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2024 (2) TMI 930 - HC - Income TaxGrant of interest u/s 244A(1)(a) on the refund admissible to appellant - ITAT refused to grant interest on the ground that the refund arising on regular assessment after allowing TDS and advance tax is less than 10% of the tax as determined on regular assessment HELD THAT - ITAT has completely misdirected itself in adjudicating the controversy involved inasmuch in the facts and circumstances of the case it is wholly academic whether the words regular assessment appearing in the proviso to Section 244A(1)(a) of the Act means the original assessment order or the assessment order passed giving effect to the CIT(A) order. The real controversy is whether the words amount of refund in the proviso must be given its natural meaning and, therefore, the actual amount of refund ought to be considered or does it contemplate an artificial split of the amount of refund into various components of advance tax, TDS, SA Tax and taxes paid pursuant to demand raised. The words amount of refund must mean, in our view, the whole of the refund, and not an artificial split as canvassed by the Department. Therefore, irrespective of what the words regular assessment mean, the proviso would not be attracted. The words amount of refund must be given their natural/neutral meaning and must, therefore, mean whole of the refund. These words must not be read as permitting an artificial split of the amount into various components of advance tax, TDS, SA Tax and tax paid pursuant to demand. This Court, in J.K. Industries V/s. Krishna Sahal, Commissioner of Income Tax 2023 (6) TMI 1037 - BOMBAY HIGH COURT wherein the word amount in the context of interest payable under the old Section 244A(1A) of the Act was interpreted, held, as being a neutral expression wide enough to include even the interest collected by the Department alongwith the tax and it was consequently held that appellant therein was entitled to interest on the aggregate amount. If the Revenue s contention that appellant is entitled to interest on advance tax and TDS under Section 244A(1)(b) of the Act is to be upheld, then appellant would be entitled to interest from the date of actual payment (i.e., for a period even prior to the first day of the assessment year) and the exchequer will only have to pay more interest to appellant, as is clear from the plain reading of Section 244A(1)(b) of the Act. The Explanation to Section 244A(1)(b) of the Act, giving a meaning to the phrase date of payment as being the date of notice of demand u/s 156 of the Act, has no application to cases where taxes have been paid voluntarily by an assessee as held by the Hon ble Apex Court in Tata Chemicals Ltd. 2014 (3) TMI 610 - SUPREME COURT Questions of law as framed have to be answered in favour of assessee, i.e., appellant. Appellant would be entitled to interest under Section 244A.
Issues Involved:
1. Entitlement to interest under Section 244A(1)(a) of the Income Tax Act, 1961. 2. Whether the appellant is entitled to interest on the entire refund amount or only on specific components like advance tax and TDS. Summary: Issue 1: Entitlement to interest under Section 244A(1)(a) of the Income Tax Act, 1961 This appeal under Section 260A of the Income Tax Act, 1961, challenges an ITAT order dated 5th December 2002, which dismissed the appellant's claim for interest under Section 244A(1)(a) on the refund granted. The ITAT denied interest on the grounds that the refund amount, after regular assessment, was less than 10% of the tax determined. The appellant filed a return for the Assessment Year 1989-1990, declaring an income of Rs. 43,64,37,800/- and paid taxes amounting to Rs. 22,68,62,710/-. The Assessing Officer made additions, raising a demand of Rs. 1,61,73,216/-, which the appellant paid. Upon scrutiny, the income was re-assessed at Rs. 45,91,84,440/-, resulting in a demand of Rs. 3,32,42,443/-. The appellant challenged this assessment before the CIT(A), who reduced the income to Rs. 35,93,17,870/-, entitling the appellant to a refund of Rs. 5,24,29,950/-. The Assessing Officer granted interest only on the taxes paid pursuant to demands raised and denied interest on advance tax, TDS, and SA Tax, citing the proviso to Section 244A(1)(a). Issue 2: Whether the appellant is entitled to interest on the entire refund amount or only on specific components like advance tax and TDS The CIT(A) ruled that the appellant is entitled to interest on SA Tax under Section 244A(1)(b) but upheld the denial of interest on advance tax and TDS, as the refund component was less than 10% of the assessed tax. The ITAT dismissed the appeal, relying on the Calcutta High Court's decision in Kooka Sidhwa & Co., interpreting "regular assessment" as the assessment post-CIT(A) order. The High Court found that the ITAT misdirected itself by focusing on the term "regular assessment" instead of the "amount of refund." The court held that the "amount of refund" should include the entire refund amount and not be split into components. The court cited the Supreme Court rulings in Tata Chemicals Ltd. and Godrej & Boyce Manufacturing Company Ltd., emphasizing that statutory words must be given their natural meaning. The court rejected the Revenue's argument that only the advance tax and TDS components should be considered for interest calculation. It held that the appellant is entitled to interest on the entire refund amount from the first day of the assessment year, as per Section 244A(1)(a). The court concluded that the appellant is entitled to interest on Rs. 2,37,22,886/- under Section 244A of the Act and disposed of the appeal accordingly.
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