13. When we examine the facts of the present case, we feel that the aforesaid judgment of the Supreme Court would not come to the aid of the assessee and permit the assessee to claim interest on interest in the given situation. As far as the appeals at hands are concerned, it is not in dispute that on filing the return by the assessee and processing the case under Section 143(1)(a), the excess amount of TDS and advance tax paid by the assessee was refunded along with interest under Section 244A within the prescribed time period. When the assessment orders were passed under Section 143(3) of the Act and the assessee was called upon to make the payments as per the demand made on the basis of the assessment order, the assessee has started making the payments in instalments. It had not completed the payments till the decision of CIT(A). Though the CIT(A) reduced the demand, but even as per the reduced demands, certain payments were still due. It is only after the orders of the Tribunal that the refunds became payable. The appeal effect, i.e. the effect to the order of the Tribunal, was given by the AO and the amount which was determined, to which the assessee had become entitled as refund was paid in entirety along with interest within the statutory period. In this background, let us scan through the relevant provisions relating to refund of tax are contained in Sections 240, 243 and 244, which are reproduced below :-
“240. Refund on appeal, etc. – 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 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.”
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243. Interest on delayed refunds. – (1) If the Income Tax
Officer does not grant the refund, –
(a) in any case where the total income of the assessee does not consist solely of income from interest on securities or dividends, within three months from the end of the month in which the total income is determined under this Act, and (b) in any other case, within three months from the end of the month in which the claim for refund is made under this Chapter, the Central Government shall pay the assessee simple interest at twelve per cent per annum on the amount directed to be refunded from the date immediately following the expiry of the period of three months aforesaid to the date of the order granting the refund.
Explanation – If the delay in granting the refund within the period of three months aforesaid is attributable to the assessee, whether wholly or in part, the period of the delay attributable to him shall be excluded from the period for which interest is payable.
(2) Where any question arises as to the period to be excluded for the purposes of calculation of interest under the provisions of this section, such question shall be determined by the Commissioner whose decision shall be final.
244. Interest on refund where no claim is needed. – (1) Where a refund is due to the assessee in pursuance of an order referred to in Section 240 and the Income Tax Officer 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 at twelve per cent per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted. (1-A) Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31 st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted:
Provided that where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted:
Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding: Provided also that where any interest is payable to an
assessee under this sub-section, no interest under sub-section (1) shall be payable to him in respect of the amount so found to be in excess.
(2) Where a refund is withheld under the provisions of Section 241, the Central Government shall pay interest 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.”
14. As per Section 240 of the Act, the amount of tax paid by the assessee is to be refunded if such refund becomes due as a result of any order passed in appeal or in other proceedings. Section 243 deals with interest on delayed refunds. Such an interest becomes payable if the amount is not refunded within three months from the end of the month in which the total income is determined or within three months from the end of the month in which the claim for the refund is made under that chapter.Interest payable is @12%p.a.”from the date immediately following the expiry of the period of three months ” aforesaid to the date of the order granting the refund.
15. No doubt, when the tax paid is more than what is due, as a result of certain additions etc. made by the AO and in appeal when those are deleted by the appellate authority, the refund of the excess amount is to be made along with interest, as envisaged under Section 243 of the Act. It is only when this interest is not refunded that the assessee would become entitled to the interest on the said interest as well. That was the factual position in Sandvik Asia (supra). In contra-distinction, where the interest is paid along with the amount payable as refund, the question of payment of interest on interest does not arise. Present cases fall under this category.
19. When the refund of tax becomes payable as a result of orders passed in appeal or other proceedings under the Act, this refund is to be given along with interest, which is to be calculated as per Section 244 of the Act. If that interest is paid along with the excess tax, no further payment is to be made. It is only when the excess amount of tax is refunded but the interest is not refunded along therewith, the retention of interest amount would become unjustified and interest on interest would also become payable. The reason is simple. It is the tax which was paid in excess by the assessee which became refundable. The assessee would be compensated by paying interest thereupon. It is only when the interest is not refunded along with excess tax that the withholding of the said interest becomes unjustified and it becomes an „amount due . to the assessee on which the assessee can claim further interest. Such a situation has not happened in the present case as the amount of interest is calculated and refunded along with the refundable tax amount.