2018 (3) TMI 1339 - AT - Income Tax

Addition of income account of interest on income tax refund - Additions on account of interest no more payable on commencing capital - cessation of liability - reversal of interest on the direction of C&AG - Held that - there is no denying the fact that whenever the department charged these interest u/s 234A, 234B, 234C and 234D, same were getting reflected in the P&L A/c of the assessee but being added back in the computation of income. Thus the assessee never claimed the deduction of the same under the Income Tax Act. Since the amount received back was the amount paid by the assessee and deduction of which was never been claimed in the Income Tax Act by the assessee in the previous years the same cannot be considered as income in the current year. - AO and CIT(A) have fell into error while making this addition. This amount is refund of the interest paid by the assessee to the department and hence cannot be considered as income and accordingly AO is directed to delete the same. Cessation of liability - reversal of interest on the direction of C&AG - Held that - the amount of ₹ 106.18 crore has been taxed twice i.e. in Assessment year under consideration 2010-11 and assessment year 2011-12. We are of the view that this is not permissible. An income cannot be taxed twice that too on substantive basis. The AO being an adjudicating officer has a duty to assess correct income. In these circumstances we have two options, either to confirm the addition in this year and direct the AO to delete the addition in the subsequent A.Y. 2011-12. However, considering the fact that the reversal of interest has happened consequent to the C&AG observation on 7th October, 2010 which falls in the F.Y. 2010-11 i.e. A.Y. 2011-12, we are of the view that this amount should not be taxed in this assessment year and be included in the income of the assessment year 2011-12. Accordingly, we direct the AO to delete the addition in this assessment year i.e. A.Y. 2010-11. - Decided in favor of assessee.

Issues Involved:
1. Addition of ?15,64,06,238/- as interest on income tax refund.
2. Addition of ?106.18 crore on account of reversal of interest.
3. Credit of TDS of ?503.21 crores versus ?459.20 crores allowed by AO.
4. Credit of advance tax paid of ?124 crores versus ?109 crores allowed by AO.

Detailed Analysis:

Issue 1: Addition of ?15,64,06,238/- as interest on income tax refund
The assessee argued that the addition of ?15,64,06,238/- was incorrect because this amount represented a refund of interest paid by the assessee on excess tax, not income. The assessee had received a refund of ?146.34 crores, including ?130.70 crores as interest on excess tax paid, which was declared as income. However, the ?15.64 crores was interest refunded by the department under Sections 234A, 234B, and 234D, which the assessee had not claimed as a deduction in earlier years. The Tribunal examined the records and concluded that the refund of interest paid by the assessee could not be considered as income since it was not claimed as a deduction previously. The AO and CIT(A) erred in making this addition, and the Tribunal directed the AO to delete the same.

Issue 2: Addition of ?106.18 crore on account of reversal of interest
The assessee contended that the ?106.18 crore was included in the income for AY 2011-12 and assessed by the AO, thus should not be taxed again in AY 2010-11. The AO argued that the interest ceased to be a liability in the year under consideration and should be taxed in that year. The Tribunal noted that the interest reversal occurred due to C&AG observations received on 7th October 2010, falling in FY 2010-11 (AY 2011-12). Since the amount was already taxed in AY 2011-12, taxing it again in AY 2010-11 would result in double taxation. The Tribunal directed the AO to delete the addition for AY 2010-11, emphasizing that income cannot be taxed twice substantively.

Issue 3: Credit of TDS of ?503.21 crores versus ?459.20 crores allowed by AO
The assessee claimed a TDS credit of ?503.21 crores, whereas the AO allowed only ?459.20 crores. The Tribunal directed the AO to verify the assessee's claim and pass the order in accordance with the law. This issue was allowed for statistical purposes.

Issue 4: Credit of advance tax paid of ?124 crores versus ?109 crores allowed by AO
The assessee claimed an advance tax credit of ?124 crores, but the AO allowed only ?109 crores. The Tribunal instructed the AO to verify the claim and pass the order in accordance with the law. This issue was also allowed for statistical purposes.

Conclusion:
The appeal was partly allowed for statistical purposes, with specific directions to the AO to verify and rectify the claims regarding TDS and advance tax credits. The Tribunal emphasized the importance of not taxing the same income twice and ensuring accurate assessment of income. The order was pronounced in the open court on 23.02.2018.

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