2015 (9) TMI 608 - AT - Income Tax

Exigibility to interest u/s.244A - refund of tax to the assessee for the relevant year - Held that - The Apex Court per its larger bench decisions in Modi Industries Ltd. (1995 (9) TMI 324 - SUPREME Court) and Gujarat Fluoro Chemicals (2013 (10) TMI 117 - SUPREME COURT) settled that there is no right to get interest of refund except as provided by the statute. The proposition of the interest being exigible on any amount paid, irrespective of either any obligation to pay or even its character under the Act, and from the date of its payment (i.e., except in the case of prepaid tax), cannot, in view thereof, be countenanced; Section 244A covers the allowance of interest on refund arising on payment of tax or penalty under the Act, and is a separate code in itself, providing for both the right to interest as well as the manner of its computation, including the resolution of any dispute qua the determination of the issue of the attribution of the delay, if any, in the grant of refund. Where an amount is paid with reference to or in violation of the provision, it cannot be said to be paid there-under. Section 140A requires payment of tax on the basis of the return, where-under only the assessee is to prefer his claims under the Act. The same, thus, contemplates an assessment by the assessee of its tax liability under the Act, as crystallized per the return finalized, i.e., for filing under the Act, paying the shortfall there-under, if any, along with the interest to date. How could it, even where not unambiguously worded, be otherwise, i.e., follow as it does the scheme of the Act. Any amount paid over and above the said shortfall cannot be regarded as tax, which, by definition, is that chargeable under the Act. ss.2(43) r/w s. 4 . To regard any amount deposited as self assessment tax would be to do violence to the clear language of the provision of the Act, as well as its scheme. The said case excess, however, on being allowed credit for against the tax payable, assumes the character of tax, i.e., upon the processing of the return for the relevant year, filed subsequently by the assessee, which constitutes a notice of demand u/s.156, vide proviso thereto. Prior thereto, the A.O. cannot take cognizance thereof, much less refund it. This, then, is the earliest point of time at which such excess can be regarded as payment of tax, exigible to refund u/s. 143(1) r/w s. 237. Not so regarding would make the machinery unworkable and prejudicial to the assessee. The assessee shall, therefore, be entitled to refund from this date to that of the grant of the refund. The facts of the case, the refund to the extent of ₹ 260.98 lacs, adjusted for the amount of interest u/s.234B, if any, up to 31.05.1994, shall arise only subsequent to the date of processing u/s.143(1), i.e., up to the date of grant of refund. In-as-much as the law does not contemplate grant of refund exclusive of interest, the same must necessarily be worked out at gross of interest u/s.244A up to the date of refund. The shortfall, if any, of the refund amount with reference to the amount so computed, would, therefore, have to be apportioned between the principal (tax) and interest amounts, so that interest u/s.244A shall arise on the un-refunded tax, while no interest u/s.244A is exigible under the Act on the unpaid interest there-under. The balance tax refund of ₹ 20.98 lacs (i.e., ₹ 2061.86 lacs ₹ 2040.88 lacs), would be governed by s. 244A(1)(a) of the Act. - Decided in favour of assessee as directed.

Issues Involved:
Exigibility to interest under section 244A of the Income Tax Act, 1961, on the refund of self-assessment tax.

Detailed Analysis:

1. Case of the Assessee:
The assessee argued that the refund arising from self-assessment tax is covered under section 244A(1)(b), which includes any tax other than advance tax, TDS, or tax collected at source. The assessee cited the decision in Stockholding Corporation of India vs. CIT, which clarified that interest under section 244A(1)(b) should be allowed from the date of actual payment of self-assessment tax.

2. Case of the Revenue:
The Revenue contended that section 244A(1)(b) does not specifically provide for interest on self-assessment tax. They argued that the Explanation to section 244A(1)(b) specifies that interest is only on tax paid in excess of the demand specified in the notice under section 156, which does not contemplate self-assessment tax. They also cited the decision in CIT vs. Engineers India Ltd., stating that interest on refunds is only for prepaid taxes or tax specified in the notice of demand.

3. Tribunal's Analysis:
The Tribunal reviewed the material on record, decisions cited, and the settled law on the matter.

4. Primary Facts:
The Tribunal noted the income as per return, tax payable, TDS, advance tax, and self-assessment tax paid by the assessee.

5. Law on Interest on Refunds:
The Tribunal referred to the larger bench decisions of the Supreme Court in Modi Industries Ltd. vs. CIT and CIT vs. Gujarat Fluoro Chemicals, which established that the right to interest on refunds is statutory. The Tribunal also noted the decision in Union of India vs. Tata Chemicals Ltd., which clarified that section 244A(1)(b) covers all payments of tax, entitling the assessee to interest on refunds.

6. Interpretation of Statutes:
The Tribunal emphasized that the words of a statute must be given their ordinary meaning and that efforts should be made to give meaning to every word used by the Legislature.

7. Provision of Section 244A:
Section 244A(1)(b) provides for interest on refunds of tax paid in excess of the demand specified in the notice under section 156. The Tribunal interpreted this to mean that self-assessment tax, being a payment of tax under the Act, should attract interest from the date of payment to the date of refund.

8. Discussion:
The Tribunal concluded that self-assessment tax is a payment of tax under the Act and should attract interest under section 244A(1)(b). The Tribunal rejected the Revenue's argument that self-assessment tax is not covered under section 244A(1)(b) and clarified that the decision in Stockholding Corporation of India supports the assessee's claim.

9. Self-Assessment Tax:
The Tribunal examined section 140A, which requires payment of tax on the basis of the return. They noted that only the shortfall of Rs. 4.02 lacs could be considered self-assessment tax and questioned the basis of the excess payment. The Tribunal concluded that the excess payment could not be regarded as self-assessment tax and was not made under any provision of law.

10. Refund of Tax:
The Tribunal explained that the excess payment assumes the character of tax upon processing of the return or assessment. They noted that the delay in refund attributable to the assessee would disentitle them to interest for that period.

11. Decision in Stockholding Corporation of India:
The Tribunal clarified that the decision in Stockholding Corporation of India addressed the issue of interest on refund of self-assessment tax and supported the assessee's claim. However, they noted that the decision did not cover excess payments made without any obligation under the Act.

12. Conclusion:
The Tribunal summarized their findings, stating that interest under section 244A is to be paid in terms of the statute, and the provision should be read holistically. They concluded that the assessee is entitled to interest on the refund of self-assessment tax from the date of payment to the date of refund, but not on excess payments made without any statutory obligation.

Decision:
The assessee's appeal was allowed on the terms that interest under section 244A is payable on the refund of self-assessment tax from the date of payment to the date of refund. The Tribunal also clarified that the excess payment would attract interest only from the date it is regarded as tax upon processing of the return.

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