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2021 (8) TMI 368 - AT - Income TaxRectification u/s 154 - denying the assessee s claim of refund of DDT paid, by holding that DDT is not income tax paid - HELD THAT - We are of the opinion learned CIT(A) has erred in holding that DDT cannot be considered income tax paid and refund cannot be granted. As regards the plea that the claim is not maintainable under section 154 of the Act, we find that the Assessing Officer in his order has duly agreed and allowed the same. However, effect of the same has not been given. This is legally absolutely untenable. If the Revenue finds section 154 order erroneous the recourse cannot be denial of the said credit after passing an order under section 154 - CIT(A) has rejected the claim in his order on merits of the issue and considering the provision of the Act. We have held above that learned CIT(A) misled himself and his order is not legally sustainable. Hence, we set aside the order of learned CIT(A) and decide the issue in favour of the assessee.
Issues:
Appeal against CIT(A) order dismissing refund claim of dividend distribution tax (DDT) as not income tax paid; CIT(A) not directing refund or adjustment of excess DDT paid; CIT(A) not adjudicating on merits of appeal grounds; Interpretation of Section 237 and Section 2(43) of the Income Tax Act regarding refund eligibility. Issue 1: CIT(A) Dismissal of Refund Claim: The appeal pertains to the CIT(A) order dismissing the appellant's claim for refund of DDT paid, as it was not considered income tax. The Assessing Officer acknowledged the correctness of the claim but did not grant the refund. The CIT(A) held that DDT cannot be equated to income tax paid, leading to the dismissal of the appeal. The appellant argued for the refund based on Section 240 r.w.s.237 of the Act, claiming entitlement to the refund. The CIT(A) rejected the claim, stating that DDT does not fall under the definition of "tax" as per Section 2(43) of the Act, hence not eligible for refund under Section 237. The CIT(A) also dismissed the reliance on a previous court decision. The Tribunal found the CIT(A)'s decision legally untenable and allowed the appeal, setting aside the CIT(A) order. Issue 2: Adjustment of Excess DDT Paid: The appellant sought a refund or adjustment of the excess DDT paid. The Assessing Officer verified the excess payment and agreed to rectify the error by granting credit for the correct amount paid. However, the credit was not given, leading to the appeal. The appellant argued for the refund under Section 240 r.w.s.237 of the Act, emphasizing the obligation on the revenue to effect refunds without the need for the assessee to apply. The Tribunal noted that the Assessing Officer had agreed to the excess payment but failed to give effect to the rectification. The Tribunal found the CIT(A)'s rejection of the claim on the grounds of DDT not being considered income tax paid as erroneous and allowed the appeal, directing the refund or adjustment of the excess DDT paid. Issue 3: Adjudication on Merits of Appeal Grounds: The appellant contended that the CIT(A) erred in not adjudicating on the merits of the appeal grounds raised before him. The CIT(A) dismissed the appeal without considering the substantive issues raised by the appellant. The Tribunal found that the CIT(A) had misled himself in interpreting the provisions of the Act and held that his order was not legally sustainable. Consequently, the Tribunal set aside the CIT(A) order and decided the issue in favor of the assessee, allowing the appeal. Issue 4: Interpretation of Section 237 and Section 2(43) of the Act: The Tribunal analyzed the provisions of Section 237 and the definition of "tax" in Section 2(43) of the Act concerning the eligibility for refunds. It noted that DDT did not fall under the definition of "tax" as per Section 2(43) and, therefore, was not considered income tax paid for the purpose of refund under Section 237. The Tribunal referred to a previous court decision that recognized DDT as tax paid, supporting the appellant's claim for refund. The Tribunal disagreed with the CIT(A)'s interpretation and held that DDT could be considered tax paid, allowing the refund claim.
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