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TMI Blog2013 (6) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... refund of the excess tax deposited for all these three assessment years. The orders of the Tribunal for the assessment years 1992-93, 1993-94 and 1994-95 all have become final and the following amounts of refund have become due : Assessment Year Amount Rs. 1992-93 7,45,163 1993-94 6,39,771 1994-95 2,05,770 2. The petitioner has been pursuing its refund claim for the last five to six years but without any success. 3. In the petition the following reliefs have been claimed : (I) A writ, order or direction in the nature of mandamus directing respondents Nos. 2 and 3 to grant refund of Rs. 15,90,694 of excess deposit of tax for the assessment years 1992-93, 1993-94 and 1994-95 together with exemplary interest for delay of 5-6 years in making the refund. (II) Issue any other writ, order or direction, as this hon'ble court may deem fit and proper under the facts and circumstances of the case. (iii) Award cost of the petition to the petitioner. 4. The above writ petition was filed on January 12, 2012, after giving its notice to the learned standing counsel for the respondent-Department. It appears that after the receipt of the notice of the writ petition good sense p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f demand issued under section 156 is paid in excess of such demand". Emphasis has been laid on the words "paid in excess of such demand." According to them, in view of the Explanation to section 244A, the petitioner having not paid any amount in excess of demand notices issued by the Assessing Officer under section 156, the petitioner is not entitled for any interest. 8. Sri S. D. Singh, learned counsel for the petitioner, submits that on a true and correct interpretation of section 244A, the petitioner is entitled for interest on the delayed payment of refund amount. The submission is that the interest is payable from the date of actual deposit till the date of actual payment of refund amount at the rate specified in section 244A(1)(b). Reliance has been placed on a Departmental Circular No. 549, dated the 31st of October, 1989 (see [1990] 182 ITR (St.) 1), explaining the scope and effect of the newly inserted section 244A as amended by the Direct Tax Laws (Amendment) Act, 1989. 9. Further, reliance has been placed upon the apex court judgment Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643 (SC) ; [2006] 2 SCC 508 in support of the claim that the interest upon interest is payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income-tax Act, were drastically amended by the Direct Tax Laws (Amendment) Act, 1989, with effect from April 1, 1989. 15. Provisions relating to refund and interest are contained in Chapter XIX of the Income-tax Act. Section 237 provides that if the Assessing Officer is satisfied with the liability of tax paid by any persons or by any other person on behalf of the assessee for any assessment year exceeds the amount with which he is properly chargeable under the Act for that year, the said person shall be entitled to a refund of the excess amount. Section 240 deals with the refund of the tax as result of an appellate order. Sections 243 and 244 deals with interest on delayed refund and interest on refund were no claim application needed. But these provisions shall not apply in respect of any assessment for the assessment year commencing on April 1, 1989, or any subsequent assessment years. 16.The material section for the present purposes is section 244A. It is a common case of the learned counsel for the parties that clause (a) of section 244A(1) is not at all attracted. The case of the petitioner is that his case falls in clause (b) of section 244A(1). For the sake of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-1991. # Inserted by the Direct TAx Laws (Amendment) Act, 1989, w. e. f. 1-4-1989. ## Inserted by the Finance Act, 2005, w. e. f. 1-4-2006. ### The words "and one-half" have been omitted by the Finance (No. 2) Act, 1991 (49 of 1991), s 64 (w. e. f. 1-10-1991). to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final. (3) Where, as a result of an order under sub-section (3) of section 115WE or section 115WF or section 115WG or sub-section (3) of section 143 or section 144 or section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under subsection (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount ; and such notice of demand shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken in respect of such Government dues, then, (a) where such Government dues are enhanced in such appeal or proceeding, the taxing authority shall serve upon the assessee another notice of demand only in respect of the amount by which such Government dues are enhanced and any proceedings in relation to such Government dues as are covered by the notice or notices of demand served upon him before the disposal of such appeal or proceeding may, without the service of any fresh notice of demand, be continued from the stage at which such proceedings stood immediately before such disposal ; (b) where such Government dues are reduced in such appeal or proceeding (i) it shall not be necessary for the taxing authority to serve upon the assessee a fresh notice of demand ; (ii) the taxing authority shall give intimation of the fact of such reduction to the assessee, and where a certificate has been issued to the Tax Recovery Officer for the recovery of such amount, also to that officer ; (iii) any proceedings initiated on the basis of the notice or notices of demand served upon the assessee before the disposal of such appeal or proceeding may be continued in relation to the amount so red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at paradoxical that plain meaning rule is not plain and requires some explanation. The rule, that plain words require no construction, starts with the premise that the words are plain, which is itself a conclusion reached after construing the words. It is not possible to decide whether certain words are plain or unambiguous unless they are studied in their context and construed. * D. Saibaba v. Bar Council of India, AIR 2003 SC 2502, 2507 ; [2003] 6 SCC 186 ; [2003] 2 KLT 669 (This proposition is approvingly referred from page 45 eighth edition of this book). See further Ibrahimpatnam Taluk Vyavasaya Coolie Sangham v. K. Suresh Reddy [2003] 7 SCC 667 pages 677, 678. The rule, therefore, in reality means that after you have construed the words and have come to the conclusion that they can bear only one meaning, your duty is to give effect to that meaning. The true import of the rule is well brought out in an American case where judge Pearson after reaching his conclusion as to the meaning of the statutory language said : 'That seems to me a plain clear meaning of the statutory language in its context. Of course, in so concluding I have necessarily construed or interpreted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CR 848, may only explain and may not expand or add to the scope of the original section. In State of Bombay v. United Motors, AIR 1953 SC 252 ; [1953] SCR 1069, it was found that an Explanation could introduce a fiction or settle a matter of controversy. Explanation may not be made to operate as 'exception' or 'proviso'. The construction of an Explanation, as was held in Collector of Customs v. G. Dass and Co., AIR 1966 SC 1577, must depend upon its terms and no theory of its purpose can be entertained unless it is to be inferred from the language used. It was said in Burmah Shell Oil Ltd. v. CTO, AIR 1961 SC 315 ; [1961] 1 SCR 902, that the Explanation was meant to explain the article and must be interpreted according to its own tenor and it was an error to explain the Explanation with the aid of the article to which it was annexed. We have to remember what was held in Dattatraya Govind Mahajan v. State of Maharashtra, AIR 1977 SC 915 (928) ; [1977] 2 SCR 790, that mere description of a certain provision, such as Explanation is not decisive of its true meaning. It is true that the orthodox function of an Explanation is to explain the meaning and effect of the main provision to whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment with regard to the interpretation of the Explanation is not sustainable in view of sub-section (3) of section 244A. This sub-section provides where as a result of appellate order, etc. "the amount on which interest was payable under sub-section (1) has been increased or reduced". It contemplates a situation which may arise on account of decision of appeal under section 250 or section 254 resultantly the amount on which interest is payable is varied in either way, the interest amount will be varied accordingly. The liability to pay interest by the Department is (i) as a result of assessment order, etc., under sub-section (1) of section 244A, as also (ii) as a result of appellate order, the amount on which the interest is payable is enhanced, due to the relief granted to the assessee by the appellate authority. 37. The interpretation of the Explanation, as suggested by the Department, runs counter to the scheme of grant of interest on refund. The said interpretation cannot be accepted as there cannot be any situation from where a person will pay tax or penalty over and above or in excess of the demand notice under section 156. It is beyond comprehension that a man of ordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department liable to pay interest for the money remaining with the Government. 42. The relevant portions from the circular is extracted below (page 48 of 182 ITR (St.) : "11.3 These provisions, apart from being complicated, left certain gaps for which interest was not paid by the Department to the assessee for money remaining with the Government. To remove this inequity, as also to simplify the provisions in this regard, the Amending Act, 1987, has inserted a new section 244A in the Income-tax Act, applicable from the assessment year 1989-90 and onwards, which contains all the provisions for payment of interest by the Department for delay in the grant of refunds. The rate of interest has been increased from the earlier 15 per cent. per annum to 1.5 per cent. per month or part of a month comprised in the period of delay in the grant of refund. The Amending Act, 1987, has also amended sections 214, 243 and 244 to provide that the provisions of these sections shall not apply to the assessment year 1989-90 or any subsequent assessment years." 43. In this connection, the relevant extract from paragraph 11.4 of the said circular is reproduced below : "11.4 The provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31, 1989 2,80,000 20,000 3,00,000 (iii) Tax determined on completion of regular assessment under section 143(3) on March 31, 1990 4,00,000 (iv) Date of payment of further demand of Rs. 1,00,000 [column (iii) minus (ii)] 1-5-1990 (v) Tax determined as a result of appellate order under section 250 on September 30, 1990 3,20,000 (vi) Refund due as a result of appeal 80,000 (vi) Date of grant of actual refund 31-10-1990 (vii) Interest payable by the Department at 1.5 per cent. per month for 6 months (May 1, 1990-October 31, 1990), i.e., at 9 per cent. on Rs. 80,000 7,200 45. The aforesaid example perfectly fits in the case of the petitioner. A reading of the said example would show that the interest would be payable by the Department at the prescribed rate per month from the date of actual deposit to the date of appellate order on the sum found excess beyond the tax determined finally. The Explanation should be interpreted accordingly. The rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 199, the assessee would be entitled to receive the simple interest on the excess amount as per formula provided under clause (a) of section 244A(1). 48. On a correct reading of the Explanation, date of actual payment of tax or penalty, in the light of Explanation III referred in the Departmental Circular No. 549 will be the date from which the refund is due. The word "excess" used in the Explanation means the amount as found "excess" as a result of subsequent to the order ordering the issue of notice of demand under section 156 of the Act. 49. There is another aspect of the case. The apex court in the case of Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643 (SC) has examined the question of payment of interest upon the interest amount in great depth. In that connection, it has observed that payment of interest for delayed refund is nothing but a compensation for depriving the assessee to utilize the money. It has been laid down that : assuming that there is no provision in the Act for payment of compensation, compensation for delay is required to be paid in view of its judicial pronouncements. 50. There is another reason to reject the contention of the Department. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officers. In the same breath, it has been stated that delay has been caused due to inaction on the part of the assessee-petitioner in bringing the fact regarding grant of refund to the notice of the assessing authority. 55. Noticeably, the said paragraph has been sworn not on the basis of the record or by any of the Assessing Officers of the petitioner. It has been sworn on the basis of the legal advise. It follows that the plea that delay is attributable to the assessee has been set out on getting the legal advice. Such a plea is liable to be rejected at its threshold. It is the obligation of the Department to grant refund of the excess amount as a result of appellate or revisional order. The Act does not contemplate that the assessee should run to the Department for refund of the excess amount. After the filing of the writ petition, the refund has been made. Till the filing of the writ petition, the Department slept over the matter and made the petitioner to run from pillar to post for years without any rhyme or reason. 56. It is apposite to note that the delay attributable to the assessee is referable to the late filing of the return, etc., and has nothing to do wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them. 64. For the sake of convenience, paragraph 49 is reproduced below (page 677 of 280 ITR) : "This is the fit and proper case in which action should be initiated against all the officers concerned who were all in charge of this case at the appropriate and relevant point of time and because of whose inaction the appellant was made to suffer both financially and mentally, even though the amount was liable to be refunded in the year 1986 and even prior thereto. A copy of this judgment will be forwarded to the hon'ble Minister for Finance for his perusal and further appropriate action against the erring officials on whose lethargic and adamant attitude the Department has to suffer financially." 65. In nutshell, our conclusions are as follows : (i) The expression "excess of such demand" used in the Explanation means the demand which is found in excess as a result of appellate order. (ii) The Explanation is relevant only for the purposes of determination of date of payment of tax or penalty. (iii) The Departmental Circular referred to above the existence of which was not disputed by the respondents clinches the issue. (iv) The date of payment is the date when the amount is dep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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