Nirma Limited Vs ACIT (ITAT Ahmedabad)
ITAT Ahmedabad held that the amount of refund issued to the assessee will be first adjusted against the interest then, after that against the principal amount.
Facts- The assessee for the year under consideration filed the return of income declaring total income at Rs. nil and further claimed refund of Tax Deducted at Source (TDS) and advance tax paid for Rs. 1,39,77,665/- only. However, the assessment was framed by the Assessing Officer (AO) under section 143(3) of the Income Tax Act dated 30-03-1999 determining total income at Rs. 16,43,11,720/- only.
Consequentially, the AO in giving effect order dated 15-01-2009 determined the amount of refund at Rs. 75,00,281/- without granting interest u/s. 244A of the Act. The assessee filed a rectification application date 11-02-2009 to grant interest u/s. 244A of the Income Tax Act which travelled up to Tribunal and the Tribunal vide order dated 27-03-2015 directed the AO to dispose of the rectification application as per law. AO in the effect giving order granted interest of Rs. 22,12,583/- on the amount of refund for the period March 2004 to January 2009. The amount of refund for Rs. 22,12,583/- being interest u/s. 244A was adjusted against demand of A.Y. 2011-12 as on 04-05-2016.
Thus, the assessee made a claim for additional compensation of interest u/s. 244A of the Act for the period February 2009 to May 2016.
But the AO rejected the claim of the assessee for additional compensation as claimed by the assessee. CIT(A) confirmed the order of AO.
Conclusion- Mumbai Tribunal in the case of Union Bank of India vs. ACIT held that the amount of refund issued to the assessee will be first adjusted against the interest then, after that against the principal amount.
Held that the amount of refund granted to the assessee, first, has to be adjusted against the interest payable to the assessee in the given facts and circumstances. Considering the fact that the amount of refund issued to the assessee for Rs. Rs. 75,00,281/- was first to be adjusted against the interest of Rs. 22,12,583/- then refund of principal amount. Admittedly, the interest for Rs. 22,12,583/- was finally issued to the assessee in the month of May 2016. Thus, the assessee will be entitled to interest under section 244A of the Act for the delay in issuing of refund for Rs. 22,12,583/- which represents the principal amount.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. The above captioned appeals have been filed by the assessee and the Revenue against the separate orders of ld. Commissioner of Income-Tax (Appeals) arising in the matter of assessment order passed under section 143(3) of the Income tax Act 1961 (in short, the ‘Act’) involving respective Assessment Years.
1.1 First, we take up ITA No. 515/Ahd/2014, an appeal by the assessee for the AY 2006-07.
2. The assessee has raised the following grounds of appeal:
1) In law and in facts and circumstances of the Appellant’s case, the learned CIT(A) has grossly erred in the points of law and facts.
2) In law and in facts and circumstances of the Appellant’s case, the learned CIT(A) has grossly erred in confirming disallowance of expenses Rs.2,72,563 u/s.37(l)of I.T.Act.
3) In law and in facts and circumstances of the Appellant’s case, the learned CIT(A) has grossly erred in confirming disallowance of Rs. 1,66,51,168.
4) In law and in facts and circumstances of the Appellant’s case, the learned CIT(A) has grossly erred in confirming disallowance of Rs.48,96,52,916.
5) In law and in facts and circumstances of the Appellant’s case, the learned CIT(A) has grossly erred in dismissing appellant’s ground regarding charging interest u/s.234B of I.T. Act forRs.39,14,40,206,
6) In law and in facts and circumstances of the Appellant’s case, the learned CET(A) has grossly erred in dismissing appellant’s ground regarding charging interest u/s.234D of I.T. Act.
7) In law and in facts and circumstances of the Appellant’s case, the learned CIT(A) has grossly erred in dismissing appellant’s ground regarding withdrawing interest u/s.244A of I.T. Act.
8) In law and in facts and circumstances of the Appellant’s case, the learned CIT(A) has grossly erred in dismissing appellant’s ground regarding initiation of penalty proceedings u/s.271(l)(c) of I.T. Act.
9) In law and in facts and circumstances of the Appellant’s case, the learned CIT(A) has grossly erred in dismissing additional ground regarding allowance of deduction u/s.80IA of I.T. Act on the profit of the power under taking a Bhavnagar.
10) Your appellant reserves the right to add, alter, amend all or any of the above grounds of appeal as may be advised from time to time.
3. The ground No. 1 of assessee’s appeal is general in nature and does not require any separate adjudication. Hence, the same is dismissed as infructuous.
4. The next issue raised by the assessee vide ground No. 2 of its appeal is that the learned CIT(A) erred in confirming the disallowance of expenses for Rs. 2,72,563/- under section 37(1) of the Act.
5. The assessee during the year claimed expenses towards general public utility for Rs. 30,07,849/- only. The list of such expenses is reproduced on page 51 in the order of the ld. CIT-A. It was submitted that it (the assessee) has made contribution towards general public utility in the locality where its business premises are situated in order to maintain harmony with local environment. Accordingly, it was contented that the same are incurred wholly and exclusively for the purpose of the business.
5.1 However, the AO disagreed with the reasoning of the assessee and held that the assessee failed to explain the nexus of such expenditure with the business. Thus, the AO disallowed the same under the provisions of section 37(1) of the Act and added to the total income of the assessee.
6. On appeal by the assessee, the learned CIT(A) following the order of his predecessor in the own case of the assessee for AY 2008-09 deleted the addition made by the AO in part by observing as under:
9.6 It is seen that appellant’s factories are located at village: Mandali, Savali, Near Baroda and Moraiya. Many of the staff and worker are residing in the vicinity of these areas. In view of these facts, I am of the opinion that donation/payments are nothing but an exercise of maintaining good relation and improving the vicinity area by which employees can get benefits, who stay in the nearby areas as well as advertisement of the appellant company for the benefit of appellant’s business. Appellant had placed reliance in the cases of CIT V/s.Madura Coats Ltd. 24 DTR 24 (Mad) and C!T v/s. Madras Refinery Ltd. reported at 266 ITR 170 (Mad.) My predecessor while deciding the appeal for Asst.Year: 2008-09 allowed certain claims of the appellant. Following the order of my predecessor for Asst.Year: 2008-09 in the case of appellant as well as considering submissions made by the appellant I allow the claim in respect of following payments. The A.O. is directed to allow the same accordingly u/s.37(1) of Income-tax Act.
