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TMI Blog2012 (9) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect from 1/6/2003. Under the Act what is brought to tax is not the income of the assessee in the assessment year but the income of the assessee in the previous year. The liability to tax arises on account of the Finance Act which fixes the rate at which the tax is to be paid. The law to be applied is as existing on the 1st day of April of the previous year - in favour of revenue. - INCOME TAX APPEAL NO.2012 OF 2011 - - - Dated:- 12-9-2012 - S.J.VAZIFDAR M.S. SANKLECHA, JJ. Mr. Suresh Kumar for the Appellant. Mr. R. Murlidhar with Mr. Atul K. Jasani for the Respondent. JUDGMENT ( Per M.S. SANKLECHA, J.) : This appeal by the revenue under section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act ) challenges an order dated 24/11/2010 of the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal ) in ITA No.2201/Mum./2006 relating to the assessment year 2002-03. 2) The appeal is admitted on the following question of law :- Whether the Tribunal was right in holding that interest under section 234D is chargeable from Assessment year 2004-05 only and it could not be charged for earlier assessment years, even tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee under sub section (1) of section 143, and- (a) no refund is due on regular assessment; or (b) the amount refunded under sub-section (1) of section 143 exceeds the amount refundable on regular assessment. the assessee shall be liable to pay simple interest at the rate of (two third) percent on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment. (2) Where, as a result of an order under section 154 or section 155 or section 2590 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount of refund granted under sub-section (1) of section 143 is held to be correctly allowed, either in whole or in part, as the case may be, then, the interest chargeable, if any, under sub-section (1) shall be reduced accordingly. Explanation [1] Whether, in relation to an assessment year, an assessment is made for the first time under Section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of this section. (B). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able on regular assessment,then, the assessee shall be liable to pay simple interest at the rate of one half per cent,on the whole or the excess amount so refunded for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment. The Explanation to the aforesaid section provides that where, in relation to an assessment year, an assessment is made for the first time under section 147 or section 153A, the assessment so made shall be regarded as a regular assessment for the purposes of the said section. It is proposed to insert a new Explanation so as to clarify that the provisions of this section shall also apply to an assessment year commencing before the 1 s t day of June, 2003 if the proceedings in respect of such assessment year is completed after the said date. This amendment will take effect retrospectively from 1 s t June, 2003. (emphasis provided) 6) Mr. Suresh Kumar, the learned Counsel for the revenue in support of the appeal submits as under: a) After the introduction of Explanation-2 to section 234D by Finance Act, 2012, there cannot be any doubt that interest is payable by an assessee in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(1) of the Act after 1/6/2003. This is evident from the opening words of section 234D of the Act which are couched in future tense viz. refund is granted; c) In the further alternative, it was submitted that in any view of the matter interest under section 234D of the Act would be chargeable on the excess refund under section 143(1) of the Act only with effect from 1/6/2003 and not prior thereto; 8) The first issue which confronts us is whether the issue of payment of interest in respect of refunds made prior to 1/06/2003 consequent to intimation under section 143(1) of the Act is no longer res integra in view of the decision of this court in Bajaj Hindustan Limited (supra). In the above case the following question of law was considered by this Court: Whether in the facts and circumstances of the case and in law the Income Tax Appellate Tribunal was right in holding that the interest under section 234D of the Act cannot be charged in respect of refunds granted prior to 1/06/2003? This Court answered the above question as under: So far as the last question is concerned, it is seen that the subject provision came on Statute book w.e.f. from 1/06/2003. If that be so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eported in 1994 94 STC page 422 wherein the Apex Court held that the provision for charging interest is a substantive provision and not a machinery or procedural provision. Consequently, a provision introduced for charging interest would not entitle the revenue to recover interest for the earlier periods in the absence of a specific provision in the statue. 12) However, even if, one accepts the submission that the provision for charging interest in every case is a part of substantive law and not a machinery provision, the same is of no consequence in view of the fact that the plain language of section 234D itself envisages that the provision would apply retrospectively. In any case, consequent to the addition of Explanation-2 by Finance Act, 2012 which is declaratory of the law there can be no manner of doubt that section-234D of the Act is to be applied retrospectively even to the period prior to the assessment year 2004-05. 13) Mr. Murlidharan, places reliance upon the decision of the Calcutta High Court in the matter of CIT v. Ram Kumar Agarwalla Bros. (P) Ltd. reported in 122 ITR 322 in support of his contention that charging of interest under the said Act not being a mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective operation. (Principle reiterated in CIT v. Gold Coin Hotels Food (P) Ltd. reported in 2008(9) SCC 622). Moreover, it is retrospective in terms. The validity thereof has not been challenged and they have accordingly proceeded on the basis that it is valid. 15) Further, reliance was placed upon the decision of the Delhi High Court in the matter of Jacobs Civil Incorporated reported in 330 ITR 578 wherein it has been held that section 234D of the Act is not applicable retrospectively. In the above case, the Delhi High Court held that the legislature had not made section 234D of the Act retrospective in operation. Consequently, it was held to be prospective in its application and would apply from the assessment year 2004-05 onwards. In view of the addition of Explanation-2 to section 234D of the Act there can be no manner of doubt that section 234D is retrospective in operation. In fact, Explanation 2 to section 234D of the Act does not restrict its application to assessment year 2003-04 but is applicable to all assessment years prior to 1/6/2003. Consequently, the above decision is inapplicable to the present facts as it did not deal with Explanation 2 to section 234D of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rifying the main part of Section 234D of the Act does not restrict its clarification only to refunds granted after 1/6/2003. 18) Mr. Murlidharan further contended that the opening words of sub-section (1) of section 234D of the Act states subject to the other provisions of this Act, where any refund is granted to the assessee under sub-section (1) of section 143 . Therefore it is sub- mitted that as the words used are where any refund is granted can only apply in the future i.e. after 1/06/2003 and would not cover refunds granted prior thereto as in the present case. 19) The submission is not well founded. In P. Anand Gajapati Raju v. P.V.G. Raju reported in 2000(4) SCC 539, the Supreme Court construed similar words in section 8(1) the Arbitration Act 1996 which inter-alia reads as under :- 8. Power to refer parties to arbitration where there is an arbitration agreement. (1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) . During an appeal before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and is subject to the final determination under section 143(3). This grant of refund is pending the conclusion of the final assessment under section 143(3) in respect of the year for which the refund is granted. The classification done in section 234D is on the basis of the date of the completion of assessment proceedings prior to 1/06/2003 on the one hand and post 1/06/2003 on the other. The classification is not on the basis of the date of grant of refund under section 143(1) of the Act. The classification on the basis of the completion of assessment proceedings is not a subject matter of challenge before us. Therefore, the date of grant of refund is immaterial to determine the applicability of section-234D of the Act. In the circumstances the submission of the respondent that section 234D of the Act only applies to refunds granted prior to 1/06/2003 is not acceptable. 22) It must be borne in mind that refund which is granted under section 143(1) of the Act to an assessee is qua an assessment proceeding for a particular assessment year. The refund granted is qua an assessment year. The refund emanates from assessment proceedings for a particular assessment year. The refund gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/06/2003. 24) Mr. Murlidhar further submitted that even if section 234D is applicable to all refunds paid prior to 1/06/2003 in respect of assessments completed post 1/06/2003 interest payable on such refund would commence only from 1/06/2003 onwards. He relied upon the decision of Kerala High Court in CIT v. Kerala Chemicals and Proteins Ltd. reported in 323 ITR 584. 25) The aforesaid decision was rendered prior to the introduction of Explanation-2 to section 234D of the Act. The Kerala High Court which had no occasion to consider Explanation 2 held that as the provision of interest is not introduced with reference to any assessment year, it must be taken to apply only with effect from 1/06/2003. This submission of the respondent-assessee would require limiting the clear words of a declaratory amendment in an Explanation 2 to section 234D of the Act which specifically provides that it shall also apply to an assessment year commencing before 1/06/2003. The only qualifying criterion is that proceedings in respect of such assessment is completed after 1/06/2003. Once the Explanation is held to be retrospective in relation to the assessment years commencing before 1/6/2003 it wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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