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TMI Blog2013 (9) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... on December 31, 1997 but net of interest which, as stated above, partook of the character of amount due‖ under Section 244A - Interest payable under Section 234B and 234C become part of the demand notice issued under Section 156 and it is on this amount, i.e., the tax payable plus interest payable under Sections 234B and 234C that interest under Section 220(2) is calculated from the date mentioned in the notice of demand till the date of actual payment. Under Explanation to Section 140A(1), it is stipulated where the amount paid by an assessee under self-assessment falls short of the aggregate amount of tax and interest aforesaid, the amount paid shall first be adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax payable. The interpretation given by us follows the same principle, when Revenue defaults and makes part payment of the amount refundable. The aforesaid interpretation also ensures that the Assessing Officer/Revenue refund the entire amount, which is due and payable, including interest payable under Section 244A. It discourages part payment. There is no other provision under the Act under which an Assessing Officer/Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter written by the appellant to the Government of India, Central Board of Direct Taxes and whether in view of the said letter no interest was payable. (b) After the order of the tribunal dated 22nd June, 2007, an amount of Rs.1,60,30,495/- was paid by the respondent vide order dated 11th June, 2008. The contention of the appellant is that they are entitled to interest on this amount of Rs.1,60,30,495/- from the date it was due and payable. In order to appreciate the contention, we would like to refer to the following: (i) Pursuant to the assessment order/appellate order, the appellant became entitled to refund of taxes paid of Rs.2,06,52,845/-. (ii) On 28th March, 1995, Rs.1,70,01,266/- was refunded. (iii) Rs.36,51,579/- was refunded on 1st June, 1999. (iv) Rs.1,42,04,705/- had accrued as interest under Section 244A on Rs.2,06,52,845/- upto 28th March, 1995 when part payment of Rs.1,70,01,266/- was made. (v) Interest of Rs.18,25,790/- had accrued on balance amount of Rs.36,51,579/- from 29th March, 1995 till 1st June, 1999. (vi) Thus in all, interest of Rs.1,60,30,495/- had accrued and payable but was not paid when the two refunds were issued. (Rs.1,42,04,705/- had ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of refund/payment. Interest, it is claimed, is payable under Section 244A of the Act. 4. The contention of the Revenue is that this would amount to paying interest on interest and this would be contrary to Section 244A of the Act. DECISION 5. At the outset, we note that there is no dispute and debate on the initial interest, which is payable and should have been paid by the Revenue when they made the refund of the taxes. The dispute has arisen as the Revenue did not pay along with the refund of taxes, the interest which had accrued and had become due and payable on the tax amount refundable. The Revenue, therefore, had made part payment of the refund by not including the interest element. 6. Secondly, it should be clarified that the interest payable on the refund stands quantified on the date when the refund was issued/granted by the respondent. The quantum or the calculation of interest does not and has not undergone a change or modification. Interest has not accrued or is not payable by the Revenue after they have made payment of the refund as interest payable under Section 244A stopped running on the said day and became quantified and an amount due and payable. In other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 case may be, dates of payment of the tax or penalty to the date on which the refund is granted. Explanation. For the purposes of this clause, date of payment of tax or penalty‖ means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand. (2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim is needed. Sub-section (2), inter alia, provides that where a refund is due to the assessee, "in pursuance of an order referred to in Section 240" and the Assessing Officer does not grant the refund within the stipulated time, the Central Government is required to pay simple interest at the stipulated rate. Section 240 deals with refund on appeal, etc. This provision clearly lays down that where as a result of any order passed in appeal or other proceedings under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessed without his having to make any claim in that behalf. The crucial expressions in Section 240 are "any amount which becomes due to the assessee as a result of any order passed in any appeal or other proceedings under the Act" and the "amount becomes due to the assessee". Section 244 refers to the liability fastened on the Central Government in case of failure to grant refund within the stipulated time in a case where refund is due to the assessee in pursuance of an order referred to in Section 240. A combined reading of both the provisions makes the position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded but the interest is not refunded along therewith, the retention of interest amount would become unjustified and interest on interest would also become payable. The reason is simple. It is the tax which was paid in excess by the assessee which became refundable. The assessee would be compensated by paying interest thereupon. It is only when the interest is not refunded along with excess tax that the withholding of the said interest becomes unjustified and it becomes an amount due to the assessee on which the assessee can claim further interest. Such a situation has not happened in the present case as the amount of interest is calculated and refunded along with the refundable tax amount. 12. Same view has been taken by Punjab and Haryana High Court in Roadmaster Industries of India Private Limited versus Commissioner of Income Tax and Another, [2010] 329 ITR 69 (P H) and Gujarat High Court in Commissioner of Income Tax versus Hynoup Food and Oil Industries Limited, [2010] 320 ITR 365 (Guj.) and Gujarat Flourochemicals Limited versus Commissioner of Income Tax and Others, [2008] 300 ITR 328 (Guj.). The said cases refer to the principle of compensation when money, which is due a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Department and it is in this way that the assessee claims interest under Section 244A of the Income-Tax Act. Therefore, on both the afore-stated grounds, we are of the view that the assessee was entitled to interest for 57 months on Rs.45,73,528/-. The principal amount of Rs.45,73,528 has been paid on December 31, 1997 but net of interest which, as stated above, partook of the character of amount due‖ under Section 244A. 15. A reading of the aforesaid passage from the decision of the Supreme Court in HEG Limited (supra) indicates that it would be incorrect and improper to regard payment of interest when part payment is made as interest on interest. What has been elucidated and clarified by the Supreme Court is that when refund order is issued, the same should include the interest payable on the amount, which is refunded. If the refund does not include interest due and payable on the amount refunded, the Revenue would be liable to pay interest on the shortfall. This does not amount to payment of interest on interest. An example will clarify the situation and help us to understand what is due and payable under Section 244A of the Act. Suppose Revenue is liable to ref ..... X X X X Extracts X X X X X X X X Extracts X X X X
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