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TMI Blog2014 (7) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... its money for sixteen long years – following the decision in Commissioner of Income Tax, Gujarat Versus Gujarat Fluoro Chemicals [2013 (10) TMI 117 - SUPREME COURT] - Commissioner of Income Tax is directed to verify and pay the amount being the interest payable from 28th March 1989 up to the grant of refund on 30th March 1998 after having excluded interest for one month in terms of second proviso to Section 244(1A) of the Act – the assessee’s prayer to direct the Commissioner of Income Tax to grant interest on the interest of ₹ 6,76,002/- from 28th March 1989 till payment is rejected – Decided partly in favour of Assessee. - Writ Petition No. 2529 of 2009 - - - Dated:- 7-7-2014 - M. S. Sanklecha And G. S. Kulkarni,JJ. For the Petitioner : Ms. A. Vissanji with Mr. S. J. Mehta For the Respondent : Mr. Suresh Kumar JUDGMENT (Per M. S. Sanklecha,J.): This petition under Article 226 of the Constitution of India challenges an order dated 28th May 2004 passed by Respondent No.1 i.e. Commissioner of Income Tax in Revision under Section 264 of the Income Tax Act, 1961 (the Act) in respect of Assessment Year 1986-87. By the impugned order dated 28th May, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Revision Application, the Petitioner reiterated its demand for interest of ₹ 6,76,002/- on the amount of ₹ 7,90,280/- paid as Self Assessment Tax under Section 244(1A) of the Act. 7. By the impugned order dated 28th May 2004, the Commissioner of Income Tax rejected the Revision Application as filed by the Petitioner under Section 264 of the Act. The impugned order dated 28th May 2004 holds that no interest under Section 244(1A) of the Act is payable as there is no provision for payment of interest therein on excess amount paid as Self Assessment Tax. 8. It is the impugned order dated 28th May 2004 passed by the Commissioner of Income Tax under Section 264 of the Act which is the subject matter of challenge before us. 9. Before considering the rival submissions, it may be convenient to set out the relevant provisions of the Act, particularly in view of the fact that from the Assessment Year 1989-90, the interest on refund is not governed by Section 244 of the Act but by Section 244 (A) of the Act. Therefore, we reproduce Section 244 of the Act which applied to Assessment Year 1986-87 i.e. prior to 1989-90 and reads as under: 244. Interest on refund where n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r commencing on the 1st day of April, 1989, or any subsequent assessment years. 10. Ms. A. Vissanji, learned Counsel appearing for the Petitioner in support of the Petition submits as under: (i) The impugned order dated 28th May 2004 of the Commissioner refusing to grant interest on the refunded Self Assessment Tax paid by the Petitioner is in the face of the binding decision of the Supreme Court in the matter of Modi Industries Ltd. Others v/s. CIT 216 ITR 759 allowing payment of interest on Advance Tax paid post the assessment order. In Modi Industires (supra), the phrase 'in pursuance of an order of assessment' found in Section 244(1A) of the Act, was construed to include Advance Tax and Tax Deducted at Source (TDS) which were paid prior to Assessment order. This on the basis that the amounts were set off against the tax demand raised in the Assessment order. It is submitted on the same principle as above, interest is payable by the Revenue on the excess Self Assessment Tax paid; (ii) The aforesaid interpretation put on the phrase 'paid in pursuance to an order of Assessment' by the Apex Court in Modi Industries Ltd. (supra) has been applied in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also have no application as all of them incorrectly applied the decision of the Apex Court in the 'Modi Industries Ltd. Others (supra) to the case of refund of Self Assessment Tax; (iii) Self Assessment Tax which is paid by the assessee is a voluntary payment made under the Act. This payment is made after closure of accounts and to correct the shortfall in paying appropriate tax as Advance Tax. Therefore, this delayed payment of Self Assessment Tax is not entitled to any interest; (iv) In the alternative, it was submitted that in view of the second proviso of Section 244(1A) of the Act, payment of interest in respect of Self Assessment Tax refunded would commence, if the refund is not made to the assessee for a period of one month from the date of passing of the order in appeal. In view of the above, it is submitted that no interest is payable till one month of passing of order in appeal, even if it is assumed that the amount attributable to Self Assessment Tax is entitled to interest when refunded; and (v) Interest, if any, payable on refund of Self Assessment Tax would be covered under Section 244 (1) of the Act and not under Section 244 (1A) of the Act. It is sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und. However, when the refund becomes payable to an assesee by virtue of an order in appeal or other proceedings, then in terms of Section 240 of the Act, the Assessing Officer is obliged to refund such amount to the assessee without the assessee even having to apply for such refund. Such refund of tax would carry interest in terms of Section 244 of the Act. Section 244(1) of the Act provides for interest consequent to the order passed in an appeal or other proceedings under Section 240 of the Act in case the Assessing Officer does not grant such refund within three months from the date of the order in appeal. Subsection (1A) of Section 244 of the Act which was introduced w.e.f. 1st October 1975 deals with the refund due under Section 244(1) of the Act in respect of any amounts paid by the assessee after 31st March 1975 in pursuance of an order of assessment which is thereafter found in appeal to be in excess. The second proviso to Section 244(1A) of the Act provides that no interest under this subsection shall be payable for a period of one month from the date of passing of order in appeal. 13. In the present facts, the Petitioner has paid Self Assessment Tax of ₹ 7,90,28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of tax deducted at source and Advance Tax, which were lying to the credit of the assessee and were ultimately adjusted and set off against the tax demands raised in the assessment order. The excess amount of tax paid under subsection (1A) of Section 244 must be calculated by treating the amount of tax deducted at source and the amount of Advance Tax which were adjusted against the assessee s liability to pay tax as well as the amount of tax paid directly upon the assessment under Chapter XVII of the Income Tax Act. In other words, so far as the amount of Advance Tax is concerned, it must be understood to have been paid in pursuance of any order of assessment only on the date of the original order of assessment and not on the date of actual payment. The reason is obvious: on the day the Advance Tax amount is paid there is no assessment and, hence, it cannot be said to have been paid in pursuance of any order of assessment . This view was also taken by the Punjab High Court in the case of Leader Engineering Work [1989] 178 ITR 529. Finally at page 808 it recorded a summary of its findings as under: (i) . . . (ii) If any tax is paid pursuant to an assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsuance of the Assessment order. To our mind, the distinction drawn by the Commissioner of Income Tax in the impugned order dated 28th May 2004 and before us by the learned Counsel for the Revenue is a pedantic distinction and not a distinction of substance. The ratio of the decision in Modi Industries Ltd. (supra) and in particular the interpretation and meaning given to the words 'in pursuance of order of assessment' is binding upon us to mean not only the amounts paid consequent to a notice of demand issued under Section 156 of the Act consequent to the order of assessment but would also include payments made as tax prior to the order of assessment, either in terms of Advance Tax or Self Assessment Tax. 16. The other objection/ distinction sought to be made by the Revenue is that Self Assessment Tax is voluntarily paid and therefore no interest can be granted. This submission overlooks the fact that Advance Tax is also voluntarily paid by an Assessee. The Self Assessment Tax is paid as much under the provisions of the Act as Advance Tax. Thus, this distinction is also of no substance. 17. The Petitioner's next contention is that the interest is payable not from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to Assessment Year 1989-90 onwards. The Court held that interest is a compensation for use and retention of money collected unauthorizedly by the Department in the context of a refund claim filed by a person. However, the Court also held that interest payment is a statutory obligation and nondiscretionary in nature. The right of interest is a substantive right and not procedural. In the present case, Section 244 (1A) of the Act provides for interest and the Petitioners are also claiming interest thereunder. It is well settled that when there are specific provisions in the statute governing the grant of interest i.e. under Section 244 (1A) of the Act, then general principles of compensation for use and retention of money would not displace the statutory provision. The Apex Court in Modi Industries Ltd. (supra) has already dealt with the appropriate interpretation of the words 'in pursuance of order of assessment' to mean and include any tax paid earlier in point of time to the order of assessment would yet be considered as tax paid in pursuance of the order of assessment for the reasons that the tax assessed in the assessment order is set off with the amount of tax paid ei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment, the learned Counsel for the Revenue pointed out that the same could not be granted to the Petitioner in view of decision of the Apex Court in CIT v/s. Gujarat Fluoro Chemicals 358 ITR 291. It is pointed out that in Gujarat Fluoro (supra), a bench of three Learned Judges of the Hon'ble Supreme Court while considering the correctness of the decision of two Member Bench of Learned Judge of the Hon'ble Supreme Court in Sandvik Asia Ltd. (supra) had inter alia observed as under: 6:- In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in Sandvik Asia Ltd.'s case (supra), this Court had directed the Revenue to pay interest on the statutory interest in case of delay in the payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period. 7:- As we have already noticed, in Sandvik Asia Ltd.'s case (supra) this Court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is bound by the principle laid down in earlier two decisions of the High Court and dismissed the Revenue's appeal. In Narendra Doshi (supra), the Supreme Court did not deal with the issue on merits of the claim for interest on interest as done in the later case of Gujarat Fluoro Chemicals (supra) which is binding upon us. 23. Learned Counsel appearing for the Petitioner then drew our attention to the decision of the Supreme Court in Sandvik Asia Ltd. (supra) to contend that the Supreme Court held that assessee is entitled to interest on interest while granting refund of interest which had accrued for the period during which interest was not paid. It was emphasized that the Supreme Court has passed the order in an appeal filed from an order of the High Court in appeal under Section 260A of the Act. Further, interest on interest as compensation was awarded only due to the delay on the part of the Government. It is contended that the above principles should be extended and applied to this case. We cannot accept the above submission as the Apex Court has explained its decision in Sandvik Asia (supra) in its Larger Bench decision given in Gujarat Fluoro Chemicals (supra). In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal, there is corresponding obligation on the Revenue to refund such amount with interest inasmuch as they have retained and enjoyed the money deposited. It is submitted that the Revenue is obliged to grant the refund of interest not paid along with interest thereon. However, the factual situation in TATA Chemicals (supra) is completely different. Interest therein was being demanded only on the delayed amount of refund and not interest on interest not paid for the delayed refund of the principal as in this case. The amount of interest therein was granted on the refund in terms of the Act. In this case, it is being urged before us that we grant interest on interest for which we find no sanction in the Act. We are bound by the decision of the Apex Court in Gujarat Fluoro Chemicals (supra). 26. Reliance was also placed upon the unreported decision of the A. P. Court in Sirpur Paper Mills Ltd. v/s. Jt. Commissioner of Income Tax, Hyderabad Others in Writ Petition No.5807 of 1999 dated 20th March 2014 wherein following the decision of the Supreme Court in Sandvik Asia Ltd. (supra) interest on interest for delayed payment was granted. With greatest of respect in all humility, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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