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TMI Blog2014 (3) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... o an assessee only without extending the similar benefit to a resident/deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/foreign company. Refund due and payable to the assessee is debt-owed and payable by the Revenue - The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies - The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances - The obligation to refund money received and retained without right implies and carries with it the right to interest. The payment of tax made by resident/depositor is in excess and the department chooses to refund the excess payment of tax to the depositor – the interest requires to be paid on such refunds - The catechize is from what date interest is payable, the present case does not fall either under clause (a) or (b) of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95 (2) of the Act inter alia requesting him to provide information/ determination as to what percentage of tax should be withheld from the amounts payable to the foreign company, namely, M/s. Haldor Topsoe, Denmark. On the request so made, the Assessing Officer/ Income Tax Officer had determined and passed Special order under Section 195 (2) of the Act directing the resident/deductor to deduct/ withhold tax at the rate of 20% before remitting aforesaid amounts to M/s. Haldor Topsoe. Accordingly, the resident/deductor had deducted tax of ₹ 1,98,878/- on the entire amount of US$ 43,290.00/- and credited the same in favour of the Revenue. 6. After such deposit, the resident/ deductor had preferred an appeal before the Commissioner of Income Tax (Appeals) against the aforesaid order passed by the Assessing Officer/ Income Tax Officer under Section 195 (2) of the Act. The appellate authority while allowing the appeal so filed by the resident/ deductor, had concluded, that, the reimbursement of expenses is not a part of the income for deduction of tax at source under Section 195 of the Act and accordingly, directed the refund of the tax that was deducted and paid over to the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Appellate Tribunal (for short, the Tribunal ). The Tribunal while reversing the judgment and order passed by the Commissioner of Income Tax (Appeals) has opined, that, the tax was paid by the deductor/ resident pursuant to an order passed under Section 195 (2) of the Act and the refund was ordered under Section 240 of the Act, therefore, the provisions of Section 244A(1) (b) are clearly attracted and the revenue is accountable for payment of interest on the aforesaid refund amount. Accordingly, the Tribunal has allowed the appeal of the deductor/ resident and directed the Assessing Officer/ Income Tax Officer to acknowledge the claim and allow the interest as provided under Section 244A(1)(b) of the Act on the aforesaid amount of refund, by order dated 28.06.2008. 11. The Revenue being of the view that they are treated unfairly by the Tribunal had carried the matter by way of Income Tax Appeal before the High Court. The High Court has refused to accept the appeal filed by the Revenue by the impugned judgment and order, dated 18.06.2009. That is how the Revenue is before us in these appeals. 12. We have heard the learned counsel appearing for the Revenue and the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this Act other than salary to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer to determine, by general or special order, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. ** **** Section 240. Refund on appeal, etc. Where, as a result of any order passed in appeal or other proceeding 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 assessee without his having to make any claim in that behalf. ** ** ** Section 244. Interest on refund where no claim is needed (1) 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 a period of three months from the end of the month in which such order is passed the Central Government shall pay to the assessee simple interest at fifteen per cent per annum on the amount of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of recipient, he may make an application to the assessing officer/income tax officer to determine, by general or special order, the appropriate proportion of such sum so chargeable. The assessing officer is expected to determine such sum/tax which are deductible out of remittance to be sent to the recipient and only after deduction and payment of such sum/tax, the balance amount is to be remitted to the non-resident. We clarify here that it is the statutory obligation of the person responsible for paying such sum to deduct tax thereon before making payment, if such application is not filed. 16. Section 240 of the Act provides for refund on appeal etc. The Section envisages that if an amount becomes due to the assessee by virtue of an order passed in appeal, reference, revision, rectification or amendment proceedings, the assessing officer is bound to refund the amount to the assessee without the assessee being required to make any claim in that behalf. The expression 'other proceedings under the Act' used in Section 240 of the Act, are wide enough to include any order passed in proceedings other than the appeals under the Act. 17. Section 244 of the Act provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty specified in the notice of demand issued under section 156 is paid in excess of such demand. (2) (3)** ** ** (4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment year (Emphasis Supplied) 19. The objects and reasons for introduction of the aforesaid Section is clarified by the Board in its Circular No. 549, dated 31.10.1989. Relevant paragraphs of which are as under: 11.2 Insertion of a new section 244A in lieu of sections 214, 243 and 244,-Under the provisions of section 214, interest was payable to the assessees on any excess advance tax paid by him in a financial year from the 1st day of April next following the said financial year to the date of regular assessment. In case the refund was not granted within three months from the date of the month in which the regular assessment was completed, section 243 provided for further payment of interest. Under section 244, interest was payable to the assessee for delay in payment of refund as a result of an order passed in appeal, etc., from the date following after the expiry of three months from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned senior counsel appearing for the resident/deductor would submit that since the payment made under Section 195(2) is payment made under the Act pursuant to an order passed by the assessing officer which in turn would be sheltered under the provisions of Section 156 of the Act, by virtue of clause(b) of sub-Section(1) of Section 244A of the Act, the Revenue is obliged to refund the tax with interest. DISCUSSION:- 22. It is cardinal principle of interpretation of Statutes that the words of a Statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning unless such construction leads to some absurdity or unless there is something in the context or in the object of the Statute to the contrary. The golden rule is that the words of a Statute must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of a Statute are clear, plain and unambiguous, then the Courts are bound to give effect to that meaning irrespective of the consequences. It is said that the words themselves best declare the intention of the law giver. The Courts have adhered to the principle that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 199 during the financial year immediately preceding the assessment year. Under this clause, the interest shall be payable for the period starting from the first day of the assessment year to the date of the grant of refund. No interest is payable if the excess payment is less than 10% of the tax determined under Section 143(1) of the Act or on regular assessment. Clause(b) of Sub-Section(1) of Section 244A opens with the words in any other case that means in any case other than the amounts paid under Clause(a) of Sub-section(1) of Section 244A. Under this clause, the rate of interest is to be calculated at the rate of one and a half per cent per month or a part of a month comprised in the period or the periods from the date or, as the case may be, either the dates of payment of the tax or the penalty to the date on which the refund is granted. An explanation is appended to clause(b) of the aforesaid sub-Section to explain the meaning of the expression date of payment of tax or penalty . It clarifies that the date of payment of tax or penalty would mean the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first day of the assessment year to the date of grant of refund. No interest is, however, payable if the excess payment is less than 10 percent of tax determined under Section 143(1) or on regular assessment. No interest is payable for the period for which the proceedings resulting in the refund are delayed for the reasons attributable to the assessee (wholly or partly). The rate of interest and entitlement to interest on excess tax are determined by the statutory provisions of the Act. Interest payment is a statutory obligation and non-discretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244A is drafted and enacted. The language employed in Section 244A of the Act is clear and plain. It grants substantive right of interest and is not procedural. The principles for grant of interest are the same as under the provisions of Section 244 applicable to assessments before 01.04.1989, albeit with clarity of application as contained in Section 244A. 31. The Department has also issued Circular clarifying the purpose and object of introducing Section 244A of the Act to replace Sections 214, 243 and 244 of the Act. It is clarified therein, that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ached by the authorities under the Act. However, the Tribunal and the High Court, have granted interest on the amount of tax deposited by the resident/deductor from the date of payment on the ground, firstly, the refund of tax is directed by the first appellate authority in the appeal filed by the deductor/resident under Section 240 of the Act and secondly, the Revenue for having retained the sum by way of tax has to compensate the person who had deposited the tax. 36. Section 240 of the Act provides for refund of any amount that becomes due to an assessee as a result of an order in appeal or any other proceedings under the Act. The phrase other proceedings under the Act is of wide amplitude. This Court has observed, that, the other proceedings under the Act would include orders passed under Section 154 (rectification proceedings), orders passed by the High Court or Supreme Court under Section 260 (in reference), or order passed by the Commissioner in revision applications under Section 263 or in an application under Section 273A. 37. A tax refund is a refund of taxes when the tax liability is less than the tax paid. As per the old section an assessee was entitled for pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course. 39. In the present case, it is not in doubt that the payment of tax made by resident/depositor is in excess and the department chooses to refund the excess payment of tax to the depositor. We have held the interest requires to be paid on such refunds. The catechize is from what date interest is payable, since the present case does not fall either under clause (a) or (b) of Section 244A of the Act. In the absence of an express provision as contained in clause (a), it cannot be said that the interest is payable from the 1st of April of the assessment year. Simultaneously, since the said payment is not made pursuant to a notice issued under Section 156 of the Act, Explanation to clause (b) has no application. In such cases, as the opening words of clause (b) specifically referred to as in any other case , the interest is payable from the date of payment of tax. The sequel of our discussion is the resident/deductor is entitled not only the refund of tax deposited under Secti ..... 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