Case Law Details

Case Name : CIT Vs Birla Corporation Limited (Calcutta High Court)
Appeal Number : ITA No.526 of 2004
Date of Judgement/Order : 02/02/2016
Related Assessment Year :

Brief of the case is to be sorted properly

Brief of the case:

  • The High Court held that the amount paid was held by the Government till a direction was issued by the appellate authority to refund the same, therefore, it should carry interest as a matter of course. Furthermore, it was held that interest was in the nature of compensation for use and retention of money collected unauthorisedly by the department.
  • The High Court further held that refund due and payable to the assessee is debt owed and payable by the revenue. Furthermore, it was held that merely because there is no express statutory provision for payment of interest on refund of excess amount collected by the Revenue, the Government cannot evade its obligation to refund the money with accrued interest for the period of undue retention

Fact of the Case:

The facts and circumstances briefly stated are as follows:-

The assessee paid tax in respect of the relevant assessment years including self-assessment tax u/s.140A of the Act. Subsequently, the assessment u/s.143(3) was completed for both the assessment years 1992-93 and 1993-94 and certain additions were made. The assessee referred an appeal before the Commissioner of Income Tax (Appeals) (hereinafter referred to as ‘CIT(A)’) who allowed certain relief resulting in an order for refund. While giving effect to the said order of the learned CIT(A), an order for refund along with interest was allowed to the assessee for both the years under consideration. Subsequently, the assessing officer issued a notice u/s.154 and the interest previously allowed u/s.244A(1)(b) on the refund of excess self assessment tax was withdrawn. In his order u/s.154 the assessing officer held that interest u/s.244A(1)(a) is not payable on refund of excess self assessment tax whereas s.244A(1)(b) is not attracted in view of the explanation appended thereto. He relied on the explanation to Clause (b) which provides that the “date of payment of tax or penalty” u/s.244A(1)(b) means the date on and from which the amount of tax or penalty specified in the notice of demand issued u/s.156 is paid in excess of such demand. The assessing officer, therefore held that “since any tax paid after issue of notice of demand does not include self-assessment tax, the interest is not payable on excess payment u/s. 140A.” The assessee preferred an appeal against the order of the assessing officer before the CIT(A). The CIT(A) reversed the order of the assessing officer by an order dated 20th November 2002 relying upon a judgement of Delhi High Court in the case of CIT –Vs- MMTC Ltd. reported in 246 ITR 725 and held that the provisions of Section 154 could not be applied to the present case. The revenue unsuccessfully appealed before the Tribunal, which also relied upon CIT -Vs- MMTC (supra) and upheld the order of CIT(A). The revenue is, as such, in appeal before this Court against the order of the Tribunal dated 22nd March 2004.

Contention of Assessee:

Mr. J. P. Khaitan learned senior advocate appearing for the assessee contended as follows:

(I) that the interest is payable on the refund of the excess selfassessment tax under Clause (b) of Sub-Section (1) of Section 244A which should be construed liberally and in favour of the assessee. He relied on the case of Union of India –Vs- Tata Chemicals Ltd. reported in (2014) 6 SCC 335; (II) that section 244A(1)(a) provides for interest on refunds out of Advance tax and tax deducted at source while Section 244A(1)(b) is residual in nature and provides for interest on refund in other cases including excess tax paid on self assessment u/s.140A. He relied on the CBDT Circular No. 549 dated 30 October 1989; (III) that the provisions of s.244A(1)(b) mandate that the revenue would pay interest on the amount refunded for the period commencing from the date when the tax was paid to the date when the refund is granted; (IV) that the explanation to Section 244A(1)(b) would have no application to the instant case because the self assessment tax u/s.140A is not paid consequent to any notice of demand issued u/s.156 of the Act and (V) both the Tribunal and the CIT(A) have rightly set aside the order of the assessing officer by holding that the issue was debatable and outside the scope of Section 154. He contended that there is no clear mandate in Section 244A by which the assessing officer can deny interest to the assessee on the excess amount paid u/s.140A of the Act. Thus according to him there was no “mistake apparent from the record” which could have been rectified in exercise of power u/s 154.

Contention of Department:

Mr. Nizamuddin learned advocate appearing for the revenue contended as follows:-

(I) that the payment of interest on refund is governed by section 244A of the Act; (II) that Clause (a) of subsection (1) of section 244A is applicable only to the circumstances enumerated under the clause and the case of the assessee does not fall in the four corners of the said provision; (III) that Clause (b) of subsection (1) of Section 244A is also not attracted in view of the explanation appended to the said clause. The explanation, clearly mentions that such excess tax must have been paid only after the department had computed the income and issued a demand notice u/s.156 of the Act. According to the explanation the “date of payment of tax or penalty” under Clause (b) means the date on and from which the amount of tax or penalty specified in the notice of demand issued u/s.156 is paid in excess of such demand. Therefore interest would not be payable on the refund of excess self-assessment tax, since the same was not paid consequent to any notice of demand u/s.156 of the Act; (IV) that the revenue is not obliged to pay any interest on the refund of excess self assessment tax as the statute does not provide for any such interest. He relied on CIT v. Engineers India Ltd. reported in [2015] 373 ITR 377 (Delhi) and (V) that the Act envisages the circumstances where interest may be granted on refund of excess tax and interest cannot be granted otherwise than in accordance with the statutory scheme. Hence there can be no debate as regards the question whether in a given situation interest can be granted on a refund of excess selfassessment tax. Thus the learned tribunal has erred in holding that the issue is debatable and beyond the scope of s.154 of the Act.

Judgement of Reputed High court:

In the light of the discussion made above, we are of the opinion that Clause (b) of Sub-Section 1 of Section 244A is residual in nature and provides for interest on refund of excess self-assessment tax paid by the assessee. Furthermore the explanation to section 244A(1)(b) would have no application since the tax in question was not paid consequent to any notice of demand u/s. 156, rather it was paid u/s 140A. Hence according to mandate of section 244A(1)(b) interest is payable on refund of excess self assessment tax from the date of payment of such tax to the date when the refund is granted. We are also supported in our view by the following judgments:-

In Commissioner of Income-Tax vs. Cholamandalam Investment and Finance Co. Ltd. reported in (2007) 294 ITR 438 (Mad) (SLP bearing no. 16877/2008 dismissed vide order dated 3/12/2009) the issue was whether the assessee was entitled to interest under section 244A as per clause (1)(b) of that section when the refund had arisen on account of payment of self assessment tax.

By the impugned order the learned tribunal relying upon CIT v MMTC Ltd (supra) held that the scope of section 154 does not extend to a debatable issue and hence the assessing officer in exercise of power u/s 154 could not have withdrawn the interest u/s 244A(1)(b) on the refund of excess self assessment tax. Mr Khaitan learned Senior Advocate appearing for the assessee contended that section 244A does not mandate that interest is not to be allowed on refund of excess self assessment tax and thus there was no “mistake apparent from the record” which could have been corrected u/s 154of the Act.

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Posted Under

Category : Income Tax (20858)
Type : Judiciary (8910)