TaxTMI 
TaxTMI 
2022 (8) TMI 532
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.... However, upon subsequent re-computation of the income vide an order dated 3rd February, 2010, passed under Sections 154/250/143(3) of the Act, the income of the assessee was assessed at Rs.40,88,00,550/- after setting-off brought forward losses for AY 1996-1997. Consequently, as a result of the reduction of taxable income, the respondent herein was entitled to refund of sum deposited as interest under Section 234D and Section 220 (2) of the Act. The assessee was held entitled to refund of a sum of Rs.1,66,46,933/- under Section 234D and a sum of Rs.1,99,131/- under Section 220(2) of the Act. 3. The respondent was, however, aggrieved by non-grant of 'interest' on the aforesaid order of refund under Sections 234D and 220(2) of the Act . The Respondent therefore filed an appeal before the Commissioner of Income Tax (Appeals) ['CIT(A)'] against the said order on the ground that the Assessing Officer ('AO') has erred in not granting interest under Section 244A of the Act on the refund granted. The CIT(A) dismissed the appeal of the respondent, relying upon the judgment of the Supreme Court in the case of Commissioner of Income Tax, Gujarat vs. Gujarat Fluoro Chemicals ....
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.... the statutory interest deposited by the assessee, the sum directed to be refunded by AO is interest. 7. Per contra, the learned counsel for the respondent had relied upon the judgment of this Court in Preeti N Aggarwala (supra). He also relied upon the order of the Supreme Court dated 12th December, 2019 in Civil Appeal No. 3826 of 2012 in M/s Universal Cables Ltd. v. Commissioner of Income-Tax, Jabalpur to contend that the Supreme Court has held therein that the Revenue is liable to pay interest on any amount recovered or collected during the assessment proceedings and which is subsequently found liable to be refunded to the assessee. 8. He also relied upon the judgment of the Bombay High Court in Stock Holding Corporation of India Ltd. v. N.C. Tewari, Commissioner of Income-tax, Mumbai City-III [2015] 53 taxmann.com 106 (Bombay), wherein the Court has held that the Revenue is liable under Section 244A(1) (b) of the Act to pay interest upon refund of tax deposited by the assessee on self assessment. The Bombay High Court relied upon the judgment of this Court in CIT v. Sutlej Industries Ltd. reported in [2010] 325 ITR 331 (Delhi), wherein it was held that interest is payable fr....
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....n any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised;" 12. The payment of refund by Revenue to assessee admittedly does not satisfy either of the twin conditions set out in the definition clause and it is therefore not interest, as sought to be contended by the Revenue. 13. The sum directed to be refunded to the assessee is a debt in the hands of the Revenue and therefore for Revenue to term 'payment of this debt' as 'interest' is fallacious. Infact, it is on the payment of this debt that the assessee is demanding that Revenue should be liable to pay interest for the period that Revenue retained the said money. The assessee is therefore seeking interest on the debt owed to it by the Revenue and not 'interest on interest' as sought to be contended by the Revenue. 14. In this regard, it would also be relevant to refer to definition of 'refund', as it appears in the Oxford English Dictionary, Fifth Edition, Volume 2, N-Z : which reads as under : ....
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....nite sum that was wrongly deducted from the Petitioners as interest. Payment of interest on that sum by the Revenue cannot be characterised as payment of 'interest on interest'. In India Trade Promotion Organization v. CIT (supra) the question before the Court concerned the denial of interest on refund. It was clarified that "if the refund does not include interest due and payable on the amount refunded, the Revenue would be liable to pay interest on the shortfall. This does not amount to payment of interest on interest." 17. The predecessor Division Bench in coming to the aforesaid conclusion, referred to the expression 'in any other case' in Section 244A(1) (b) of the Act to hold that Revenue is liable to pay interest on the sum found refundable to an assessee, upon waiver of interest. In the facts of the present case too, a sum has admittedly been found refundable to the assessee as a consequence of reduction in the taxable income. The relevant text of Section 244A(1)(b) of the Act reads as under : "Interest on refunds. 244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitle....
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....ee is entitled for the said amount of refund with interest thereon as calculated in accordance with clause (a) & (b) of sub-section (1) of Section 244-A. In calculating the interest payable, the section provides for different dates from which the interest is to be calculated. xxx xxx xxx 37. 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 m....