TaxTMI 
TaxTMI 
2011 (7) TMI 1322
X X X X Extracts X X X X
X X X X Extracts X X X X
....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) has erred on the facts and in law in allowing interest on refund till the date of issue of re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een 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 refund. Therefore, the appellant filed an application dt. 4th Sept., 2007 before AO to provide to it a copy of the CBDT instructions which h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt 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 above interest of Rs. 16,87,183 from 14th Nov., 2007 in view of the judgment of the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. (supra). A statement of computation of refund....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-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 refund at Rs. 9,94,57,031 (copy appearing at pp. 1 to 5 of the 1st paper book). (vi) 27-5-2006 The said order along with a cheque for refund of Rs. 24,22,13,625 (including the aforesaid sum of Rs. 9,94,57,031) was received by the appellant. II-Claim of the appellant 2. The ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l 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 ITOs that the date of the assessment order is to be taken as the 'date of the order granting the refund' is not correct. Thus, in cases where interest is payable by the Central Government to assessees under s. 243, such interest is to be calculated upto the date of issue of the refund voucher.-Circular No. 20-D(XXII-22), dt. 20th Aug., 1968' The said circular has got binding effect ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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/2009. In its appeal, the appellant begs to refer and rely upon the following case law : (i) Chimanlal S. Patel v. CIT [1994] 119 CTR (Guj.) 293 : [1994] 210 ITR 419 (Guj.) approved 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). (ii) CIT v. Narendra Doshi (supra); (iii) Punjab Small Industries & Export Corpn. Ltd. v. IAC [2004] 192 CTR (Punj. & Har.) 396 : [2005] 278 ITR 92 (Punj. & Har....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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, the learned Departmental Representative supported the order of the AO and further submitted that the learned CIT(A) had erred in allowing the interest under s. 244A of the IT Act till the date of issue of refund voucher by misinterpreting directions for payment of interest on refunds as given under s. 244A of the IT Act i.e. the interest shall be paid only till the date on which the refund is granted, i.e. upto 17th Jan., 2006 in the present case. It was further stated that the refund was granted the moment the concerned officer signed the order regarding payment of interest under s. 244A o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 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 CBDT from the higher authorities, which was granted only on 29th May, 2006 and the refund voucher No. 414611 was issued on the said date i.e. 29th May, 2006. In the present case, it appears that the delay occurred in taking administrative approval, so the delay was due to the internal working of the Department, which was not attributable to the assessee; as such, the assessee was entitled to interest upto the date on which the refund has been issued. In the present case, the refund was granted to the assessee only on 29th May, 2006 and therefore, the assessee was entitled for interest upto the said date. 9.2 (i) The aforesaid vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....herefore, 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 to pay the interest on such refund on general principles to pay the interest on sums wrongfully retained.-CIT v. Cholamandalam Investment & Finance Co. Ltd. [2007] 211 CTR (Mad.) 384 : [2007] 294 ITR 438 (Mad.) concurred with; Sandvik Asia Ltd. v. CIT [2006] 200 CTR (SC) 505 : [2006] 280 ITR 643 (SC) followed." 9.3 In the present case also, there was statutory liability on the Revenue to pay the interest on the refund which was retained for seeking the administrative approval. As the refund was granted to the assessee only on 29th May, 2006, therefore, the assessee was entitled for the interest upto the said date and the AO was not just....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 issue, the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. (supra) has held as under : "Interest is payable on the amount to be refunded under s. 244(1) within three months from the decision of the appellate or other authority specified in s. 240. The expression 'amount' in the earlier part of s. 244(1A) refers not only to the tax but also to the interest; it is a neutral expression and it cannot be limited to the tax paid in pursuance of the order of assessment." Even assuming that there is no provision for payment of compensation, compensation for delay is required to be paid as the Act itself recognizes in principle of the liability of the Department to....