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TMI Blog2016 (2) TMI 171X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner had applied for refund and brought the factual aspect to the notice of the respondent authorities. It is wellsettled that the law comes to the assistance of the vigilant and diligent. If the petitioners have chosen to be in slumber for long years, the respondents cannot be fastened with the liability for a period earlier to the date on which the petitioners have woken and brought this factual position to the notice of the respondents. In that view of the matter, we find that in the interest of justice, it would be appropriate to restrict the claim of the petitioner for interest in accordance with the provisions of Section 244A from 31.1.1994 till the date on which the actual amount was paid to the petitioners. - WRIT PETITION NO. 3827 OF 1998 - - - Dated:- 19-1-2016 - B.R. GAVAI AND P.N. DESHMUKH, JJ. For The Petitioner : Mr. V.R. Thakur, Advocate For The Respondent : Mr. Anand Parchure, Advocate ORAL JUDGMENT (PER B.R. GAVAI, J.). 1] The petitioner which is a public limited company has approached this Court, in effect for a writ of mandamus directing the respondents to pay interest on the amount of ₹ 49,40,923/as provided under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited as advance TDS towards the third instalment of the payment which was to be made to the German company and in fact which payment was not made to the German company. The petitioners as directed by the Department executed an indemnity bond for the said amount of ₹ 53,70,567/on 18.2.1994. On 24.3.1994 the Deputy Commissioner of Income Tax, Special Range2, Nagpur addressed a communication to the Commissioner of Income Tax, Vidarbha, Nagpur stating that since in the present case there was no excess tax liability, he was of the opinion that the excess tax deducted at source should be refunded to the assessee company. However, since going through note of his predecessor on the ordersheet, it was noticed that in similar situation the Chief Commissioner of Income Tax had referred the matter to the Central Board of Direct Taxes, he requested the Chief Commissioner of Income Tax to give necessary clarification. 5] The Central Board of Direct Taxes vide the communication dated 18.7.1995 informed the Chief Commissioner of Income Tax, thereby conveying the authorization of the Board for grant of refund of ₹ 53,70,567/independent of the provisions of the said Act to the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appropriate the third instalment of the TDS only in the event the third instalment was in fact paid to the German company. He submits that since undisputedly the third instalment has been agreed to be waived by the German company and as such, no payment was made, the respondents had no authority to retain the TDS for the said amount of ₹ 53,70,567/. The learned Counsel submits that the respondents correctly understanding the position have rightly decided to refund the amount of ₹ 53,70,567/which was deducted. Shri V.R. Thakur, learned Counsel for the petitioner, further submitted that as such, the petitioner would be entitled to the interest for the entire period between the date of deposit and the date of refund. The learned Counsel, however, submits that on an untenable ground, the respondents are denying to pay interest under the provisions of Section 244A for the amount which was erroneously withheld by them. The learned Counsel relies on the judgment of the Apex Court in the case of Union of India through Director of Income Tax .vs. Tata Chemicals Limited reported in (2014) 6 SCC 335, Commissioner of Income Tax, Bhopal .vs. H.E.G. Limited reported in (2010) 15 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resident, not being a company, or to a foreign company, any interest not being interest referred to in section 194LB or section 194LC or section 194LD or any other sum chargeable under the provisions of this Act (not being income chargeable under the head Salaries ) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct incometax thereon at the rates in force. The relevant portion of Section 200 reads thus : 200. (1) Any person deducting any sum in accordance with the foregoing provisions of this Chapter shall pay within the prescribed time, the sum so deducted to the credit of the Central Government or as the Board directs. The relevant portion of Section 201 reads thus : 201. (1) Where any person, including the principal officer of a company,- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in subsection (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter. Subclause (b) includes every person who is deemed to be an assessee under the provisions of the said Act, whereas subclause (c) also includes every person who is deemed to be an assessee in default under any provisions of the Act. It could thus clearly be seen that an assessee would also include every person who is deemed to be an assessee under any provisions of the Act and also every person who is deemed to be an assessee in default under any provisions of the Act. 10] In the light of the aforesaid import of subsection (7) of Section 2, it will be relevant to refer to the provisions of Sections 163 160 of the said Act. The perusal of clause (b) of subsection (1) of Section 163 would reveal that for the purposes of the said Act, in relation to an nonresident, any person in India who has any business connection with the nonresident would be an agent. Similarly, any person in India from or through whom the nonresident has received directly or indirectly any income would be an agent for the purposes of the said Act in relation to such a nonresident. The perusal of Section 160 would reveal that clause (i) provides that in respect of nonresident specified in subsection (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is responsible for deducting and paying, either does not deduct or deducts but does not pay any part of the tax, he would be deemed to be an assessee in default in respect of such a tax. 13] In the background of the aforesaid legal provisions, let us examine the factual position as is appearing in the present matter. The position that would emerge is that the petitioner had entered into an agreement with the German nonresident company for supply of technical knowhow. It had agreed to pay the amount to the said company in three instalments. Out of the three instalments, the first two instalments were paid to the German company. The German company failed to supply further technical knowhow and as such, agreed to waive the third instalment and as such, the said amount was not paid to the German company. The petitioner had deducted TDS as was required under Section 195 for all three instalments and also deposited the said TDS on account of all the three instalments with the Revenue as required under Section 201. If the petitioner had failed to deduct the amount or after deducting failed to deposit the same with the Revenue, he would have squarely fallen in the term of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in view of the Circulars of the CBDT and not under the statutory provisions of the Act, no interest would accrue on the refunds. The Assessing Officer, therefore, though granted refund of the tax, refused to entertain the claim of interest on the amount so refunded. The resident/deductor carried the matter in appeal before the Commissioner of IncomeTax, Appeals. The appeal was dismissed by the first Appellate Authority. The deductor aggrieved by the appellate order went before the Income Tax Appellate Tribunal. The learned Tribunal reversed the order passed by the Appellate Authority and held that the tax was paid by the resident/deductor pursuant to the order passed under Section 195(2) of the Act and ordered the refund under Section 244, holding that provisions of Section 244A( 1)(b) are clearly attracted and that the revenue was accountable for payment of interest. Their Lordships of the Apex Court while considering the scope of Section 240 of the said Act observed thus : 15. 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, rectificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and a direction is issued by the appellate authority to refund the tax paid. The amount paid by the resident/deductor was retained by the Government till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest inasmuch as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to 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 nonresident/ foreign company. 38. Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than the appeals under the Act. Their Lordships further hold that the other proceedings under the Act would include orders passed under Section 154, orders passed by the High Court or Supreme Court under Section 260 or orders passed by the Commissioner in revision applications under Section 263 or in an application under Section 273A of the Act. 20] It has further been observed that the tax refund is a refund of taxes when the tax liability is less than the tax paid. It has further been held that the payment of interest is a kind of compensation of use and retention of money collected unauthorizedly by the Department. It has further been held that when the collection is illegal, there is corresponding obligation on the Revenue to refund said amount with interest, inasmuch as they have enjoyed the money deposited. Their Lordships held that there is no reason to restrict the same to an assessee only without extending the similar benefit to the resident/deductor, who has deducted the tax at source and deposited the same before remitting the amount payable to a nonresident foreign company. It could thus be clearly seen that the contention of the Revenue that an application at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which it was observed at page 613 that circulars issued under the aforesaid provisions are binding on all officers even if they deviate from the provisions of the Act . As to what was sought to be conveyed by the word 'deviate' is not clear to us. This much, however, is apparent that this Court did not mean, while saying as above, that circulars can override any provision of the Act or to put in the language of Mukharji, J. detract from the Act. Though Shri Salve has urged that the decision in Varghese has been affirmed by a Constitution Bench in C.B. Gautam v. Union of India, (1993) 1 SCC 78, reference to that case shows that Varghese's case was mentioned in para 22 while stating that the conclusion arrived at, namely, that the provisions of Chapter XXC of the Act are to be resorted to only where there is significant undervaluation of the immovable property with a view to evading tax, finds support from the decision in Varghese. This shows that what was stated about permissibility of circulars to 'deviate' from the provisions of the Act was not one which was affirmed by the Constitution Bench. No doubt that it is an equally settled that the circulars issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we find that the petitioner's case is squarely covered by the provisions of Section 244A( 1)(b) of the Act. However, the only question is as to from what date the respondents should be directed to pay the interest. Undisputedly, though the TDS was deducted and deposited at earlier point of time, the agreement between the petitioner and the German company was executed only on 1.7.1992 wherein the German company waived the instalment. However, even after that date, the petitioner waited till 31.1.1994 to make an application for refund. It is only when the petitioner brought to the notice of the respondent authorities that the German company had agreed to waive the third instalment and as such, the petitioner was entitled to refund of the TDS deducted and deposited on account of third instalment, the respondent Revenue would come to know about the same. 28] In so far as the submission of Shri Thakur is concerned, we find that in the peculiar facts and circumstances of the case the petitioner would be entitled to refund only from the date on which the petitioner had applied for refund and brought the factual aspect to the notice of the respondent authorities. It is wellsettled ..... 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