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TMI Blog2006 (3) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) was not justified in not allowing interest under s. 214 of the Act on the excess amount of advance tax determined at Rs. 77,20,172. In ITA No. 4893 of 1995, the grievance of the assessee is that learned CIT(A) was not justified in sustaining the order of AO for not allowing the appropriate amount of interest under s. 244(1) of the Act on the refund of Rs. 11,58,105 representing interest under s. 214 of the Act. The facts of the case are that the assessee filed return of income for the assessment year under reference on 1st Nov., 1988 declaring therein income of Rs. 1,47,10,762. The assessee had paid advance tax and TDS aggregating to Rs. 1,27,66,667. Subsequently, the assessee filed revised return disclosing therein income of Rs. 72,22,415. The AO granted a provisional refund of Rs. 46,26,243 under s. 141A on 27th April, 1989 by computing the income of Rs. 1,55,05,565 and did not grant any interest on the excess amount of advance tax and TDS paid. Subsequently, the AO completed regular assessment under s. 143(3) on 11th March, 1991 on a total income of Rs. 1,51,63,640 and granted further refund of Rs. 85,208 without allowing any interest thereon. The assessee filed an appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us that ground withdrawn was in fact related to s. 214(1A). As regards next ground relating to grant of interest under s. 244(1), i.e., interest on interest because of delay in granting interest on refund under s. 214, the learned CIT(A) relied on the decision of Tribunal. Delhi (Special Bench), in the case of A.K. Jain Bros (HUF) vs. ITO (1991) 42 TTJ (Del)(SB) 353 : (1992) 40 ITD 100 (Del)(SB) and held that assessee was entitled to interest on interest. Since the AO had not considered such claim while deciding the assessee's request for rectification under s. 154 of the Act, the learned CIT(A) directed the AO to decide such claim of the assessee keeping in view the decisions of Tribunal in ITA No. 5?06 of 1994 is against such order of CIT(A). As regards assessee's appeal in ITA No. 5089 of 1994, the learned CIT(A) vide his order of same date i.e., 24th June, 1994 held that this appeal had become infructuous in view of the decision in the earlier appeal. Therefore, the same was treated as dismissed. The assessee has also filed an appeal against such order which bears the No. 5089 of 1994. Thereafter, the AO gave effect to CIT(A)'s first order dt. 24th June, 1994. The AO obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest and interest on interest under ss. 214 and 244/244A works out to Rs. 37,62,121. He further stated that the issue is now squarely covered by the recent judgment of Hon'ble Supreme Court in the case of Sandvik Asia Ltd. vs. CIT (2006) 200 CTR (SC) 505 : (2006) 280 ITR 643 (SC). He submitted that directions may be issued to the AO for computation of interest as per provisions of the Act in the light of judgment of apex Court in the case of Sandvik Asia Ltd. vs. CIT. 5. The learned Departmental Representative, on the other hand, submitted that the issue for grant of interest was referred to the AO for his comments and the AO vide his letter dt. 7th Feb., 2006 has conceded that the interest of Rs. 10,90,879 under s. 214 is due to the assessee. 6. We have heard both the parties and carefully considered the rival submissions, examined the facts, evidence and material on record. From the facts discussed above, it is clear that the quantum of refund allowed to the assessee on different dates is not in dispute. Now the Department itself has conceded that the assessee is entitled to interest under s. 2.14 amounting to the extent of Rs. 10,90,879 (correct amount as per assessee works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at where the refund becomes due as a result of order passed in appeal, the AO shall refund the amount to the assessee without waiting for an application from the assessee for such claim. Proviso to S. 24G was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989 which provides that in a case where the appellate authority has set aside or cancelled the assessment and fresh assessment is directed to be made, the refund if any, shall become due only on the making of such fresh assessment. The proviso further states that if the assessment is annulled, the refund shall become due only on the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by the assessee. Considering the fact that in the present case, the assessment has not been set aside, cancelled or annulled, the proviso to s. 240 is not applicable. Sec. 243 of the Act provides payment of interest on delayed refund in a case where the claim for refund has to be made by the assessee. Clause (a) of sub-s. (1) of s. 243 provides for payment of interest if it is not granted within a period of three months from the end of the month in which the total income is determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r assessment under s. 143(3) on 11th March, 1991 and interest on refund of Rs. 30,09,321 granted at the time of giving effect to CIT(A)'s order on 26th Aug., 1991. But interest was granted only upto the date of regular assessment completed on 11th March, 1991. Now the AO has conceded vide his letter dt. 7th Feb., 1996 that assessee is entitled to interest under s. 214 on the amount of Rs. 30,09,321 for the period from 12th March, 1991 to 26th Aug., 1993, which according to AO works out to Rs. 10,90,879 and as per assessee at Rs. 10,08,123. 6.2. Now the question that requires to be decided by this Bench whether the assessee would be entitled to interest on interest on the amounts of refund referred to above because the Revenue has delayed the grant of interest on the amounts of refunds granted to the assessee. This issue has also been considered by the various High Courts. The Hon'ble Gujarat High Court in the case of D.J. Works vs. Dy. CIT (1992) 102 CTR (Guj) 2 : (1992) 195 ITR 227 (Guj) where it was held that once the legislature has considered right of the assessee to receive interest on the amount paid in excess, by the same reasoning the assessee would also be entitled to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bar do not have a direct bearing on the above question and therefore, we do not propose to refer to or deal with them. On general principles, we are of the opinion that the Government is liable to pay interest, at the rate applicable to the excess amount refunded to the assessee, on the interest amount which had become due under s. 214(1) of the Act. In the light of the above discussion, this petition must succeed." This decision was followed by the Hon'ble Gujarat High Court in the case of Chimanlal S. Patel vs. CIT Anr. (1994) 119 CTR (Guj) 293 : (1994) 210 ITR 419 (Guj). The Revenue accepted the two judgments of Gujarat High Court in the aforesaid two cases and no SLP was filed before the Supreme Court. This matter was also considered by the Hon'ble Madhya Pradesh High Court in the case of CIT vs. Narendra Doshi (2002) 174 CTR (SC) 411 : (2002) 254 ITR 606 (SC), where by referring to the two judgments of Gujarat High Court in the cases of D.J. Works vs. Dy. CIT and Chimanlal S. Patel vs. CIT held that the Revenue was liable to pay interest on the amounts of interest which it should have paid to the assessee but has unjustifiably failed to do. However, the Revenue filed an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had paid advance tax and was allowed refund of tax on the basis of assessment order. However, subsequently the assessee was asked to pay additional tax in pursuance of rectification order passed under s. 154. The learned CIT(A) allowed substantial relief and the assessee received refund only of the excess amount paid as advance tax and the assessee was not granted interest on the amount refundable. For the asst. yr. 1978-79, the assessee was granted refund of tax on the basis of the assessment order, but no interest was paid on the refund. After the learned CIT(A) allowed substantial relief, the assessee received only refund of the excess amount paid, but no interest was granted. For the asst. yr. 1981-82, the assessee was granted refund as well as interest on the amount under s. 214. After the learned CIT(A) granted substantial relief, the assessee was allowed interest only under s. 214 but no interest was granted under ss. 214(1A) and 244(1A). For the asst. yr. 1982-83, the assessee paid further tax on assessment, but the learned CIT(A) gave substantial relief and the assessee received refund of the assessed tax paid. However, no interest was granted under s. 214 or s. 244. Purs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und on completion of regular assessment and further at the time of granting refund while giving effect to CIT(A)'s order. It was only after the assessee made an application, the assessee was granted refund of interest of Rs. 11,58,105 under s. 214 of the Act. Further, interest of Rs. 10,08,123 on refund of Rs. 30,09,321 for the period from 12th March, 1991 to 26th Aug., 1993 at the time of giving effect to CIT(A)'s order is yet to be paid. Therefore, the ratio of the judgment of Supreme Court in the case of Sandvik Asia Ltd. vs. CIT and the judgments of various other High Courts referred to above is applicable to the facts of the present case also. Thus, the assessee is also entitled to simple interest on interest from the dates when the refund of interest became due till the date when such refund of interest was granted or yet to be granted at the rate applicable and specified in the Act. However, the assessee would not be entitled to compound rate of interest. We, therefore, set aside the orders of the CIT(A) and direct the AO to grant interest on amount of interest due to the assessee from the dates when the interest became due till the date of granting refund of interest as per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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