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TMI Blog2006 (1) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of Pope the King Match Factory v. CIT [ 1962 (3) TMI 81 - MADRAS HIGH COURT] . It has been apprehended by assessee s counsel that assessee would be without remedy if the interest is reduced by virtue of assessment u/s 143(3). This apprehension, in our opinion, is unfounded. If interest is reduced by virtue of sub-section (3) of section 244A on account of assessment u/s 143(3), the interest granted in earlier year gets substituted and it is the reduced amount of interest that would form part of income of that year. Thus, it would amount to mistake rectifiable u/s 154 of the Act. In our opinion, if the basis, on which income was assessed is varied or ceases to exist, then such assessment would become erroneous and can be rectified. This can be explained with an example. Similarly, any income assessed may become non-taxable by virtue of retrospective amendment and consequently, erroneous assessment can be rectified. Therefore, in our humble opinion, if the interest granted u/s 244A(1) is varied under sub-section (3) of such section, then the interest originally granted would be substituted by the reduced/increased amount as the case may be. Thus, income on account of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held to be taxable in the year of receipt, then assessee would be without remedy if the interest is reduced under section 244A(3). 4. On the other hand, the Learned Departmental Representative has contended that an absolute right is created in favour of assessee under section 244A(1) and, therefore, the moment a refund is issued the assessee becomes entitled to interest. There is no compulsion on the Assessing Officer to make assessment under section 143(3) in every case. Further, the right vested in assessee is independent right and is not dependent on the assessment under section 143(3). It is the quantification which is finally done in case assessment is made under section 143(3). In support of his contention, he relied on the decision of Tribunal in the case of Saffron Trading Co. ( supra ). A query was raised whether provisions of section 154 of the Act can be invoked in case interest is taxed in the year of receipt but varied under section 244A(3). In response to the same, the Learned Departmental Representative did not respond but the learned counsel for the assessee submitted that he has no objection if it is held that such assessment can be rectified under section 154 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 244A of the Act which for the benefit of this order are stated below : 244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of his section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely : ( a ) Where the refund is out of any tax paid under section 115WJ or collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted: Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 115WE or sub-section (1) of section 143 or on regular assessment; ( b ) in any other case, such interest shall be calculated at the rate of one-half per cent for every month or part of a month comprised in the period or periods from the date or, as the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quires a right to receive the interest. Sub-section (3) of section 244A only affects its quantification under certain circumstances and not the right of interest. The Hon ble Supreme Court in the case of CIT v. Shri Goverdhan Ltd. [1968] 69 ITR 675, has observed at page 681 that once a debt is created, then the liability cannot be said to be contingent merely because it is to be quantified at later date. Under section 244A, even the interest is quantified immediately whenever a refund is issued. In our view, the right to grant interest is absolute since existence of such right is not dependent on any event. For example, assessee is granted interest of Rs. 1,000 on the date of granting refund. Subsequently, under section 244A(3), it is reduced to Rs. 600 by virtue of assessment under section 143(3). Can it be said that right to interest did not accrue on the date of refund? In our opinion, the right of interest came into existence on the date of refund by virtue of section 244A(1) though its quantification may or may not vary depending upon the outcome of assessment. 10. The view of ours is justified by the judgment of the Hon ble Supreme Court in the case of Kedarnath Jute Mfg. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of these observations, the Apex Court upheld the claim of assessee. It also affirmed the Madras High Court judgment in the case of Pope the King Match Factory ( supra ). 12. The ratio of the above judgment is clearly applicable to the present case. According to the above judgment, if an enforceable debt is created under a statute then any subsequent event would not affect the existence of such right/obligation despite the fact that such debt is subject-matter of appeal. The right to interest under section 244A is not dependent upon any assessment inasmuch as there is no compulsion or obligation upon the Assessing Officer to make an assessment under section 143(3). The moment the return is processed under section 143(1)( a ) and refund is issued on the basis of intimation under section 143(1)( a ), an enforceable legal right is created in favour of assessee under section 244A and simultaneously the Assessing Officer is under legal obligation to grant the interest. Merely because quantum of such interest may vary on assessment made under section 143(3), it cannot be said that legal right was not acquired on the date of refund. The effect of assessment under section 143(3) would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court of Madras held that, where a managing agent is entitled under the terms of the managing agency agreement to remuneration at a certain percentage on the annual net profits of the company, the remuneration payable to the managing agent accrued when the net profits of the company for the year are ascertained. The mere fact that, owning to disputes between the company and the managing agent the company had not credited the managing agent with the remuneration due to the latter in its accounts would not entitle the managing agent to claim that the remuneration due to him had not accrued and should not be assessed to income-tax until the company had credited him in its accounts with the amount of commission due to him. We are in agreement with the ratio of that decision and that ratio governs the facts of the present case. The ratio of the decision of the Bombay High Court in F.E. Hardcastle Co. (P.) Ltd. v. CIT is also to the same effect. The above judgment clearly shows that once a right accrues under an agreement, then such accrual is not affected by dispute between the parties. Further, in case of dispute, the final outcome would ultimately relate back to the year of accrua ..... X X X X Extracts X X X X X X X X Extracts X X X X
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