2011 (2) TMI 1232 - HC - Income Tax

Interest on excess refund under section 234D - assessment was completed under s. 143(3) on 20th Dec., 2004 determining the income-tax wherein interest under s. 234D was calculated only from 1st June, 2003 onwards and not from the date of issue of refund which was in March 2002 Held that - since s. 234D was inserted into the statute w.e.f. ast June, 2003, no interest under the said section is leviable from any earlier date, assessee is not liable to pay tax from the date of refund and the liability is only from ast June, 2003 when s. 234D came into force, decision in favour of the assessee and against the Revenue

Issues:
Delay in preferring the appeal; Interpretation of interest payable under section 234D of the Income Tax Act, 1961.

Analysis:
1. The judgment addresses a delay of 150 days in preferring the appeal, which is condoned due to the unopposed application.

2. The main issue involves the interpretation of interest payable under section 234D of the Income Tax Act, 1961, challenged by the Revenue against the Tribunal's order regarding interest on refund.

3. The assessment under section 143(3) for the year 1999-2000 was completed in December 2004, with interest under section 234D calculated from June 2003 onwards. The dispute arose regarding the retrospective application of interest on refunds.

4. The key legal question was whether interest under section 234D is payable from the date of refund if the refund predates June 2003, and the assessment order is post-June 2003.

5. The judgment highlights the absence of interest payable on refunds before the introduction of section 234D, emphasizing the significance of the amendment made by the Finance Act in 2003.

6. Section 234D, inserted in the Act in 2003, outlines the liability of the assessee to pay interest on excess refunds granted under section 143(1) from the date of refund to the date of regular assessment.

7. The provision of section 234D clearly states that interest is payable on excess refunds granted to the assessee under section 143(1) from the date of refund to the date of regular assessment.

8. The court's analysis emphasizes that the provision of section 234D is not retrospective, as it explicitly states its effectiveness from June 2003, clarifying that interest liability arises from the date of refund.

9. Referring to the J.K. Synthetics Ltd. case, the judgment underscores that interest levied under tax statutes is substantive law, not adjectival law, and must be construed as such.

10. The judgment concludes that in the absence of express retrospective language, the levy of interest under section 234D is prospective from June 2003, aligning with the Delhi High Court's decision in a similar case.

11. Citing the Karimtharuvi Tea Estate Ltd. case, the judgment reiterates that tax amendments apply from the beginning of the financial year and not retroactively, supporting the decision that interest liability starts from June 2003.

12. Ultimately, the appellate authorities were justified in ruling that the assessee is not liable to pay tax from the date of refund, but only from June 2003 when section 234D came into force, deciding in favor of the assessee against the Revenue.

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