SUPREME COURT OF INDIA
Sandvik Asia Ltd.
versus
Commissioner of Income-tax, Pune
H.K. SEMA AND DR. A.R. LAKSHMANAN
CIVIL APPEAL NOS. 1337-1340 OF 2005
JANUARY 27, 2006
JUDGMENT
Dr. A.R. Lakshmanan, J.
These appeals raise substantial and important questions of law of great general public importance as well as under the Income-tax Act, 1961 pertaining to assessment years 1977-78, 1978-79, 1981-82 and 1982-83 requiring consideration of this Court. Since common questions of law and facts arise in all these appeals they were heard together and are being disposed of by this common judgment. The impugned common judgment was passed by the High Court of Bombay rejecting the appellant’s claim on interest holding that no such interest on interest is payable under any of the provisions of the Income-tax Act, 1961 (for short ‘the Act’).
2. The main issue raised in these appeals is whether an assessee is entitled to be compensated by the Income-tax Department for the delay in paying to the assessee amounts admittedly due to it? The delay in the instant case was for various periods ranging from 12 to 17 years.
3. The following facts are not in dispute:—
Assessment year 1977-78
Notice of demand was issued to the appellant by respondent No. 2 for advance tax payable of Rs. 2,74,31,250. The appellant paid a sum of Rs. 1,86,04,450. Assessment order was passed by respondent No. 2 determining income of Rs. 3,88,37,630. Respondent No. 2, after rectifying his assessment order, determined the income of Rs. 3,45,91,830 and tax thereon at Rs. 1,99,76,781 and raised a demand for further tax payable of Rs. 13,72,331. The appellant paid the said sum. Commissioner of Income-tax (Appeals) disposed of the appellant’s appeal substantially allowing the same. Respondent No. 2 gave effect to the appellate order determining income at Rs. 2,68,88,220 and tax thereon at Rs. 1,47,88,521. The appellant on 30-4-1986 received a refund of Rs. 42,38,260 and became entitled to receive interest on the refund and requested respondent No. 2 to grant interest on refund under sections 214 and 244 of the Act for the period from 1-4-1977 to 31-3-1986.
Assessment year 1978-79
Notice of demand was issued to the appellant by respondent No. 2 for payment of advance tax on Rs. 2,14,56,853. The appellant submitted its estimate of advance tax and paid instalments thereon at Rs. 1,11,81,844. An assessment order determining income of Rs. 1,54,17,090 and tax payable thereon at Rs. 89,03,368 after adjusting the advance tax paid against the tax payable a refund of Rs. 22,78,476 was determined. However, respondent No. 2, declined to grant interest on refund to the appellant. The appellant filed a revision petition with Respondent No. 1 under section 264 of the Act against the second respondent’s refusal to grant interest under section 214 of the Act. Respondent No. 1 rejected the same. Commissioner of Income-tax disposed of the appellant’s appeal against the assessment order substantially allowing the same. Respondent No. 2 gave effect to the appellate order determining income at Rs. 93,93,180 and tax payable thereon at Rs. 54,24,561. Respondent No. 2 granted a refund of Rs. 34,78,807 and the appellant also became entitled to receive interest on the said refund.
Assessment year 1981-82
The appellant submitted its estimate of advance tax and paid installments thereon amounting to Rs. 1,49,62,292. Respondent No. 2 passed a provisional assessment order determining the tax payable at Rs. 1,29,54,736 and, therefore, granted a refund of Rs. 20,07,556. Respondent No. 2 passed an assessment order determining the total income of Rs. 1,79,84,200 and tax payable thereon at Rs. 1,06,33,157 and hence granted a further refund on Rs. 23,20,051. Along with the said refund, a sum of Rs. 10,06,464 was also paid as interest under section 214 of the Act. The Commissioner of Income-tax (Appeals) disposed of the appellant’s appeal substantially allowing the same. Respondent No. 2 gave effect to the appellate order determining income of Rs. 89,02,070 and tax payable thereon at Rs. 52,63,348. The appellant received a refund of Rs. 53,69,809 and became entitled to receive interest on the refund. The appellant requested to grant interest on refund under sections 214 and 244 of the Act was for the period from 1-4-1981 to 31-3-1986. Respondent No. 2 rectified its order and granted further interest of Rs. 1,87,203 under section 214 of the Act but refused to grant interest under sections 214(1A) and 244(1A) of the Act.
Assessment year 1982-83
The appellant submitted its estimate of advance tax and paid installments thereon of Rs. 1,45,48,006 a provisional assessment order determining the tax payable at Rs. 1,28,46,079 and, therefore, granted a refund of Rs. 17,01,927. He passed an assessment order determining the total income of Rs. 2,43,41,780 and tax payable thereon at Rs. 1,37,22,678 and raised demand for further tax of Rs. 8,76,600 which was paid by the appellant on 30-3-1985. The Commissioner of Income-tax (Appeals) disposed of the appellant’s appeal substantially allowing the same. Respondent No. 2 gave effect to the appellate order determining income of Rs. 2,05,91,540 and tax payable thereon at Rs. 1,16,07,670. The appellant received a refund of Rs. 21,15,008 and became entitled to receive interest on the refund. The appellant requested respondent No. 2 to grant interest on refund under sections 214 and 244 of the Act for the period from 1-4-1982 to 31-3-1986. Respondent No. 2 granted interest of Rs. 1,20,533.
For all four assessment years
2-1-1987Appellant asked for further interest on the advance tax paid for the assessment years 1977-78, 1978-79, 1981-82 & 1982-83.
12-1-1987Appellant asked for further interest on the advance tax paid which was rejected by Respondent No. 2 holding that interest under section 244(1A) of the Act was admissible only on post assessment taxes.
27-2-1987Appellant filed four Revision Petitions under section 264 of the Act before the 1st respondent for grant of interest under sections 214 and 244 of the Act for the following periods:
Assessment yearsPeriod
1977-781-4-1977 to 30-4-1986
1978-791-4-1978 to 30-4-1986
1981-821-4-1981 to 30-4-1986
1982-831-4-1982 to 30-4-1986
28-2-1990Respondent No. 1 rejected the revision petitions.
30-4-1997Being aggrieved by the 1st Respondent’s order, appellant moved this Court which by its common order passed in Civil Appeal No. 1887 of 1992 with Civil Appeal Nos. 2649 of 1992 etc. directed respondent No. 1 to consider the revision petitions in light of its decision in the case of Modi Industries Ltd. v. CIT [1995] 216 ITR 759 (SC).
The order of this Court dated 30-4-1997 is reproduced hereunder:—
“Civil Appeal No. 1887 of 1992
Sandvik Asia Ltd….Appellant
Versus
S.M. Soni & Ors.
(With C.A. Nos. 2649/92, 2550/92, 2687/92 & 1471/96)
ORDER
These appeals are covered against the revenue by the decision of this Court in Modi Industries Ltd. v. CIT 216 ITR 759 . For the reasons given in the said judgment these appeals are allowed, the impugned order passed by Respondent No. 1 are set aside and the matter is remitted to him for considering the revision petitions filed by the appellant claiming interest under section 214 of the Income-tax Act, 1961 in accordance with the principles laid down in Modi Industries Ltd.’s case (supra). No order as to costs.
Sd/-
(S.C. Agarwal)
Sd/-
(D.P. Wadhwa)
New Delhi, April 30, 1997″
27-3-1998Pursuant to the 1st Respondent’s direction, the 2nd Respondent passed an order paying amounts under sections 214 and 244(1A) of the Act up to the date of refund of tax. The refund order has been marked as Annexure P-16 (Colly).
4. For the sake of brevity, the working of interest under sections 214 and 244(1A) is reproduced hereunder:—
“WORKING OF INTEREST UNDER SECTION 214/244(1A)
