TaxTMI 
TaxTMI 
2021 (4) TMI 1346
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....cs filed on 29/11/2002. The returned Book-Profits of Rs.3007.07 Lacs u/s 115JB were determined at Rs.5751.40 Lacs after certain adjustments. Upon further appeal, Ld. CIT(A) has granted partial relief to the assessee which has given rise to cross-appeals before us. The assessee being resident corporate assessee is stated to be engaged in manufacturing of pharmaceuticals products and pesticides etc. 1.3 As elaborately noted by ld. AO in the assessment order, the assessee is engaged in life sciences business consisting of manufacture and sale of Pharmaceuticals, Animal Health products, eye-care products. It operates through three divisions namely-(i) Pharmaceuticals; (ii) Animal Health; (iii) Ciba Vision. 1.4 During the year under consideration, the assessee has divested its agri business comprising of crop-protection and seed division. These divisions have been transferred to a new company namely M/s. Syngenta India Ltd. Further, during the year a company named M/s.Ciba CKD Biochem Ltd. doing business of manufacture of pharmaceutical products merged with Assessee Company. The divestment as well as the merger has taken place w.e.f. 01/04/2000 pursuant to orders of Hon'ble Bombay....
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.... CIT(A) ought to have directed the AO not to disallow any expenditure with respect to investments made in the past years, GROUND NO.7 (a) The CIT(A) ought to have held that the provisions of section 43B are not applicable to ESIC. (b) Without prejudice to the above, the CIT(A) erred in upholding the action of the ACIT in disallowing ESIC dues aggregating to Rs.2,62,310 under section 43B which were paid by the appellants before the end of financial year, or before the due date of filing Return of Income, on the ground that these were paid after the due date and the amended provisions of Section 43B by the Finance Act 2003 w.e.f. 01.04.2004 would not be applicable retrospectively. GROUND NO. 8 (a) The CIT(A) erred in upholding the action of the ACIT in disallowing Bad Debts and advances amounting to Rs.1,80,30,995 written off and charged to the profit and loss account by the assessee's for the previous year relevant to assessment year 2001-02. (b) Without prejudice to the above, the CIT (A) ought to have allowed the above under section 37(1) as business expenses. GROUND NO.9 (a) The CIT(A) erred in confirming the action of the AO in excluding 90 per cent o....
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....axed by the AO in the earlier years. Sr no . Particulars Rs. Rs. AY in which offered to tax 1. Under section 43B i) Sales tax 20,01,498 ii) Service tax 2,50,000 2000-01 iii) Bonus 2,276 22,53,774 2. Write off of Tardeo property value 1,25,66,000 1999-00 3. Offered to tax on accrual basis 61,864 2000-01 4. Provision for doubtful debts 2,90,84,000 not claimed in ROI of any Earlier year 5. GIDC name transfer fees 70,90,630 1999-00 6. Provision for expenses 4,50,717 2000-01 TOTAL 5,15,06,985 GROUND NO.13 (a) The CIT(A) ought to have held that the provisions of section 234D were not applicable to the year under appeal. (b) Without prejudice to the above, the CIT(A) ought to have directed the AO to compute the interest under section 234D on the amount of tax refunded at vide intimation under section 143(1) by excluding the amoun....
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.... disallowance of corporate entrance fees of Rs.1,76,500/- paid by the assessee to the clubs by observing that the fees has been paid by the assessee as a corporate entity thereby disregarding the fact that the entrance fees have actually been, paid by the directors to the clubs for their own use thereby deriving a benefit of enduring nature on a long term basis which makes expenditure, capital in nature. 6. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in directing the AO to reduce the interest paid by assessee u/s.234C of Rs.52,54,033/-, provision for Wealth Tax Rs.2,43,73,657/- and provision for diminution in value of investment of Rs.12 lakhs from the book profit computed u/s.115JB without appreciating the contents of A.O. made in page No. 32 &, 33 of the assessment order holding that these amounts have to be added to the book profit u/s. 115JB. 7. On the facts and in the circumstances of the case and in law, the CIT(A) has erred in directing the AO to consider the profits eligible for calculating deduction u/s.80HHC instead of allowable deduction u/s.80HHC for the purpose of computing the book profit u/s. 115JB. 8. On the fact....
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....The judicial pronouncements as cited during course of hearing have been deliberated upon. Our adjudication to the subject matter of cross-appeals would be as given in succeeding paragraphs. 2.3 For ease of reference, the assessee's ground could be tabulated in the following manner:- G.No. Grounds / Issue 1. Depreciation on Computer software 2. Disallowance of Foreign Travel expenses 3. Disallowance of hotel and airfare expenses incurred on foreign visitors 4. Adjustment of MODVAT in closing Stock 5. Depreciation of assets as vested in Ciba Specialty Chemicals (India) Ltd.(CSCIL) 6. Disallowance u/s. 14A read with Rule 8D 7. Disallowance of ESIC u/s. 43B 8. Disallowance of bad debts & Advances written-off 9. Exclusion of certain receipts u/s. 80HHC 10. Notional Rental Value under the head Income from House Property 11. Depreciation on DLP projectors 12. Exclusion of certain items from Book Profits u/s 115JB 13. Interest u/s 234D 2.4 Similarly, the issues of revenue's appeal may be tabulated as under: - G.No. Grounds / Issues 1. Depreciation on block of assets 2. Disallow....
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....yable in respect of any asset falling within that block which is sold or discarded or destroyed during that previous year together with the amount of the scarp value subject to rider that such reduction would not exceed written down value of the block. In case of demerger, there is no sale transaction and there is no money payable in such a case and therefore, there would be nothing required to be adjusted to the written down value of block of assets while computing depreciation claims. 3.4 However learned AO opined that to be eligible to claim depreciation u/s 32, what is required is that the assessee should own the assets and should have used the said assets for the purpose of business during the relevant accounting year. Since assets have been transferred w.e.f. 01/04/1996, the assessee is neither the owner of assets not it had used the assets for business purposes. Therefore, the question of allowing depreciation against the same would not arise. Further, in AY 1998-99, a finding was rendered that full depreciation was claimed by CSCIL on the basis of book WDV of assets transferred by the assessee which would show that both the entities were claiming depreciation on the same....
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....efore the matter was restored to the file of Ld. AO for de-novo adjudication. However, the assessee sought rectification of the directions vide MA No.43/Mum/2018. The Ld. Judicial Member concurred with the submissions that Explanation 2A to Sec. 43(6) would not have any application to assessee's case for the year under consideration since demerger happened in previous year relevant to AY 1997-98 and in the current year, depreciation was to be allowed automatically on the opening written down value of the block as held by Tribunal in AYs 1997-98, 1998-99 & 1999-2000. However, the Learned Accountant Member, vide separate order, opined that the directions given in the order would not require any interference by the bench. Keeping in view the contrary views, reference was made u/s 255(4) to Hon'ble Vice President (third member) who vide para-13 of his order dated 09/08/2019, held that there exist mistake apparent from record which was to be rectified. Finally, following majority view, confirmatory order was passed by the bench on 27/09/2019. Thus, this issue has attained finality in assessee's favor in AY 2000-01 wherein it have been held that the assessee would be eligible to claim de....
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.... ground no.1 of assessee's cross-objection as infructuous. 5. Inclusion of Freight Component on closing stock 5.1 The assessee did not include proportionate amount of freight component while valuing closing stock of finished goods. As against this, the assessee claimed full expenditure of freight as deduction. The AO opined that as per the decision of Hon'ble Apex Court in CIT Vs. British Paints (1991; 188 ITR 44), it is the real cost of stock which was to be taken into account to determine real income of the assessee. All costs incurred towards stock-in-trade were to be considered while valuing the closing stock and exclusion of any cost would result in distorted picture of taxable income. The freight component on closing stock came to be Rs.44.09 Lacs. However, similar adjustment made in AY 2000-01 resulted into increase in valuation of closing stock of that year by Rs.147.46 Lacs and therefore, opening stock for this year was to be increased by that amount. Consequently, the differential of the two i.e. Rs.103.36 Lacs was reduced from assessee's income. 5.2 The Ld. CIT(A), relying upon Tribunal's decision for AY 1993-94 and appellate orders for AYs 1994-95 to 2000-0....
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....lar bench for fresh adjudication. Keeping in view the contrary views, a reference was made u/s 255(4) to Hon'ble Vice President (third member) who concurred with the view of Hon'ble Judicial Member. Finally, following majority view, confirmatory order was passed by the bench on 27/09/2019 allowing assessee's miscellaneous application. Thus, this issue has already attained finality in assessee's favor in AY 2000-01 wherein the bench has upheld the stand of Ld. CIT(A). Respectfully following the same, we confirm the impugned order, on this issue. Ground No.4 of revenue's appeal stand dismissed which renders ground no.3 of assessee's cross-objection infructuous. The assessee's cross-objection stands dismissed as infructuous. 7. Disallowance of Club membership fee : 7.1 It transpired that the assessee paid membership fee of Rs.1.76 Lacs to certain club. The Ld. AO opined that the expenditure being enduring in nature, the same would be capital in nature. The assessee submitted that the amount was paid by company for use of club facilities by its employees for organizing meetings and conferences for its business associates and employees for legitimate business purposes. However, no....
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....ntly, similar depreciation of earlier years for Rs.18.98 Lacs was allowed to the assessee disregarding the depreciation on assets pertaining to demerged division. 8.2 The Ld. CIT(A) noted that the payments were in the nature of license fees or for right to use certain packages which have normally longer periods of life, usage and validity and therefore, the benefits would be enduring in nature. Accordingly, the action of Ld. AO was upheld. Aggrieved, the assessee is in further appeal before us. 8.3 We find that this issue has been adjudicated in Tribunal's order for AY 2000-01, para nos.2 to 5. The bench, following earlier years, held that the expenditure was revenue in nature. Upon perusal, we find that this ground is covered in assessee's favor in several earlier years and the department has accepted the ruling of the Tribunal in those years and has not preferred further appeal, on this issue. This being the case, we direct Ld. AO to allow the expenditure fully and reverse the depreciation adjustment thus made in the assessment order. Ground No.1(a) of assessee's appeal stands allowed whereas Ground No.1(b) has been rendered infructuous. 9. Foreign Travel Expenses : 9....
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.... nos.10 to 13. The bench, following earlier years, deleted the disallowance. Upon perusal, we find that this ground is covered in assessee's favor in several earlier years also and the department has accepted the ruling of the Tribunal in those years and has not preferred further appeal, on this issue. This being the case, we direct Ld. AO to delete this addition. Ground No.3 stands allowed. 11. Unavailed Modvat Credit : 11.1 As per tax audit report, the un-availed MODVAT credit on 31/03/2001 was Rs.44.32 Lacs which was not included in the value of closing stock even though the assessee was following exclusive method of accounting for valuation of closing stock. This, in the opinion of Ld. AO, was in violation of the provisions of Section 145A. Similar addition was made in AY 2000-01. Therefore, the amount of Rs.44.32 Lacs was added to the value of closing stock as on 31/03/2001. Considering similar addition in AY 2000-01, the opening stock was to be increased by Rs.97.99 Lacs. Therefore, the net result was a reduction in total income by Rs.53.66 Lacs. 11.2 The Ld. CIT(A), relying upon appellate orders for AY 2000-01 confirmed the addition to closing stock for Rs.44.32 Lac....
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....8D. Aggrieved, the assessee is in further appeal before us. 12.4 We find that this issue has been adjudicated in Tribunal's order for AY 2000-01, para nos.39 to 41. The bench, in conclusive para-41, directed Ld. AO to estimate the disallowance @2% of exempt income. Also, it is settled position that the provisions of Rule 8D are not applicable to this year. Therefore, following the aforesaid adjudication of Tribunal, we confirm estimated disallowance of 2% as made by Ld. AO. The stand of Ld. CIT(A) stand reversed. Ground No.6 of assessee's appeal stands partly allowed. 13. Delayed ESIC payments: 13.1 During assessment proceedings, ESIC contributions of Rs.2.62 Lacs were found to have been paid beyond due date as specified in that act. Hence, invoking the provisions of Sec.43B, Ld.AO disallowed the same while framing the assessment. The action of Ld. AO, upon confirmation by Ld. CIT(A), is in further challenge before us. 13.3 We find this issue stood covered in assessee's favor by the decision of Hon'ble Bombay High Court in the case of CIT V/s Hindustan Organic Chemical Ltd. (366 ITR 1) wherein Hon'ble High Court, following the decision of Hon'ble Apex Court in CIT V/s A....
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....ssee's claim merely in terms of Sec. 36(1)(vii) r.w.s. 36(2) which was not the case. The perusal of the details filed before us would show that the amounts written-off by the assessee was mostly in the nature of advance payments for procurement of goods from third parties, which have become irrecoverable over a period and are under dispute. Few of the write-offs represent MODVAT claims outstanding against third party manufacturers for more than 5 years. Majority of these amounts are stated to be outstanding prior to 01/04/1996. This being the case, we are of the considered opinion that the claim is allowable in terms of Sec. 37(1) as business expenditure or alternatively as business loss u/s 28. For the same, we draw support from the decisions of Hon'ble Bombay High Court in Lord Dairy Farm Ltd. V/s CIT (1955 27 ITR 700); IBM World Trade Corpn. V/s CIT (48 Taxman 11); the decision of Mumbai Tribunal ion ACIT V/s Sodexo Food Solutions India Private Ltd. (ITA Nos.5781/Mum/2016 & ors. dated 03/10/2018). The ratio of all the stated decisions support the conclusion that advances lost during the course of business would be business losses. Therefore, we are inclined to delete this additi....
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....ement, the respective companies had occupied the property jointly and shared the respective costs. The assessee by recovering the cost of shared premises does not stand to lose since occupation cost is recovered. However, Ld. AO opined that property owned by assessee was used by CSCIL for which no rent was reflected in the accounts of the assessee. The assessee owned the property and let out the same to CSCIL without charging any rent. No agreement was produced by assessee for use of premises by CSCIL. Therefore, the exact commercial consideration or the benefit other than rent, being derived by the assessee from the letting out of the premises, could not be ascertained. In the above background, Ld.AO proceeded to work out notional rent in terms of Section 22 of the Act. The assessee, without prejudice, contended that Municipal Rateable Value (MRV) of the premises was Rs.88,088/- for approx. 50,000 square feet of commercial and residential premises being used by CSCIL. However, Ld. AO opined that since the assessee had let out the property but did not charge the rent then in terms of decision of Hon'ble Bombay High Court in M.V. Sonavala Vs. CIT (177 ITR 246) Bom.), it was possi....
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....s 1997-98 to 2000-01, the same arrangement continued and Ld. AO did not dispute the fact that the property stood occupied by the assessee for the purposes of its business and hence, was not liable to be assessed as "Income from House Property‟. For this, the attention was drawn to the assessment orders for AYs 1997-98 to 2000-01. Therefore, there being no change in facts, it was not open for Ld. AO to take a different view in the matter. In terms of Sec. 23(1), the income could not be assessed as "Income from House Property‟ if the property was occupied by the assessee for its business. The buildings have been used by both the entities for their respective businesses. Upon demerger, CSCIL could not have been asked to vacate the said premises immediately. They were allowed to occupy the premises for the purpose of their business for a reasonable time till they were able to find an alternate facility. Therefore, the arrangement should be viewed as occupation of the property by assessee for its own business. In the alternative, Ld. Sr. Counsel submitted that the annual value could not exceed municipal retable value in terms of various judicial decisions and not in the mann....
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....or Rs.177.76 Lacs. It transpired that for the purpose of computation, the assessee did not include sales tax and excise duty in total turnover. The Ld.AO opined that these components would be includible as per the decision of Mumbai Tribunal in Ponds India Ltd. V.s DCIT (164 ITD 33). The department was in further appeal against the favorable decision of Hon'ble Bombay High Court in Sudarshan Chemical Industries Ltd. (245 ITR 769). Therefore, these items were to be included in computing the figure of total turnover in denominator. 17.2 It was further seen that while working out profits of the business, the assessee failed to exclude 90% of the following items on the ground that the same were not in the nature of receipts mentioned in explanation (baa) of Sec.80HHC: - No. Item Amount (Rs.) 1. Interest on Employee Loans 14.09 Lacs 2. Interest on overdue debtors 19.91 Lacs 3. Interest on MSEB deposits 2.03 Lacs 4. Interest on MIDC deposits 0.18 Lacs 5. Interest on Sales Tax Refund 2.69 Lacs 6. Interest on Income Tax Refund (gross) 158.18 Lacs 7. Sales Tax Set-off 553.86 Lacs 8. Insurance Claims realized ....
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.... of Rs.167.14 Lacs. 17.3 The Ld. CIT(A), following decision of Hon'ble Apex Court in Lakshmi Mills (290 ITR 667) directed Ld. AO not to include sales tax and excise duty in total turnover for the purpose of computing deduction u/s 80HHC. Regarding scrap sales, if the proceeds were out of scrap sales of raw material then they were to be excluded from total turnover. However, scrap sale of packing material was to be included as per the decision of Hon'ble Bombay High Court in Sudarshan Chemical Industries Ltd. (245 ITR 769). 17.4 Proceeding further, Ld. CIT(A), relying upon the decision of Hon'ble Apex Court in Pandian Chemicals Ltd. V/s CIT (262 ITR 278) which held that the term "derived from‟ must be understood as something which has a direct or immediate nexus with the assessee's industrial undertaking, held that the tabulated receipts were not directly derived from export activities and therefore, the same should not form part of the eligible profits. Another plea that only net receipts should be reduced was also dismissed. Aggrieved, the assessee is in further appeal before us . Our findings & adjudication 18.1 Upon perusal of statutory provisions, we find that....
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....cture of Pharmaceuticals and animal health products. For the assessment year in question the assessee claimed a deduction under section 80HHC. The AO, while computing the deduction excluded 90 per cent of the amount of an insurance claim which was related to the stock-in-trade of the assessee. The CIT(A) confirmed the order of the AO. The Tribunal noted that for assessment year 1998-99 it had come to the conclusion that there was no justification to exclude 90 per cent of the insurance claim. Besides this, the Tribunal held that the insurance claim formed part of the income of the business of the assessee and was liable to be considered as part of the profits of the business in view of Expln. (baa) to section 80HHC. The Tribunal was of the view that the insurance claim was not in the nature of brokerage, commission, interest, rent or charges, and therefore, was not any other receipt of a similar nature within the meaning of Expln. (baa). The Tribunal, therefore, held that 90 per cent of the insurance claim could not be excluded. 4. Counsel appearing on behalf of the Revenue submits that an insurance claim constitutes an independent income which is not relatable to the expo....
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.... the discussion in respect of the issue in regard to processing charges as an independent income unrelated to export, would similarly apply to the other issues raised in the question of law framed by the Revenue viz. in regard to recovery of freight, insurance and packing receipts, sales-tax refund and service income. The question of law was therefore answered in favour of the Revenue and against the assessee. From this it is apparent that insofar as the insurance claim was concerned, Dresser Rand (supra) proceeded on a concession by counsel appearing on behalf of the assessee. That apart the facts do not contain an elaboration of the nature of the insurance claim in that case. The judgment of the Division Bench in Dresser Rand (supra) would therefore not conclude the issue which has fallen for determination in this appeal. 7. Sub-section (1) of section 80HHC contemplates a deduction to an assessee, being an Indian company or a person resident in India and engaged in the business of export out of India of any goods or merchandise to which the section applies. The deduction is to be allowed in computing the total income of the assessee to the extent of the profits derived b....
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....ed in the following observations of the Supreme Court : "That, profit incentives and items like rent, commission, brokerage, charges etc., though formed part of gross total income had to be excluded as they were 'independent incomes' which had no element, of export turnover. That, the said items distorted the figure of export profits." Again, in para 21 the Supreme Court observed as follows : "The said clause stated that 90 per cent of incentive profits or receipts by way of brokerage, commission, interest, rent, charges or any other receipt of like nature included in business profits, had to be deducted from business profits computed in terms of sections 28 to 44D of the IT Act. In other words, receipts constituting independent income having no nexus with exports were required to be reduced from business, profits under clause (baa). A bare reading of clause (baa)(1) indicates that receipts by way of brokerage, commission, interest, rent, charges, etc. formed part of gross total income being business profits. But for the purposes of working out the formula and in order to avoid distortion of arriving export profits clause (baa) stood i....
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....a receipt would not be subject to a deduction of ninety per cent under clause (1) of Expln. (baa). 11A. Counsel appearing on behalf of the Revenue submitted that the insurance claim has no element of export turnover and that consequently it must sustain a reduction of ninety per cent under Expln. (baa). Now it is necessary to note that Expln. (baa) in terms does not refer to export turnover. Sub-section (1) of section 80HHC contemplates a deduction to the extent of profits derived by the assessee from the export of goods or merchandise to which the section applies. The basic issue therefore is to determine the extent of profits derived by the assessee from the export of such goods or merchandise. The formula in sub-section (3) of section 80HHC has been provided by the Parliament, for the purposes of sub-section (1) to compute the profits derived from the export of goods. Clause (a) of sub-section (3) specifies that where the export is of goods or merchandise manufactured or processed by the assessee the profits derived from the export shall be the amount which bears to the profits of business, the same proportion as the export turnover in respect of such goods bears ....
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.... period allowed to them. The interest so charged could not be said to be an independent source of income but could be said to have arisen only out of normal business operations only. Interest on deposit with MSEB & MIDC- The income arises on account of deposit placed by the assessee with MSEB for obtaining power connections to run the manufacturing facility. Similarly, deposits with MIDC have been placed for obtaining land on which manufacturing facility would be set up. Unless the deposits are placed the assessee would not be able to manufacture the goods. Thus, the deposits have been placed only out of business compulsion. Insurance Claims- These represents claims allowed by insurance company in respect of loss of trading goods. A contract of insurance is in the nature of indemnity and indemnifies the assessee for loss of stock-in-trade. Had the goods not been destroyed, the same would have been sold at profits and therefore, the insurance claims are compensatory in nature. The claims could not be said to be an independent source of income for the assessee and could not be equated with "receipts of similar nature‟ as mentioned in explanation (baa). Scrap Sales Inco....
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....ilar is the situation with interest on sales tax refund. Both these items, in our opinion, would be covered by explanation (baa) and accordingly, required to be reduced to the extent of 90% while computing profits of the business. However, as per the decision of Hon'ble Apex Court in ACG Associates Capsules Pvt. Ltd. V/s CIT (334 ITR 89), netting-off would be available to the assessee. The Ld. AO is directed to re-work the same. Sales Tax Set-off & Excise Duty refund- These two items would stand excluded in view of the fact that as per the impugned order, sales tax aswell as excise duty would not form part of total turnover in the denominator. When denominator has been reduced by these two components, similar connected items would stand excluded from the numerator also. 18.5 The Ld. AO is directed to re-compute the deduction available to the assessee u/s 80HHC in the light of our adjudication on various issues effecting computations u/s 80HHC. Ground No.9 of assessee's appeal stand partly allowed. 19. Computation of book profit u/s. 115 JB (Assessee's Grounds) In Ground No. 12, the assessee is seeking exclusion of sum of Rs.515.06 Lacs while computing Book Profits....
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....that since Ld. CIT(A) has relied upon the decision of jurisdictional High Court while adjudicating the issue and therefore, our interference is not called for. No contrary decision has been placed on record. (ii) Provisions for diminution in value of investments The assessee debited an amount of Rs.12 Lacs being diminution in value of investment but did not add back the same while computing book-profits. The Ld. AO treating the same as contingent liability, increased the Book-Profits to that extent. The Ld. CIT(A), relying upon Tribunal's decision in N.W. Exports 34 BCAJ 1368 Mumbai Tribunal) as well as the decision of Kolkata Tribunal (SB) in JCIT V/s Usha Martin {288 ITR (AT) 62 SB-Kol)}, held that the same was not to be added back while computing Book-Profits u/s 115JB. Aggrieved, the revenue is in further appeal before us. In view of insertion of clause (i) to Explanation- 1 to Section 115JB(2) by Finance Act, 2009 w.r.e.f. 01/04/2001 which envisages that book profits are to be increased by the amount or amounts set aside as provision for diminution in the value of any asset, we restore this issue back to the file of Ld.AO to ascertain the nature of provision and re....
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....the impugned order, on this issue. Ground No.7 & 8 of revenue's appeal stand dismissed. 22. Applicability of interest u/s Section 234D 22.1 Before Ld. CIT(A), the assessee assailed the action of Ld.AO in charging interest u/s 234D by submitting that interest was not leviable. Further, the interest if any which is to be charged, would be chargeable only on tax refunded at the time of summary assessment and no on interest granted u/s 244A. A plea was also made to direct Ld. AO to apply correct rates of interest chargeable u/s 234D. This was in the background of the fact that Section 234D was inserted only w.e.f. 01/06/2003 and therefore, it would apply only from AY 2004-05. 22.2 However, Ld. CIT(A) opined that interest was chargeable w.e.f. 01/06/2003 and there was no mention of any assessment year. Hence, any proceedings which are completed after 01/06/2003 would be very much covered by the provisions of Sec.234D. Accordingly, the grounds raised by the assessee was dismissed. Aggrieved the assessee is in further appeal before us. 22.3 The Ld. Sr. Counsel pleaded that interest u/s 234D was to be charged only in respect of the tax component of amount received p....
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....ion (3) of this section or section 144 is made,- (a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessment; (b) if no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly". It is clear therefore, that excess refund determined under section 143(3) of the Act is deemed to be tax payable by the assessee. However, as there was no provision of interest on the grant of refund under Section 143(1) of the Act it became necessary to provide for the same by having a charging provision. This was done by section 234D of the Act in respect of all pending assessments in which refund was given. Thus even if, a refund has already been granted the same would be subject to the provisions of section 234D of the Act. Under section 234D(1) where the refund under section 143(1) is in excess of the amounts refundable on regular assessment, interest on the excess amount woul....
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.... same was clarified by adding an Explanation to section 234D by Finance Act, 2012. Under the Act what is brought to tax is not the income of the assessee in the assessment year but the income of the assessee in the previous year. The liability to tax arises on account of the Finance Act which fixes the rate at which the tax is to be paid. The law to be applied is as existing on the 1st day of April of the previous year. In support the Counsel for the respondent relied upon the decision of the Supreme Court in Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 , Maharajah of Pithapuram v. CIT [1945] 13 ITR 221 (PC) and CIT v. Scindia Steam Navigation Co. Ltd, f 1961142 ITR 589 (SO. The aforesaid decisions are not relevant for our purpose particularly, in view of the fact that Explanation 2 to section 234D of the Act as introduced by the Finance Act,2012 being declaratory in nature would be retrospective. This amendment make it cleat that it shall apply assessment years even prior to 1/06/2003. 27. In view of the above, we hold that the decision of the Tribunal in /TO v. Ekta Promoters (P.) Ltd. [2008] 113 ITD 719 (Delhi) (SB) which has been followed in the im....
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....r our consideration is that whether the assessee would be liable to pay interest u/s 234D on the interest granted in an intimation u/s 143(1) or not. The Ld. Sr. Counsel has pleaded that only tax could have been refunded to the assessee and interest was only a consequential as well as compensatory in nature and therefore, the same could not be refunded to the assessee. Therefore, the interest which was to be computed would be only with respect to tax as refunded to the assessee in an intimation u/s 143(1). 23.3 We find that as per the provisions of Sec.234D, where any refund is granted to the assessee u/s 143(1) and no refund is due on regular assessment or the amount refunded u/s 143(1) exceeds the amount refundable on regular assessment, the assessee would be liable to pay interest on the whole or the excess amount so refunded. We find that the expression used in Sec. 234D is 'amount refunded' and not 'tax refunded'. Clearly the intention is to charge interest on excess amount refunded to the assessee either by way of refund of tax or by way of interest. Our view is fortified by the provisions of Sec. 143(4) which provides that if no refund is due on regular as....
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.... are two different things under the Income-tax Act and that they cannot be mixed up while interpreting section 245. Mr. Mistry also relied upon a ruling of the Madras High Court in M.A. Khader and Co. v. Deputy Commercial Tax Officer [1970] 25 STC 104 in support of his argument and drew my attention to the observations made by their Lordships of the Madras High Court that, in common law, only a person who had paid tax can ask for refund, if he is statutorily entitled to it and it would be strange if the dealer who paid the Central sales tax is permitted to obtain a refund of the local tax which he did not pay. The argument of Mr. Mistry appears to be attractive but I am unable to persuade myself to agree with him for the simple reason that, while interpreting the provisions of section 245 of the Income-tax Act, we cannot give such a restricted meaning to the word "refund". It is important to bear in mind in this connection that the expression "refund" is a commonly understood generic term which refers to the payment by the Income-tax Department of any amount due to an assessee and it does not mean only the return of an excess amount "paid" to the Department by an assessee. The Inco....
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....ion 244(1A) of the said Act is set off and adjusted against the tax liability of an assessee under section 245 as if the said amount was a refund due to an assessee. Thus, I find no substance in the argument of Mr. Mistry that "refund" and "interest" in the Income-tax Act are two different things. In this case, it was argued that interest as accrued to the assessee in one assessment year could not be set-off against demand of another assessment year on the ground that one has to be funded first before a refund could be granted. Since the assessee did not fund the department with anything and therefore, the payment of interest could not be equated with payment of refund. However, rejecting the same, the Hon'ble Court held that the expression "refund" is a commonly understood generic term which refers to the payment by the Income-tax Department of any amount due to an assessee and it does not mean only the return of an excess amount "paid" to the Department by an assessee. Further, the amount payable by assessee / revenue may include Income Tax, penalty, interest etc., however, the demand or refund is made of the net figure which cannot, therefore, be identified as tax, penalt....