the decision" of the High Court of Madhya Pradesh in Civil Appeal No.2053 of 2000 stood merged in the order of the apex court passed on July 26,2001, in Narendra Doshi's case [2002] 254 ITR 606. The said order of the Madhya Pradesh High Court was, however, not on the point of liability to pay interest on interest by the Revenue under the provisions of the said Act but it was in the circumstances where the Department was bound by the ruling of the Gujarat High Court on account of the fact that it was not challenged and had attained finality. Th....
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.... used in different parts of a statute, it is used in the same sense, is a weak one and in reality displaced by the context and it is rather appropriate to state that where the draftsman uses the same word or phrase in similar contexts, he must be presumed to intend it in each place to bear the same meaning (vide Shamrao Vishnu Parulekar v. District Magistrate, AIR 1957 SC 23 and Aswini Kumar Ghose v. Arabinda Bose, AIR 1952 SC 369). Bearing in mind the object and the purpose behind the provision relating to set-off in section 245 of the said Act, the learned single judge of this court in Suresh Jain's case [1992} 194 ITR 148 had observed that after all, the amount of interest payable to an assessee under section 244(1A) is also an amount payable by the Department to the assessee, and if the same is not permitted to be adjusted under section 245 while permitting the excess refundable amount to be adjusted, almost absurd, if not ridiculous, result may ensue inasmuch as the Department would be required to pay a certain sum of money on account of interest with one hand and take back the same amount as tax liability with the other. Being so, the word "refund" in section 245 was construe....
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....the said Act and which, either in entirety or part thereof, becomes refundable by the Revenue Department to such assessee, but the same does not include any amount payable by the Department in the form of interest on such refundable excess amount of the assessee. The interest payable on the refund amount under section 244(1) is a simple interest at the rate specified therein and neither compound interest nor interest on interest. Once interest is calculated and paid under section 244(1A) no further interest shall be payable under section 244(1) for the same period and on the same amount. There is no provision in the said Act for payment of interest on interest. In Narendra Doshi's case [2002] 254 ITR 606, the apex court had not laid down any law contrary to any of these propositions. The first three questions stand answered accordingly. This brings us to the next contention, which is in the form of claim in the alternative. It is the contention of the petitioners that even if there is no statutory provision in law empowering the assessee to have interest on interest, considering the fact that the interest amount payable to the petitioners was illegally withheld by the respondent....