2019 (11) TMI 86 - AT - Income Tax

Non-granting of interest to the assessee for the period starting from the date of determination of the refund to date of issue of refund - claim of interest on amounts which were not allowed by the Assessing Officer while issuing the refund to the assessee - HELD THAT - As relying on M/S. K. LAKSHMANYA AND COMPANY 2017 (11) TMI 589 - SUPREME COURT and M/S. HEG. LIMITED 2009 (12) TMI 35 - SUPREME COURT we hold that even on account of interest withheld by the Assessing Officer and not issued on time, for part of the refund, the delay is from June 2006 to July 2015 and for the next refund of ₹ 2.01 crores, the delay is from 15.06.2010 to 20.07.2015, the assessee is entitled to the interest. Accordingly, we hold that the assessee is entitled to claim the interest for withholding the refund due to the assessee on account of interest ultimately allowed to the assessee for a period from the date of short allowed to the date of refund on 20.07.2015. Accordingly, we direct the Assessing Officer to compute the interest in this regard after verifying the calculation of the assessee for the aforesaid interest due to the assessee. Thus, grounds raised by the assessee in this appeal are allowed. Claim of loss on diminution in value of fertilizer bonds - assessee pointed out that the claim made by the assessee was withdrawn by an order passed u/s 154 HELD THAT - The bonds which were held under the head current investments assets, within the diminution value of the bonds was in the nature of revenue loss and could be claimed by the assessee . Since the bonds was held in stock in trade, the same could be valued at market value or cost, whichever was less. Following the said decision of the Hon ble High Court in assessee s own case 2015 (12) TMI 1769 - DELHI HIGH COURT we hold that the assessee is entitled to claim the loss for the diminution in value of fertilizer bonds, since the bonds were held in stock in trade and the same had to be valued either on market rate or cost, whichever was less. Thus, grounds of appeal raised by the assessee in this appeal are allowed.

Summary

Issues Involved:
1. Non-granting of interest on delayed refund for AY 2005-06.
2. Applicability of Section 154 for AY 2009-10.
3. Adjustment of provision for diminution in value of fertilizer bonds under Section 115JB for AY 2009-10.

Issue 1: Non-granting of Interest on Delayed Refund for AY 2005-06
The primary issue in the appeal for AY 2005-06 was the non-granting of interest on the delayed refund. The assessee argued that the refund of ?2,14,64,710/- should have been granted in June 2010, but was only refunded in July 2015, and thus interest for the delayed period was due. The CIT(A) denied this claim, interpreting it as a request for "interest on interest," which was not allowable. The Tribunal, however, held that the interest was due for the period the refund was withheld, referencing Section 244A(1)(b) and decisions from the Supreme Court in HEG Ltd. and K. Lakshmanya & Co. The Tribunal directed the Assessing Officer to compute the interest due for the period from June 2010 to July 2015.

Issue 2: Applicability of Section 154 for AY 2009-10
For AY 2009-10, the issue was whether the provisions of Section 154 were applicable. The CIT(A) upheld the Assessing Officer's order under Section 154/143(3), which the assessee contested, arguing that the issue was debatable and not a mistake apparent from the record. The Tribunal agreed with the assessee, noting that the matter was before the High Court, making it a debatable issue. Therefore, the Assessing Officer could not invoke Section 154.

Issue 3: Adjustment of Provision for Diminution in Value of Fertilizer Bonds under Section 115JB for AY 2009-10
The second aspect of the AY 2009-10 appeal involved the adjustment of the provision for diminution in value of fertilizer bonds under Section 115JB. The CIT(A) had held that the adjustment was required, treating it as a provision rather than an actual loss. The Tribunal, however, referenced the High Court's decision in the assessee's own case, which held that the bonds, being current investments, should be valued at market value or cost, whichever was lower. Consequently, the Tribunal allowed the assessee's claim for the loss on diminution in value of fertilizer bonds, affirming it as a revenue loss.

Conclusion
Both appeals by the assessee were allowed. For AY 2005-06, the Tribunal directed the Assessing Officer to compute the interest due on the delayed refund. For AY 2009-10, the Tribunal held that Section 154 was not applicable and allowed the claim for the loss on diminution in value of fertilizer bonds.