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2017 (7) TMI 1402 - AT - Income TaxRevision u/s 263 - interest u/s 244A in relation to taxation of interest on securities - allowance of interest u/s 244A allowed in the order of rectification u/s 154 by the AO as excessive for the reason that the assessee included the amount of interest on securities on accrual basis and paid self assessment tax thereon though claimed by way of a note accompanying the return of income the said income as not taxable in that year as it has not become due - HELD THAT - As in THE STOCK HOLDING CORPORATION OF INDIA LTD. 2014 (11) TMI 899 - BOMBAY HIGH COURT held that tax paid on self assessment would fall u/s 244A (1) (b) i.e. a residuary clause covering refunds of amount not falling u/s 244A (1) therefore interest is payable on refund on excess amount paid on self assessment tax. We are of the considered view that the issues in the instant appeal are decided in favour of the assessee by the judgment of the Hon ble Bombay High Court in Stock Holding Corporation of India Ltd. (supra) and order of the Co-ordinate Bench in the case of the assessee delineated here-in-above. We follow the same and hold that the rectification order dated 20.07.2010 passed by the AO is neither erroneous nor prejudicial to the interest of revenue.
Issues Involved:
1. Invocation of Section 263 by the CIT. 2. Computation of interest under Section 244A. 3. Taxation of interest on securities on a due basis versus an accrual basis. 4. Claim for interest under Section 244A and its denial by the CIT. 5. Applicability of judicial precedents and past assessments. Detailed Analysis: 1. Invocation of Section 263 by the CIT: The CIT invoked Section 263 to revise the rectification order under Section 154 passed by the AO on 20.07.2010. The CIT issued a notice dated 30.01.2012 to initiate proceedings, stating that the AO's order was erroneous and prejudicial to the interest of the Revenue. The CIT's primary contention was that the AO's computation of interest under Section 244A was incorrect and resulted in an excessive grant of interest to the assessee. 2. Computation of Interest under Section 244A: The AO, in the rectification order dated 20.07.2010, allowed interest under Section 244A amounting to ?221,39,24,597/-. The CIT argued that this computation was incorrect as no refund arose to the assessee on any excess payment with reference to the interest on securities at the time of processing the return on 31.03.2001. The CIT directed the AO to re-compute the interest by taking the excess tax paid with respect to interest on securities on a due basis from the date of CIT(A)'s order to the date of the order under review. 3. Taxation of Interest on Securities on a Due Basis versus an Accrual Basis: The assessee initially included the interest on securities on an accrual basis in its return and paid self-assessment tax accordingly. However, it later claimed that the interest should be taxed on a due basis. The CIT(A) accepted this claim, and the AO, in the subsequent rectification order, adjusted the total income and granted interest under Section 244A based on this adjustment. 4. Claim for Interest under Section 244A and Its Denial by the CIT: The CIT denied the grant of interest under Section 244A, stating that the claim was made only at the appellate stage and not during the assessment proceedings. The CIT held that the voluntarily paid tax on the declared income could not be converted into 'excess payment' eligible for interest under Section 244A. The assessee argued that the issue was in dispute for preceding years and had been decided in its favor by appellate authorities. 5. Applicability of Judicial Precedents and Past Assessments: The assessee relied on several judicial precedents, including decisions in the cases of ACC Ltd., Sutlej Industries Ltd., South Indian Bank Ltd., and Assam Roofing Ltd., to support its claim for interest under Section 244A. The Tribunal found that the issue was covered in favor of the assessee by the Co-ordinate Bench's decision in a similar case involving the same assessee. The Tribunal also referred to the judgment of the Hon'ble Bombay High Court in Stock Holding Corporation of India Ltd. vs. N.C. Tewari, which held that tax paid on self-assessment falls under Section 244A(1)(b), and interest is payable on the refund of excess self-assessment tax. Conclusion: The Tribunal concluded that the rectification order dated 20.07.2010 passed by the AO was neither erroneous nor prejudicial to the interest of the Revenue. The issues raised by the CIT under Section 263 were decided in favor of the assessee, following the judicial precedents and the Co-ordinate Bench's decision. The order passed by the Commissioner under Section 263 was canceled, and the appeal was allowed. Order Pronounced: The order was pronounced in the open Court on 14/07/2017.
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