TaxTMI 
TaxTMI 
2006 (11) TMI 232
X X X X Extracts X X X X
X X X X Extracts X X X X
.... carried the matter in appeal. 4. The assessee had made payment of Rs. 1,75,85,615, as under:- ----------------------------------------------------------- Sr. Date of payment Amount No. (Rs.) ----------------------------------------------------------- 1. 14-9-1998 - Advance tax 9,50,000 2. 14-12-1998 - Advance tax 6,25,000 3. 13-3-1999 - Advance tax  ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing that once the liability along with interest under section 234B is crystallized then iris the final amount of refund due which would be eligible for interest; that interest charged under section 234B on crystallization of final tax demand become refundable and like any tax paid in excess of final tax demand, it become excess tax paid and would be eligible to interest under section 244A; that the assessee has paid all the amounts only towards tax liability, but the Assessing Officer has adjusted the said taxes paid, firstly to interest liability under section 234B and then towards tax liability; and that on finalization of tax demand, the Assessing Officer has denied the interest under section 244A on the reasoning that it is refund of interest and hence not eligible for interest under section 244A which had caused grave injustice to the assessee resulting in a short refund of interest under section 244A. Reliance was placed on the Gujarat High Court decisions in the case of D.J. Works v. Dy. CIT [1992] 195 ITR 227, Chimanlal S. Patel v. CIT [1994] 210 ITR 419, CIT v. Gujarat State Warehousing Corporation [2002] 256 ITR 596 and Ahmedabad Tribunal decision in the case of Dhanvi Tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and 24 held as under:- "23. I have gone through the submissions made by the appellant and the relevant case law on the subject. A perusal of the Apex Court decision in Sandvik Asia Ltd. as well as the direct decision of the Gujarat High Court and other High Courts which have been approved by the Hon'ble Supreme Court the issue is now beyond and shade of doubt that the assessee would be entitled to interest under section 244/244A on the refund of interest paid in excess by it pursuant to an appeal proceeding. Although the Hon'ble Supreme Court has considered and approved most of decisions cited therein which were dealing with interest under section 214, the interest under section 234B is also on similar lines. 24. Following the ratio of the decision of the Hon'ble Supreme Court, it is held that the appellant is entitled to interest on refund of interest payment under section 234B after verifying all the payments. The Assessing Officer is directed to grant refund accordingly." 7. The ld. CIT DR, Shri N.S. Dayam, relied heavily upon the recent decision of Ahmedabad Tribunal in the case of GSFC Ltd., wherein after considering the decision of the Supreme Court in the case of S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....said law as held by the Gujarat High Court in the case of CIT v. Maganlal Mohanlal Panchal (HUF) [1994] 210 ITR 580. He further submitted that the Delhi High Court decision in the case of Goodyear India Ltd. was under the scheme of the Act, which was upheld by the Supreme Court. He then referred to in paragraph 20 of the Tribunal order in the case of GSFC Ltd. and submitted that it is contrary to the Gujarat High Court decision. 9. The learned CIT D.R., in counter reply submitted that the three Tribunal decisions have already been considered by the Tribunal and the two decisions now cited additionally in this case fell on the similar line and, therefore, the matter is concluded by the decision of GSFC Ltd.'s case and does not require any reference to the Special Bench and the revenue's appeal is to be allowed on the basis thereof. 10. We have heard the parties and considered their rival submissions. In our opinion none of the case referred to by the parties have any bearing in this case. The cases referred to are all on the issue whether the interest can be granted on interest due, accrued and payable to the assessee under section 244A/244/214 of the Act, whereas in the prese....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... thereon shall be final. (3) Where, as a result of an order under sub-section (3) of section 143 or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly. (4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on 1-4-1989, and subsequent assessment years." 12. The opening sentence of the section starts with the words 'refund of any amount becomes due to the assessee under this Act', and it entitles an assessee to interest on such refund....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... would be absent. It was in these circumstances it was held in GSFC Ltd.'s case that though the term 'refund' may include the interest due to an assessee under the Act, the assessee would not be entitled to interest on late payment thereof because it was not out of any payment by the assessee. 14. Sub-section (2) of this section provides that if the delay is attributable to the assessee, interest to that extent is not to be paid. Sub-section (3) of this section 244A provides that where as a result of an order of assessment, rectification, appeal or revision or settlement, amount on which interest was payable has been increased or decreased, the interest is to be increased or decreased accordingly. Here also increase or decrease is of the amount on which interest was payable i.e., of t4e refund out of tax paid or collected from the assessee. 15. Earlier section 244 provided for interest on refund of amount due and granted to the assessee in pursuance of an order on appeal or other proceedings and if the Assessing Officer did not grant the same within three months from the end of the month of such order, the interest was to be paid from the date immediately following the expiry....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceeding for the period commencing after the expiry of [three months from the end of the month in which the order referred to in section 241 is passed] to the date the refund is granted. (3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on 1-4-1989, or any subsequent assessment years." 16. On a comparative study of the provisions of section 244 as were in force upto the assessment year 1988-89 and the provisions of 244A applicable from assessment year 1989-90 onwards and with which we are concerned in this case, we find that there is a marked difference in the language used in these two provisions. In section 244 the interest was to be granted on any refund of 'the amount' becoming due on appeal or other proceedings. On the contrary section 244A provides for the interest on refund of any amount out of the payments made by the assessee. See under clause (a) of the sub-section (1) it is on 'the amount' of refund out of any tax paid by or collected from the assessee. Similar is the position under c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ued to an assessee under section 244A from the Department as interest on refund of some other tax paid by it and not out of any payment by the assessee. 20. The term 'refund' has not been defined under the said Act. The dictionary meaning thereof, as appearing in the Advanced Law Lexicon; is that 'to repay to give back; to restore; reimburse... to make return or restitution of a sum received or taken; to hand back, repay, restore'. In New Lexicon Webster's Dictionary it is 'to pay back (money spent) : to reimburse (some one) : to make repayment', whereas-in terms of the Shorter Oxford English Dictionary, it means, 'to give, restore, to make return orres1itution of (sum received or taken), to hand back, retake, restore, to reimburse'. Considering these dictionary meanings of the word 'refund', it can be said that it is an act of repayment or reimbursement of what one has paid earlier. This test is satisfied in this case. The term 'refund of any amount' in sections 240 and 244 has been held to include the refund due to an assessee though not necessarily out of the payments made by the assessee. The opening words of section 244A use the same language as was in section 244 effective....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner was, however, of the view that the refund referred to in section 240 of the Act is 'of any amount that had become due to the assessee' and so would include the interest under section 220 of the Act as well, which became refundable by virtue of the proviso to section 220(2) of the Act. The Tribunal upheld the order of the CIT(A) and held that the refund of interest under section 220 of the Act is 'an amount' which comes within the purview of section 240 and, therefore, eligible for the interest contemplated by section 244(1) of the Act. The revenue filed Reference Application before the Kerala High Court and the Court upheld the order of the Tribunal by observing as under:- "It is common ground that the amount collected by the revenue included also interest levied and collected under section 220 of the Act. The amounts became refundable to the assessee as a result of the order passed by the Supreme Court. The refund of the amounts was made to the assessee in consequence of such an order passed by the court. That was done under section 240 of the Act. It cannot be disputed that income-tax, penalty and interest collected became refundable to the assessee. Whenever refund of an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Tribunal order Rs. 17,508. The assessee claimed interest on the refund of these two amounts. But the Assessing Officer, however, allowed interest on the excess amount of tax only. The AAC affirmed his order. But the Tribunal in further appeal held that interest on the entire amount of refund had to be paid to the assessee under section 244(1) of the Act. The matter carried in reference to the High Court and the High Court upheld the order of the Tribunal by observing in paragraph 4, as under:- "4. Section 240 of the Act provided that where as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the ITO shall, except as otherwise provided in this Act refund the amount to the assessee without his having to make any claim in that behalf. Sub-section (1) of section 244 of the Act further provides that where a refund is due to the assessee in pursuance of an order referred to in section 240 and the ITO 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 the assessee simple interest on the amount of refund due at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etion of assessment. Though these amounts paid by the assessee are statutory levies, they were paid by the assessee in pursuance of the order of assessment. Further, the expression, 'amount' in the earlier part of the section 244(1A) would refer to not only the tax but also the interest and the expression 'amount' is a neutral expression and it cannot be limited to the tax paid in pursuance of the order of assessment. We are of the opinion that the expression 'tax or penalty' found in the later part of the section 244(1A) would not qualify or restrict the scope of the expression 'amount' found in the earlier part to mean only 'tax or penalty'. As already seen, the function of the later part of section 244(1A) of the Act is to find out the excess of the amount which the assessee paid by way of tax or penalty and that is the reason the expression 'tax or penalty' has been employed However, to determine the amount on which the revenue is liable to pay interest, section 244(1A) gives emphasis on the amount paid by the assessee in pursuance of the order of assessment and the amount, in our opinion, cannot be limited to the amount of tax or penalty, but would encompass the amount of i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 215 of the Act and collected in pursuance of an order of assessment which was refunded as the expression 'amount' is a neutral expression and it cannot be limited to the tax paid in pursuance of the order of assessment. 28. The court also held that the expression 'tax or penalty' found in the later part of the section 244(1A) would not qualify or restrict the scope of the expression 'amount' found in the earlier part to mean only 'tax or penalty'. It is stated that the function of the later part of section 244(1A) of the Act is to find out the excess of the amount which the assessee paid by way of tax or penalty and that is the reason the expression 'tax or penalty' has been employed. However, to determine the amount on which the revenue is liable to pay interest, section 244(1A) gives emphasis on the amount paid by the assessee in pursuance of the order of assessment and the amount, in our opinion, cannot be limited to the amount of tax or penalty, but would encompass the amount of interest paid by the assessee. The clear intention of Parliament is that the right to interest will compensate the assessee for the excess payment during the intervening period when the assessee di....