IN THE ITAT MUMBAI BENCH ‘L’
NEO Sports Broadcast (P.) Ltd.
Deputy Director of Income-tax (International Taxation), Range 4(2), Mumbai
IT APPEAL NO. 7649 (MUM.) OF 2010
[ASSESSMENT YEAR 2008-09]
JANUARY 30, 2013
B. Ramakotaiah, Accountant Member
This is an appeal by assessee against the order of the CIT(A)11, Mumbai, dated 06-09-2010. The only issue in this appeal is with reference to non granting of interest under section 244A consequent to the refund received giving effect to the order of the CIT(A), pursuant to the order under section 251/195 of the I.T. Act.
2. Assessee filed an application on 12.03.2008 under section 195(2) for lower or nil deduction of income tax on payments to be made to M/s Nimbus Sports International Pte. Ltd who is having the rights over the telecast of cricket matches. It was the contention of assessee that the payments to be made on account of live matches are not in the nature of ‘royalty’ and therefore, the same is not taxable in India. It was contended that broadcast of live matches consequently does not entitle any broadcasting right to assessee and therefore no income is being accrued or arisen in India to the payee as the agreement has been signed outside India and matches will be played outside India. AO did not agree with the contention and directed assessee to deduct the tax at 11.72% (inclusive of surcharges) on the payment being made to M/s Nimbus Sports International Pte Ltd. The matter was carried in appeal before the CIT (A), who decided in favour of assessee vide the order dated 29.09.2008 wherein it was held that no taxes are deductible on account of amounts remitted to the recipient outside India as the same was not taxable in India. Consequent to that a refund of Rs. 2,65,11,410 was issued by AO to the assessee company without any interest under section 244A. Assessee filed an application under section 154 of the Act on 10.10.2009 requesting AO to rectify and grant interest under section 244A of the I.T. Act on the amount of TDS deposited under section 195(2) of the I.T. Act. AO held that there is no provision in the Income Tax Act for allowing the interest on the TDS deducted. Assessee preferred appeal before the CIT (A) for grant of interest under section 244A from 31.03.2008 i.e. on the date of deduction/payment to the government till the date of granting of refund i.e. 30.07.2009. The Learned CIT (A) relying on the Board Circular No.007 of 2007 dated 23.10.2007 held that the amount of TDS cannot be considered as ‘tax’ and in view of that no interest under section 244A is admissible in accordance with the Circular. The CIT (A) further opined that the assessee company could not show whether the TDS was deposited voluntarily or under protest when the order under section 195(2) was passed. In the result the claim of assessee was rejected by the CIT (A).
3. The learned Counsel submitted that interest under section 244A was eligible to assessee as the refund was granted consequent to the order of the CIT (A) and AO raised the demand by the order under section 195(2). He placed the order of AO dated 28.03.2008 on record. Further, he submitted that similar issue was decided in favour of assessee by the Coordinate Benches in the case of Dy. DIT (International Taxation) v. Star Cruises (India) Travel Services Pvt. Ltd. [ITA Nos. 6498 & 6500/Mum/06, dated 24-3-2009]. He also further placed reliance on the decision of the Tata Chemicals Ltd. v. Dy. CIT  16 SOT 481 (Mum.) and in the case of ADIT (IT) v. Taj TV Ltd.  10 taxmann.com 48 (Mum.).
4. In reply, the learned DR relied on the orders of the authorities and placed reliance on the orders of the Coordinate Bench in the case of Godrej Industries Ltd. v. Dy. CIT  8 SOT 417 (Mum.).
5. We have considered the rival contentions and perused the Board Circular, orders of the authorities and the decisions of the Coordinate Bench. First of all, it is to be noted that assessee was directed to deduct tax at 11.72% vide order under section 195(2) dated, 28.03.2008 and accordingly assessee deducted the said tax. Assessee did not claim any refund in pursuance to the Circular directly but has contested the matter on the directions so given by AO. The CIT (A) analyzing the factual situation and legal position held that payment for the live telecast of cricket matches does not come in the nature of ‘royalty’ and accordingly the amount was not required to be deducted and directed the tax paid to be refunded. Therefore, the observations of the CIT (A)/reliance by him on the Board Circular No.007 of 2007 dated 23.10.2007 is not correct in the sense that it is not a direct refund claim placing reliance on the Board Circular and the circumstances stated therein. Had assessee deducted the tax on its own voluntarily and claimed the benefit of the Circular for issuance of the refund, then the Circular may be applicable. In the Circular it was clarified that the amount deducted cannot be considered as ‘tax’ and no interest under section 244A is admissible on refunds to be granted in accordance with this Circular (007 of 2007) or on the refunds already granted in accordance with the Circular Nos. 769 or 790. Since the refund was granted consequent to the order of the CIT (A), relying on the above Circular where claim of direct refund was considered by the CBDT is not correct.
6. The learned DR relied on the decision of the Godrej Industries Ltd. (supra), wherein assessee voluntarily deducted the tax and sought interest on refund under section 244A, it was held that refund of interest under section 244A can be allowed in those cases where notice of demand has been issued under section 156 and tax was paid in excess of such demand. In that case since no notice of demand under section 156 was issued, it was held that no interest could be allowed. However, in the very same order the Coordinate Bench also considered the decision of the Tata Engg. & Locomotives Co. Ltd. v. Dy. CIT  92 ITD 111 (Mum.) and Royal Airways Ltd. v. Addl. DIT (IT)  98 ITD 259 (Delhi) distinguishing those decisions for the reason that AO insisted upon the payment of TDS by assessee. Therefore, the above decision does not apply to the facts of the case as assessee paid the tax consequent to an order u/s 195 by AO and did not claim direct refund as per the Board Circular. The refund arose consequent to an order of CIT(A) in an appeal.
7. In fact, this issue was already considered by the decision of the Star Cruises (India) Travel Services (P.) Ltd. (supra) wherein it was elaborately discussed as under:
“6. It would be relevant to refer to section 240 of the Act. Section 240 of the Income tax Act, 1961 reads as under:-
Sec 240: Where, as a result of any order passed in appeal or other proceedings under this Act, refund of any amount becomes due to the assessee, the (Assessing) Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf:
[Provided that where, by the order aforesaid,-
(a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment;
(b) the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid. in excess of the tax chargeable on the total income returned by the assessee.)”
7. Section 244A which provides for grant of interest to the assessee reads as under:-
“244A. (1) [where refund of any amount becomes due to the assessee under this Act], he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely:-
(a) where the refund is out of any tax [paid u/s 115WJ or [collected at souse u/s 206C or] paid by way of advance tax or treated as paid u/s 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of [one-half per cent] for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the-date on which the refund is granted:
Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined [under [sub-section (1) of section 115WE or] sub-section (1) of section 143 or] on regular assessment.
(b) in any other case, such interest shall be calculated at the rate of 79 [one-half per cent] for every month or part of a month comprised in the period or periods from the date, or as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.
(2) If the’ proceedings resulting in the refund are delayed for reasons attributable to -the- assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final.
(3) Where, as a result of an order under 80) Sub-section (3) of section 115WE or section 115WF or section 115WG or 8l[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 2450, 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 AO 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 u/s 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 the 1st day of April, 1989, and subsequent assessment years.]”
8. In the present case, the assessee has been found entitled to refund in accordance with the provisions of the Act and section 244A provides for payment of interest on the amount of refund which becomes due to assessee under the act. Since the refund had had become due to the assessee under the Act, we have no doubt in our mind to hold that the assessee is entitled to interest u/s 244A. Needless to mention that the interest so granted is subject to modification, as a result of any appellate orders or orders, of the higher authorities in accordance with law. The CBDT Circular nos. 769 & 790 dated 6.8.98 & 20.4.2000 respectively are inapplicable to the facts of this case. The said Circulars have been issued to benefit the persons who had voluntarily deducted the tax at source without any order from the AO and the refund not becoming due under .the provisions of the Act. In the present case, the Dy. Director of Income Tax passed two orders u/s 201 read with section 201(1A) and the payment was made to the assessee on the direction of the Dy. Director in accordance with law. This issue was considered by the Mumbai Bench of the Tribunal in the case of Tata Chemicals Ltd. v. Dy CIT  16 SOT 481 (Mum.). In this case it has been held by the Tribunal as under:.-
“Under the ‘provisions of section 195(2), the assessee is empowered to make an application to the AO for non-deduction tax on such sums remitted to a non-resident which according to the assessee are not subject to tax .at source. In view of the provisions of DTAA between the two countries under the said sub-section (2) of section 195, the AO is empowered to determine such sums which are deductible out of remittance to be sent to the recipient and only ‘after deduction and payment of such sums, the balance amount is to be remitted to the non-resident. In the instant case, in compliance of the order of the AO, the assessee had deducted the tax at source before remitting the amounts to Germany and Denmark.
The order u/s 195(2) is appealable under the provisions of section 248. Section 248. Section 248 clearly provides that after deduction and payment of tax in accordance with the provisions of sections 195 and 200, if the assessee denies his liability to make such deduction, he is empowered to file an appeal before the CIT(A) in order to get a declaration that he is no liable to make such deduction. In the instant case, CIT(A) granted relief to the assessee holding that no tax was deductible out of the remittances made to Denmark and Germany and directed the AO to refund the amount of tax so deposited by it.
Further the provisions of section 240 very categorically provided that where an order is passed in appeal, or other proceedings under the Act, the AO is duty bound to refund amount due to the assessee even without the assessee making any claim in that behalf. In addition to the refund of amount due, the assessee is also entitled to interest on such refund under the provisions ‘of section 244A. Once the provisions of section 240 are applicable to the amount paid by the assessee as tax, then the provisions of section 244A will apply thereafter.
In the instant case, the refund became due to the assessee pursuant to the order of the CIT(A); wherein it was held that assessee was not to deduct tax at source on the amounts remitted to the recipient outside India. The refund of money paid by the assessee became due to it on the passing of the appellate order in appeal as per the provisions of section 240. The assessee was not to make any claim’ in this regard for the issue of refund as per the provisions of section -240, which provides that refund is automatically due to the assessee after the order is passed in appeal or any other proceedings under the Act. Section 244A (1) further’ provides that” in addition to refund of any amount becoming due to the assessee’ under the Act, the assessee is also entitled to’ receive interest on such refunds which have become due to the assessee under the Act. The refund in the instant case was determined on account of the order giving effect to the order in appeal passed by the CIT(A).
Clause (a) of section 244A(1) covers the instance of payment of sums of money by way of advance-tax or TDS. Clause (b) of section 244A(1) covers all other cases wherein refund has become due to the assessee. The phrase used in clause (b) of section 244A(1), is ‘in any other case’, The explanation to clause (b) of section 244A(1) further provides that ‘date of payment of tax or penalty’ means the date on which the amount or tax or penalty specified in the notice of demand issued u/s 156 is paid. The Explanation attached to the main section does not in any way obliterate the meaning of the section.
Section 156 talks of service of a notice of demand in the prescribed form where any tax, interest, penalty, fine or any other’ sum is payable in consequence of any order passed under this Act. The order u/s 195(2) had been passed under the provisions of the Act and any notice of demand, for the said amount due pursuant to order passed u/s 195(2) was bound to be issued u/s 156. The provisions of clause(b) of section 244A(1) very categorically provide interest, on any refund, arising because of payment of tax ‘in any other case’ which shall include the payment made by assessee pursuant to order u/s 195(2), by which the AO requisitioned the assessee to deduct the tax and deposit the same in treasury before remitting the amounts due to the recipients outside India. Accordingly, the assessee was entitled to receive interest u/s 244A(1)(b) on amount deposited pursuant to order passed u/s 195(2), which in turn had become due to the assessee because of the order passed in appeal against the said order u/s 195(2). The Board by way of Circular No. 769 dated 6.8.98 and Circular no. 790 dated 2.0.42.000 provided that the assessee shall be entitled to refund of such payments made u/s 195, but the amount paid-into the Government account in such cases is no longer tax. In view of this. no, interest u/s 244A is admissible on refunds to be granted in accordance with these Circulars.
The circumstances mentioned in the aforesaid Circulars were different from the facts and circumstances of the instant case. In the circumstances referred to in the Circulars, the tax was deposited by the persons on their own and voluntarily without any demand being made by the AO or any other authority under the Act. But, in the instant case, the amount was paid pursuant to an order passed by the AO under the provisions of section 195(2) against which the assessee filed an appeal before the CIT (A). In the order giving appeal effect to the order of the CIT (A), refund become due to the assessee which in fact arose because of the provisions of section 240. The provisions of the Act prevail over the instructions issued by the Board by way of CSDT Circulars. The Supreme Court in Sandvik Asia Ltd. Vs. CIT (2006) 280 ITR 643 has held that where excess amount of tax is collected from assessee, the revenue must compensate assessee and the compensation in, the instant case was by ways of interest u/s 244A for the period when the amount was withheld. Accordingly, AO was, to be directed to allow interest u/s 244A(1)(b) on the amount due to assessee pursuant to the order passed giving effect to CIT (A)’s order in appeal”.
9. The decision of the Tribunal in the case of Godrej Industries Ltd. v. Dy. CIT (supra) is distinguishable on facts. In that case assessee had voluntarily deducted the tax at source and there was no order passed by AO under section 201 or under section 195(2). In such cases, the refund is not granted to the deductor by virtue of provisions of the Act, as there is no such provisions contained in the statute for grant of refund in respect of the tax deducted at source to the deductor, the tax having been deducted voluntarily at source and deposited with the Govt. In the present case assessee did not deduct the tax voluntarily. The Dy. Director of Income Tax (International Taxation (2)(1) has held assessee to be an assessee in default and the said order was challenged by assessee before the CIT (A) under the Act. The CIT (A) on appeal found the order made by the Dy. Director of Income Tax to be contrary to law and assessee was held not to be treated an assessee in default. It was as a result of the order of the CIT (A), assessee was entitled to refund. The payment made by assessee was on demand under the provisions of the Act and refund also because due to assessee under the provisions of the Act. Therefore, it cannot be said that the refund was not granted to assessee under the Act. The decisions of the CIT (A) to this effect in our view, does not warrant any interference. The appeals of the Revenue are accordingly dismissed”.
8. As can be seen from the above, the decision in the case of Tata Chemicals Ltd. and the decision of the Godrej Industries Ltd. were also considered. Similar view was also taken by the Coordinate Bench in the case of Taj TV Ltd. (supra) wherein on similar facts it was held as under:
“3.19. In view of the decision of the Hon’ble Supreme Court in the case of ITO vs. Delhi Development Authority (Supra) and the decision of a Coordinate Bench of this Tribunal in the case of Tata Chemicals (supra), we hold that once the refund becomes due as per the provisions of this Act, the interest is payable as per the provisions of section 244A and accordingly assessee is entitled for the interest. Hence we do not find any error or illegality in the order of the learned CIT (A). We confirm the same”.
9. The principles laid down in the above decisions are that in a case where assessee voluntarily deducted tax and claimed refund directly, grant of interest under section 244A may not arise and the Board Circulars on this issue are applicable, whereas in a case where AO demand the tax / interest consequent to an order under section 195/201 or 201A, and the refund arose consequent to the orders of the CIT (A)/ITAT, then interest under section 244A has to be granted. In the present case, the assessee has been found entitled to refund in accordance with the provisions of the Act and section 244A provides for payment of interest on the amount of refund which becomes due to assessee under the Act. We have no doubt in our mind to hold that the assessee is entitled to interest u/s 244A. Needless to mention that the interest so granted is subject to modification, as a result of any appellate order or orders of the higher authorities in accordance with law. We therefore, set aside the orders of AO and the CIT (A) on this issue and direct AO to calculate the interest from the period from 31.03.2008 to 30.07.2009 as per the provisions of the law and grant the same to assessee.
10. In the result appeal filed by assessee is allowed.