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1995 (1) TMI 1 - SC - Income TaxRevenue was directed to pay to the respondent interest on the amount of Rs. 84,562 from September 7, 1969, to August 14, 1973, at the rate of six per cent. per annum under section 244(1) - in case fresh assessments are made, refund becomes due only after fresh assessment - hence interest on that refund can be claimed only from date of fresh assessment
Issues Involved:
1. Entitlement to interest on tax refund under section 244(1) of the Income-tax Act, 1961. 2. Interpretation of sections 237, 240, and 244(1) of the Income-tax Act, 1961. 3. Applicability of the proviso to section 240 added by the Direct Tax Laws (Amendment) Act, 1987. 4. Validity of the High Court's judgment in light of the aforementioned sections and proviso. Detailed Analysis: Issue 1: Entitlement to Interest on Tax Refund under Section 244(1) of the Income-tax Act, 1961 The respondent-assessee, a limited company in liquidation, claimed interest on a refundable amount of Rs. 84,562 for the period from March 6, 1969, to August 1973. The claim was based on section 244(1) of the Income-tax Act, 1961, which provides for interest on refunds if the Assessing Officer does not grant the refund within three months from the end of the month in which the appellate order was passed. The Income-tax Officer and the Commissioner rejected this claim, stating that the delay in providing particulars by the respondent justified the denial of interest. The High Court of Andhra Pradesh allowed the writ petition filed by the respondent, directing the Revenue to pay the interest. Issue 2: Interpretation of Sections 237, 240, and 244(1) of the Income-tax Act, 1961 Sections 237, 240, and 244(1) were scrutinized to determine if a refund and interest were due to the assessee. Section 237 entitles a person to a refund if the tax paid exceeds the amount properly chargeable. Section 240 mandates a refund if an appellate order results in an amount becoming due to the assessee. Section 244(1) stipulates interest on refunds if not granted within three months of the appellate order. The Court noted that section 240 speaks of an amount becoming due as a result of any appellate order, and section 244(1) carries forward this idea. Issue 3: Applicability of the Proviso to Section 240 Added by the Direct Tax Laws (Amendment) Act, 1987 The proviso to section 240, effective from April 1, 1989, clarifies that if an assessment is set aside and a fresh assessment is directed, the refund becomes due only upon the fresh assessment. The Court found this proviso to be merely clarificatory, reflecting the pre-existing position. Issue 4: Validity of the High Court's Judgment The Court disagreed with the High Court's judgment, which relied on the Allahabad High Court's decision in Purshottam Dayal Varshney v. CIT [1974] 94 ITR 187. The Supreme Court found that the Appellate Assistant Commissioner's order did not determine the tax payable but merely directed a fresh assessment. Therefore, no amount became due to the assessee as a result of the appellate order. The refund amount was ascertained only upon the fresh assessment on August 14, 1973. The Court emphasized that the assessment must be deemed pending until completed, and thus, the question of refund does not arise until then. Conclusion: The appeal was allowed, the judgment of the High Court was set aside, and the order of the Commissioner of Income-tax was restored. The Court clarified that in cases where an appellate authority sets aside an assessment and directs a fresh assessment, the refund becomes due only upon the fresh assessment. The Court did not express any opinion on different situations not covered by the proviso to section 240. The respondent-assessee was not entitled to any further amount from the Revenue, and no costs were awarded.
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