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The central question involved in the present appeal is whether the expression ‘in any other case’ occurring in section 244A(1)(b) of the Act would include interest on an amount of refund resulted from reversal of excess interest charged under s.234B of the Act. As per Income Tax computation form prepared by AO, interest under s.234B was originally computed at ₹4,09,36,700 which was reduced to ₹1,41,03,094 due to reversal of certain additions in the second round of appeal before the CIT(A).
This resulted in reduction of interest chargeable to the assessee by ₹2,68,33,606. Consequently, this has resulted in enhancement of refund amount. The AO while giving effect to order of CIT(A) in second round of proceedings, omitted to calculate interest under s.244A of the Act on the aforesaid excess interest charged earlier under s.234B and which led to reduction of the principal amount of tax refund to the extent of excess interest.
The principal sum of refund stood enhanced on the reduction of aforesaid interest under 234B wrongly charged earlier. The assessee seeks claim of interest under s.244A on the enhanced principal amount of refund on applying revised and correct liability under s.234B of the Act.
We find that the CIT(A) has dealt with the issue threadbare as noted above and applied correct legal principles while granting relief to the assessee. We do not consider it necessary to reiterate the similar finding and adopt the findings of the CIT(A) in toto. Suffice it to say, the tax liability including interest is required to be determined on the correct assessed income.
The assessee, in consequence, is entitled to interest on excess tax paid beginning from date of payment of tax to the date on which refund is granted as contemplated under s.244A of the Act. The transient error in the intervening period which resulted in excess tax paid stood corrected at a later point of time. Thus, the assessee would be entitled the claim under s.244A from the original date.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
The captioned appeal is directed by the Revenue against the order of the Commissioner of Income Tax(Appeals)-I, Baroda [CIT(A) in short] dated 14/02/20 14 for the Assessment Year (AY) 2007-08.
2. The grounds of appeal raised by the Revenue read as under:-
1. On the facts of the case and on the circumstances and in law, the CIT(A)-IV Baroda has erred in granting an amount of ₹33,54,201, being interest u/s.244A of the Act on the interest u/s.234B of ₹ 2,68,33,606 ignoring the fact that there is no provision u/s.244A r.w.s.2(43) of the Act to pay interest on interest.
2. On the facts of the case and on the circumstances and in law, the CIT(A)-IV Baroda has erred in granting interest of ₹33,54,201 u/s.244A of the Act on the interest u/s.234B of ₹2,68,33,606 relying on the decision of ITAT Ahmedabad ‘C’ bench in the case of Alembic Glass Industries Ltd. dated 10.11.2006, brushing aside the ratio laid down by Hon ’ble Supreme Court in the case of CIT Gujarat v/s. Gujarat Fluoro Chemicals dated 18.09.2013 that the revenue has not to pay interest on interest.
3. Briefly stated, the assessee came into existence by an Act of Parliament called National Dairy Development Board Act, 1987. The assessment of the assessee for AY 2007-08 under consideration was completed under s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) vide order dated 30/09/2010 after making certain additions. The assessee preferred appeal before the CIT(A) against the aforesaid assessment order. The CIT(A) confirmed certain additions made by the Assessing Officer (AO) and granted relief in respect of some other additions. The AO passed an order dated 05/01/2011 giving appeal effect to the order of the CIT(A). It is the claim of the assessee that while giving appeal effect, the AO misinterpreted the directions of the CIT(A) in respect of issue of Write back of provisions and denied relief claimed by Assessee. The assessee went in appeal before the CIT(A) once again who vide order dated 29/02/20 12 decided the issue in favour of assessee. The AO passed another order dated 19/03/2012 giving effect to the order of the CIT(A) which resulted into refund of ₹17,56,65,904 excluding interest payable to assessee on excess tax deposited as per s.244A of the Act. The AO computed interest of ₹1,05,01,836 under s.244A of the Act on principal amount of refund of ₹17,56,65,904. However, as per the assessee, the correct interest under s.244A entitled to assessee was worked out to ₹1,38,56,037. Accordingly, the assessee carried the matter before the CIT(A) assailing wrong calculation of interest by the AO under s.244A owing to which interest has been short granted to the extent of ₹33,54,201.
4. The CIT(A) revisited the issue and found merit in the case of the assessee. The relevant paras of the order of the CIT(A) dealing with the issue is reproduced hereunder for ready reference:-
“2. Again during the course of appellate proceedings $hri Yogesh Shah, CA attended and filed submission dated 11/02/2014 on behalf of the appellant and the same is also reproduced hereunder for reference:
“The assessment for the year under consideration was completed under section 143(3) of the Act after making various additions. The appellant had preferred appeal to the CIT(A) against the order of the AO. The CIT(A) had confirmed certain additions made by the AO vide his order dated 30/09/2010 and deleted certain additions. AO passed an order dated 05/01/2011 giving effect to the directions of CIT(A) but erred in giving effect to the issue of write back of provision created in earlier years. AO erroneously misinterpreted the direction of CIT(A) and gave exactly opposite effect thereof. Against the said order of AO, appellant preferred an appeal to CIT(A) who wide his order dated 29/02/2012 decided in favour of the appellant. AO has now passed an order dated 19/03/2012 giving effect to the same which resulted into refund of Rs.17,56,65,904/- excluding interest u/s 244A. The AO has granted interest of Rs. 1,05,01,836/-.
Ground no. 1 General
Ground no.2 Interest under section 244A not properly granted
The appellant submits that the interest granted by the AO under section 244A is not properly granted and on proper working the interest would work out to be Rs. 1,38,56,037/- as against Rs. 1,05,01,836/-.
The appellant gives below comparison of the working of interest under section 244A as made by the AO and as per appellant:
| Particulars | As per AO | As per Appellant | ||
| Total income as determined in the order under consideration |
18,21.02.564
|
18,21,02,564
|
||
| Tax on total income | 5,46,30,769 | 5,46,30,769 | ||
| Add: Surcharge | 54,63,077 | 54,63,077 | ||
| Add: Education cess | 12.01.877 | 6,12,95,723 | 12,01,877 | 6,12,95,723 |
| Less: TDS | 1,85,59,075 | 1,85,59,075 | ||
| 4,27,36,648 | 4,27,36,648 | |||
| Less: Taxes paid after regular assessment on 26/2/2010 | 12,40,50,606
|
12,40,50,606
|
||
| Refund due | (8,13,13,958) | (8,13,13,958) | ||
| Add: Interest u/s | ||||
| 234B | ||||
| Payable as per this order | 1,41,03,049 | 1,41,03,049 | ||
| Less: Levied earlier | 4.09.36.700 | (2,68.33,606) | 4,09,36,700 | (2, 68,33,606) |
| (1 0,81,47,564 ) | (10,81,47,564) | |||
| Add: Refund of AY 11- 12 adjusted on 29/2/2012 | (6,75,18,340) | (6,75,18,340) | ||
| (17,56,65,904) | (17,56,65,904) | |||
| Interest u/s 244A | ||||
| On Rs.81313958/-from 26/2/2010 to 22/3/2012 i.e for 25 months @ 0.5% | 1,01,64,244 | |||
| On Rs.67518340/- from 1/3/2012 to 22/3/2012 i.e. for 1 month @
0.5% |
3,37,592 | 1,05,01,836 | ||
| On Rs.108147564/- from 26/2/2010 to 22/3/2010 i.e. for 25 months @ 0.5% | 1,35,18,446 | |||
| On Rs.67518340/- from 1/3/2012 to 22/3/2012 | 3,3 7,592 | 1,38,56,038 | ||
The appellant submits that from the above calculation of interest under section 244A it is clear that the AO has erred in not granted interest on refund of Rs.2,68,33,606/- which is arising out of the payment made towards interest under section 234B of the Act. Copy of the ITNS 150 in respect of the order under consideration is enclosed at page no. 1-2 of the paper book evidencing the working set out above.
The appellant Submits that it is entitled to interest under section 244A of the Act on the amount of interest paid under section 234B Rs.26833606/- which is being now refunded back to it. The refund on the interest is also a refund of amount paid or collected from its and hence it is entitled to interest under section 244A of the Act. While so submitting the appellant relies on the decision of Ahmedabad Tribunal in case of Alebmic Glass Industries Ltd. Ill ITD 320. The Hon’ble Tribunal held as under:
Section 244A grants interest only on that amount of refund that is out of the payments of tax or penalty, made by the assessee or collected from him. In the instant case, the assessee had made the payment of interest under section 234B, which was to be refunded as the same was found to be not chargeable. Therefore, the condition, that refund was out of amount paid or collected from the-assessee, was satisfied for granting the interest. [Para 19]
Considering the 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 was satisfied in the instant case.
As regards the question as to whether interest paid by assessee under section 234B has to be taken out of the payment of tax or penalty for granting interest under section 244(l)(b), the expression ‘tax or penalty1 found in the clause (b) in later part of the section 244A(1) would not qualify or restrict the scope of the expression ‘amount’ found in the opening part of the section to mean only ‘tax or penalty’. The function of the clause (b) of later part of section 244(1A) is to find out the date and payment of the excess amount which the assessee paid by way of tax or penalty to start the running of interest and that is the reason the expression ‘from the date or, as the case may be, dates of payment of tax or penalty’ has been employed. To determine the date(s) of the payment of the amount under section 244(1), it gives emphasis? on the amount paid by the assessee in pursuance of an order and that amount cannot be limited to the amount of tax or penalty, but would encompass the amount of interest paid by the assessee. It seems to be the intention of the Legislature that the right to get interest on refund of interest payment is to compensate the assessee for the excess payment during the intervening period when the assessee did not have the benefit of use of such money paid in whatsoever character. A literal meaning given to the expression ‘tax or penalty’ found in clause (b) of the later part of section 244A(1) would create an anomalous situation resulting in exclusion of the concept of the interest. Therefore, in the context of section 244A(l)(b), the expression ‘tax’ would include interest also and the definition of tax in section 2(43) meaning ‘income- tax’ may not be applicable in the context of section 244A(1). Consequently, the interest paid in pursuance of an order under section 234B has to be regarded as forming part of tax or an adjunct to income-tax. The result was that the assessee would be entitled to interest on the refund of interest paid under section 234B also. [Para 29]
The copy of the decision is enclosed at page no. 3-11 of the paper book.
The appellant has also filed rectification application before the AO pointing out the above, but the AO has not disposed of the same. Copy of the application is enclosed at page no. 12-13 of the paper book.
In view of the above, the appellant prays to your honour to direct the Assessing officer to grant interest under section 244A of the Act of Rs.33,54,20i/- on the refund of interest paid under section 234B of the Act.”
3. The above submission of AR of the appellant in connection with considered. The first ground of appeal of the appellant is that the order passed by the assessing officer is erroneous and contrary to the provisions of law and facts and therefore requires to be suitably modified. It Is submitted that it be so done now. This ground of appeal of the appellant is of general nature and therefore the same is not adjudicated upon. The ground of appeal no. 2 of the appellant is that the Ld. Assessing officer erred in computing interest u/s 244A at Rs. 1,05,01,836/- as against Rs, 1,38,56,037/- on the refund determined of Rs. 17,56,65,904/-. It is submitted that the assessing officer be directed to grant further interest of Rs. 33,54,201/-. With regard to this ground of appeal the above submission dated 1 1/02/2014 of the AR of the appellant is found to be tenable. The main contention of AR of the appellant is that it is entitled to interest u/s 244A of the Act on the amount of interest paid u/s 234B of Rs. 2,68,33,606/- which was refunded back to it. It is submitted by the AR that the refund on the interest is also a refund of amount paid or collected from appellant and hence appellant is entitled to interest u/s 244A of the Act. The appellant has relied upon the decision of Hon ‘ble ITAT Ahmedabad in the case of Alembic Glass Industries Ltd. 111 ITD 320. The Hon’ble ITAT Ahmedabad in this referred decision has mainly held that section 244A grants interest only on that amount of refund, i.e. out of the payments of tax or penalty, made by the assessee or collected from him. As per the Hon’ble ITAT in, the instant case, the assessee had made payment of interest u/s 234B which was to be refunded as the same was found to be not chargeable. As per the Hon’ble ITAT therefore, the condition, that refund was out of amount paid or collected from the assessee was satisfied for granting the interest. As per the Hon’ble ITAT, Ahmedabad a literal meaning given to the expression ‘tax or penalty’ found in clause (b) of the later part of section 244A(1) would create an anomalous situation resulting in exclusion of the concept of the interest. Therefore, in the context «pf section 244A(l)(b), the expression ‘tax’ would include interest also and the definition of tax in section 2(43) meaning ‘income- tax’ may not be applicable in the context of section 244A(1). As per the Hon’ble ITAT consequently, the interest paid in pursuance of an order under section 234B has to be regarded as forming part of tax or an adjunct to income-tax As per the Hon ‘ble ITAT, the result was that the assessee would be entitled to interest on the refund of interest paid under section 234B also. In view of this decision of Hon’ble ITAT, it is held that the appellant is entitled to interest u/s 244A of the IT Act on the amount of interest of Rs.2,68,33,606/- as paid by it u/s 234B of the IT Act. In view of this the AO is directed to grant interest to the appellant on amount of 2,68,33,606/- u/s.244A of the IT Act for the period for which it is eligible in accordance with the law. Thus the appeal of the appellant is allowed.”
5. Aggrieved by the order of the CIT(A) allowing extra interest of ₹33,54,201 to assessee under s.244A qua the working of AO, the Revenue filed an appeal before the Tribunal.
6. Submissions were made on behalf of both the sides.
7. We have carefully perused the orders of the authorities below and considered the rival submissions. The central question involved in the present appeal is whether the expression ‘in any other case’ occurring in section 244A(1)(b) of the Act would include interest on an amount of refund resulted from reversal of excess interest charged under s.234B of the Act. As per Income Tax computation form prepared by AO, interest under s.234B was originally computed at ₹4,09,36,700 which was reduced to ₹1,41,03,094 due to reversal of certain additions in the second round of appeal before the CIT(A). This resulted in reduction of interest chargeable to the assessee by ₹2,68,33,606. Consequently, this has resulted in enhancement of refund amount. The AO while giving effect to order of CIT(A) in second round of proceedings, omitted to calculate interest under s.244A of the Act on the aforesaid excess interest charged earlier under s.234B and which led to reduction of the principal amount of tax refund to the extent of excess interest. The principal sum of refund stood enhanced on the reduction of aforesaid interest under 234B wrongly charged earlier. The assessee seeks claim of interest under s.244A on the enhanced principal amount of refund on applying revised and correct liability under s.234B of the Act. We find that the CIT(A) has dealt with the issue threadbare as noted above and applied correct legal principles while granting relief to the assessee. We do not consider it necessary to reiterate the similar finding and adopt the findings of the CIT(A) in toto. Suffice it to say, the tax liability including interest is required to be determined on the correct assessed income. The assessee, in consequence, is entitled to interest on excess tax paid beginning from date of payment of tax to the date on which refund is granted as contemplated under s.244A of the Act. The transient error in the intervening period which resulted in excess tax paid stood corrected at a later point of time. Thus, the assessee would be entitled the claim under s.244A from the original date. The CIT(A) has rightfully concluded the issue in favour of assessee. Hence, we do not find any merit in the appeal of the revenue.
8. In the result, appeal of the revenue is dismissed.
