TaxTMI 
TaxTMI 
2009 (10) TMI 51
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....ounts of taxes paid from the date of actual payment as provided in Section 244A(1)(b) of the Income Tax Act, 1961 (for short, the "Act") for the entire period of wrongful retention as defined in the judgment of the Supreme Court in the case of Sandvik Asia Ltd. v. Commissioner of Income Tax I, Pune & Ors., (2006) 2 SCC 508 where the entire or almost entire additions and disallowances made by the Assessing Officer (AO) stand ultimately deleted wiping out the entire or almost entire additional demand so created. In essence the assessees are claiming interest on interest by way of compensation on the premise that the interest amount was wrongfully withheld by the respondent. 2. For the sake of convenience, the synopsis and the facts as they appear in ITA No. 35/2009 are taken note of. 3. This appeal is filed by Motor & General Finance Ltd., which relates to the assessment year 1994-95. The assessee had filed its return of income tax showing a particular income. Tax payable had been paid in the form of TDS and advance tax. On the basis of income tax return filed, tax payable was less than what was already paid in the form of TDS and advance tax and, therefore, refund was claimed. A....
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.... for both the parties concede that the principles laid down in the decision of the Supreme Court in Sandvik Asia Ltd. (supra) would govern the outcome. It is the interpretation and effect of that judgment which is to be examined. 7. Before adverting to the principle of law enunciated in the said judgment, it would be necessary to scan through the facts of that case on which the judgment of the Supreme Court is founded. 8. For the assessment years 1977-78, 1978-79, 1981-82 and 1982-83, the appellant company was found to be entitled to refund of advance tax. On the amount consequently refunded, it claimed interest under Sections 214 and 244(1-A) of the Act. Some disputes arose in that regard but ultimately, the Supreme Court by its order dated 30.4.1997 directed the CIT to reconsider the matter in the light of Modi Industries Ltd. case, (1995) 6 SCC 396. Pursuant thereto, the assessing officer passed an order on 27.3.1998 paying certain amounts under Sections 214 and 244(1-A) of the Act by way of interest up to the date of refund of tax. The appellant then filed a revision petition claiming interest for the delay of 12 to 17 years in payment of the amount of interest. That petiti....
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....hether excess amounts of tax are collected from the assessee or any amounts are wrongfully withheld from the assessee without the authority of law, the Revenue must compensate the assessee. It noted that the word „any amount‟ appearing in Section 240, in contra-distinction to the words "tax paid in excess" appearing in Section 237 of the Act would encompass interest as well. Significantly, the cases relate to the period prior to 1.7.1989 and, therefore, the Supreme Court also held that proviso to Section 240, which was inserted with effect from 1.4.1989, had no applicability/ relevance. 11. It would, thus, be seen that in the said case the Court has accepted the general principle applicable to the income tax refunds also, namely, the assessee has to be compensated for ordinary delay in receiving monies properly due to it. Following observations in this behalf are made :- "Learned counsel for the appellant says that it cannot be denied that it has been deprived of the use of its monies for periods ranging from 12 to 17 years. It also cannot be denied that such deprivation is solely due to the actions of the Revenue which have been held by this court to be contrary to the ....
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....he Department first adjusts the amount paid towards interest so that the principal amount of tax payable remains outstanding and they are entitled to charge interest till the entire outstanding is paid. But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. Hence as per the stand that the Department takes they are liable to pay interest only up to the date of refund of tax while they take the benefit of the assessees funds by delaying the payment of interest on refunds without incurring any further liability to pay interest. This stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to lakhs and lakhs of assessees. Very large number of assessees are adversely affected inasmuch as the Income Tax Deparmtent can now simply refuse to pay to the assessees amounts of interest lawfully and admittedly due to them as has happened in the instant case. It is a case of the appellant as set out above in the instant case for the assessment year 1978-79, it has been deprived of an amount of Rs.40 lakhs for no fault of its own and exclusively because of the admitt....
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....filed by the Income-tax Department against the said judgment of the Madhya Pradesh High Court. This court specifically held that following the principle laid down by the Gujarat High Court, viz., that … The Revenue is liable to pay interest on the amount of interest which it should have paid to the assessee but has unjustifiably failed to do… the question has, as we find, been rightly answered in the affirmative and in favour of the assessee. This is clearly a decision of this court on the merits of the matter, al beit proceeding on the assumption that there was no provision in the Act granting interest on unpaid interest, in favour of the appellant's contentions." 13. When we examine the facts of the present case, we feel that the aforesaid judgment of the Supreme Court would not come to the aid of the assessee and permit the assessee to claim interest on interest in the given situation. As far as the appeals at hands are concerned, it is not in dispute that on filing the return by the assessee and processing the case under Section 143(1)(a), the excess amount of TDS and advance tax paid by the assessee was refunded along with interest under Section 244(a) within the prescri....
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....er case, within three months from the end of the month in which the claim for refund is made under this Chapter, the Central Government shall pay the assessee simple interest at twelve per cent per annum on the amount directed to be refunded from the date immediately following the expiry of the period of three months aforesaid to the date of the order granting the refund. Explanation - If the delay in granting the refund within the period of three months aforesaid is attributable to the assessee, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which interest is payable. (2) Where any question arises as to the period to be excluded for the purposes of calculation of interest under the provisions of this section, such question shall be determined by the Commissioner whose decision shall be final. 244. Interest on refund where no claim is needed. - (1) Where a refund is due to the assessee in pursuance of an order referred to in Section 240 and the Income Tax Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to th....
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.... months from the end of the month in which the claim for the refund is made under that chapter. Interest payable is @ 12% p.a. "from the date immediately following the expiry of the period of three months" aforesaid to the date of the order granting the refund. 15. No doubt, when the tax paid is more than what is due, as a result of certain additions etc. made by the AO and in appeal when those are deleted by the appellate authority, the refund of the excess amount is to be made along with interest, as envisaged under Section 243 of the Act. It is only when this interest is not refunded that the assessee would become entitled to the interest on the said interest as well. That was the factual position in Sandvik Asia (supra). In contra-distinction, where the interest is paid along with the amount payable as refund, the question of payment of interest on interest does not arise. Present cases fall under this category. 16. In the present case, the order of the Tribunal would demonstrate that it had taken into consideration various dates on which orders were passed by the successive authorities, including the order of refund. It has also taken into consideration the interest on the....
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....; 1,95,32,914 1.3.04 to 30.7.06 29 0.50% 28,32,272 Less: Refund already issued On 3.8.06 1,37,33,468 97,99,446 1.8.06 to 31.1.07 6 0.5% 3,30,569 TOTAL 1,92,04,436 It is clear from the above that the assessee had been paid the refund of the amounts collected/paid within the statutorily permissible periods. 17. On the other hand, in Sandvik Asia Ltd. (supra), only refund of excess tax had been given, but no interest on refund had been given to the assessee along with that. This interest was retained by the department for a period of 12 to 17 years in respect of various assessment orders. It was under these circumstances, the Court opined that withholding of interest was also unjustified as this had become part of the refund due to the assessee along with tax, interest on this amount was also payable. 18. It is, thus, manifest that at both the stages, namely, while passing intimation under Section 143(1)(a) of the Act, refund along with interest under Section 244(a) was given of the excess TDS and advance tax. Again, after the orders of the ....