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2011 (7) TMI 1322
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....owing interest on interest under s. 244A of the IT Act, 1961. 2. Because the learned CIT(A) ought to have allowed interest on interest till the date of actual grant of interest short allowed by the AO on 29th May, 2006. 3. Because the learned CIT(A) erred in distinguishing principles laid down by the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. v. CIT [2006] 200 CTR (SC) 505 : [2006] 280 ITR 643 (SC) for grant of interest on interest under s. 244A till the date of actual grant of interest. 4. Because the learned CIT(A) failed to appreciate that in granting interest, provisions of s. 244A are to be complied and there is no scope for non-grant of interest for delay even if it is not wilful/wrongful. 5. Because the order appealed against is contrary to principles of natural justice and fair play. 6. Because the appellant craves leave to add, alter, amend, substantiate or vary from any of the grounds of appeal before or at the time of hearing of the appeal." 2.1 The Department in its appeal in ITA No. 419/Luck/2009 has taken the following grounds : "1. Under the facts and circumstances of the case, the learned CIT(A....
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....has passed order dt. 17th Jan., 2006 under s. 254/154/148 of the IT Act, 1961 vide which a refund of Rs. 9,94,57,031 has been determined. The above refund has actually been granted to the appellant on 29th May, 2006. The said refund has been issued to the appellant vide R.V. No. 414611, dt. 29th May, 2006 for Rs. 24,22,13,625 which comprised of other refunds also. In the above refund, interest under s. 244A has been granted upto the month of January, 2006 while such interest should have been granted till the month of May, 2006 during which the refund voucher has been prepared. Hence, the AO has issued short refund for an amount of Rs. 17,99,663. The appellant filed an application dt. 16th July, 2007 under s. 154 before the AO for grant of above short interest. The AO disposed of the application under s. 154 vide order dt. 7th Aug., 2007 by rejecting request for grant of interest short allowed by him. While disposing of the above application, the AO has stated that there was no wrongful retention of the refund as the approval for refund was required from higher authorities as per the procedures and instructions of CBDT and there was no willful retention of the refu....
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....ear in asst. yr. 1994-95, the Hon'ble CIT(A) as well as Hon'ble Tribunal have held that the assessee would be entitled to interest with effect from 1st April of the assessment year provided the tax deductor had deposited the tax in time. Hence, the AO has issued short refund for an amount of Rs. 16,87,183 on 14th Nov., 2007 for the reasons mentioned hereinabove. The appellant filed an application dt. 12th March, 2008 under s. 154 before the AO for grant of above short interest. The AO disposed of our above application under s. 154 vide order dt. 9th April, 2008 by rejecting request for grant of interest short allowed by him. While disposing of the above application, the AO has stated that there was no wrongful retention of the refund as the approval for refund was required from higher authorities and there was no wilful retention of the refund. In this respect, the appellant submits that the interest is allowable to the assessee under s. 244A of the Act until the date of grant of the refund irrespective of any reason for delay on the part of the Department. The appellant further submits that interest under s. 244A of the Act is also available to the appellant on ab....
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....n raised in terms of the said order), following payments were made : 5-2-2004 Paid by challan 5,00,00,000 4-8-2004 Adjusted out of refund for the asst. yr. 1995-96 3,95,73,884 18-11-2004 Adjusted out of refund for the asst. yr. 1996-97 4,09,282 8,99,83,166 (iii) 26-9-2005 Assessee's 2nd appeal against the above-referred assessment order dt. 11th March, 2003 was decided by the Hon'ble Tribunal. As a result of said order the sums aggregating Rs. 8,99,83,166 became refundable as per provisions contained in s. 240 of the Act. (iv) 31-12-2005 As per s. 240 r/w s. 243 refund (of the payments made in pursuance of assessment) was due to be allowed in a period of three months (along with interest to be calculated from the date of payments made in pursuance of the demand created as a result of assessment), after giving effect to appellate order, particulars of which are given at serial No. (ii) above. (v) 17-1-2006 The AO revised the assessment order dt. 11th March, 2003 under s. 143(3) r/w s. 254 on this date and worked out the ....
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.... 3. The aforesaid calculations are based on the contention that refund due to the appellant (as a result of the Tribunal's order dt. 26th Sept., 2005) should have been allowed within a period of three months. The said circular also goes to support the contention that interest due to an assessee should be calculated upto the date on which actual refund is issued and not till the date of assessment order. This contention is supported vide Circular No. 1421 issued by CBDT which is reproduced hereunder : '1421. Interest payable by Central Government to assessees under the section is to be calculated upto the date of issue of refund voucher. Under the terms of s. 243, interest is payable by the Government where the refund is not granted within three months from the date on which the total income is determined, and the interest, where payable, is to be calculated at the specified rate, from the date immediately following the expiry of the three months aforesaid to the date of the order granting the refund. From this it is clear that the date of the order granting the refund is the date of the refund voucher itself. The view stated to have been taken by some ....
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.... Ltd. v. CIT [1995] 128 CTR (SC) 361 : [1995] 216 ITR 759 (SC); (ii) CIT v. Narendra Doshi [2002] 174 CTR (SC) 411 : [2002] 254 ITR 606 (SC). Copy of the later judgment appears at pp. 1 and 2 of the supplementary paper book. 6. The point at issue is further supported by the decision of Hon'ble Gujarat High Court in the case of CIT v. Hynoup Food & Oil Industries Ltd. [2010] 320 ITR 365 (Guj.) (copy enclosed). 7. As far as secondly is concerned, the same was decided by the learned CIT(A), against the appellant vide para 6.2 of the appellate order, which is reproduced hereunder : '6.2 In regard to the admissibility of the interest on interest, the decision of the Hon'ble Supreme Court, relied upon by the appellant, was delivered on the peculiar facts of that case. In the instant case, the facts do not show that there was any willful/wrongful withholding of the grant of interest, this situation is occurred only due to time factor for taking administrative approval since the refund exceeded Rs. 25 lacs.' Assessee's appeal : 8. The appellant is aggrieved by the finding given in para 6.2 as aforesaid in ITA No. 396/Luck/200....
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....t is that where two views are possible, the view favourable to the 'subject' should be followed until the matter is concluded either way by the decision of jurisdictional High Court or by the decision of Hon'ble Apex Court. This contention is covered by the following case law : (i) CIT v. Vegetable Products Ltd. 1973 CTR (SC) 177 : [1973] 88 ITR 192 (SC) (ii) CIT v. J.K. Hosiery Factory [1986] 52 CTR (SC) 142 : [1986] 159 ITR 85 (SC) as stated in para 5, the decision of learned CIT(A) (which has been challenged by the Revenue in this appeal) is covered by the decision of Hon'ble Gujarat High Court in the case of Garden Silk Mills Ltd. v. Dy. CIT (supra). 10. Assessee's appeal being ITA No. 396/Luck/2009 should be allowed, so as to hold that it is entitled to a refund of Rs. 21,46,705 (which represents interest on account of delay in granting refund) and further interest on the said sum be allowed till the actual refund is made. At the same time the Revenue's appeal being ITA No. 419/Luck/2009 deserves to be dismissed. Respectfully submitted, Encl. : As above (S.K. Garg)" 8. In his rival submissions,....
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....unt of refund is less than ten per cent of the tax as determined under sub-s. (1) of s. 115WE or sub-s. (1) of s. 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 the 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 under s. 156 is paid in excess of such demand." 9.1 As per provisions contained in cl. (b) of sub-s. (1) of s. 244A of the IT Act, the interest shall be calculated for every month or for part of the month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted. The crucial words are "the date on which the refund is granted". In the present case, the AO prepared the refund voucher on 17th Jan., 2006, however approval was taken as per the instructions of the ....
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.... where prepaid taxes are in excess of the assessed tax, the assessee is entitled to refund of such tax along with interest thereon. Where an assessee out of abundant caution pays self-assessment tax whilst staking a claim in the return, which claim is accepted, resulting in refund of self-assessment tax, the assessee should be equally entitled to interest thereon. Sec. 244A was inserted in the statute as a measure of rationalization to ensure that the assessee is duly compensated by the Government, by way of payment of interest for monies legitimately belonging to the assessee and wrongfully retained by the Government, without any gaps. Therefore, where the self-assessment tax paid by the assessee under s. 140A is refunded, the assessee should be, on principle entitled to interest thereon since the self-assessment tax falls within the expression 'refund of any amount'. The computation of interest on self-assessment tax has to be in terms of s. 244A(1)(b), i.e., from the date of payment of such amount upto the date on which refund is actually granted. Even otherwise, it is trite law that wherever the assessee is entitled to refund, there is statutory liability on the Revenue....
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....y, 2006 since the refund voucher was issued to the assessee only on 29th May, 2006. 11.2 Similarly, while deciding the case of Motor & General Finance Ltd. v. CIT [2009] 185 Taxman 167 (Delhi), their Lordships observed in para 19 of the said order as under : "When the refund of tax becomes payable as a result of order passed in an appeal or other proceedings under the Act, this refund is to be given along with interest, which is to be calculated as per s. 244A. If that interest is paid along with the excess tax, no further payment is to be made. It is only when the excess amount of tax is refunded but the interest is not refunded along therewith, the retention of the interest amount would be unjustified and interest on interest would also become payable. The reason is simple. It is the tax which was paid in excess by the assessee which becomes refundable. The assessee would be compensated by paying interest thereon. It is only when the interest is not refunded along with excess tax that the withholding of the said interest becomes unjustified and it becomes an 'amount due' to the assessee on which, the assessee can claim further interest." 11.3 On a similar i....