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TMI Blog2005 (6) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... specific provision in the Estate Duty Act, 1953, for payment of interest on refunds. Although the facts are not in dispute, some essential facts necessary for disposal of the case may be noted. The petitioner is the accountable person in respect of the property which passed on the death of the late Vithal Govinda Rao Saraf who passed away on October 18, 1984. She filed a statement showing (-) Rs. 6,45,345 as the principal value of the estate of the deceased. The respondent determined the principal value of the estate at Rs. 70,93,950 and determined the estate duly payable thereon at Rs. 49,94,200 and interest under section 53(3) at Rs. 1,74,797. This assessment was later revised at Rs. 57,29,355 and Rs. 39,66,126 respectively. Against the assessment, appeal was filed which was partly allowed. Thereafter, the assessment was reopened by the Assessing Officer and the principal value redetermined. Against the same, there were appeals by both sides and ultimately, consequent on exhibit P6 orders of the Income-tax Appellate Tribunal, refund of estate duty amounting to Rs. 42,80,167 became due to the petitioner and by exhibit P9 order dated December 12, 1995, the respondent modified th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n paying interest under the Act and in such circumstance, interest is payable on the refund, since the petitioner was deprived of the use of his money and the Revenue had the use of the same. Counsel has cited several decisions of the Supreme Court in support of his contention that in the absence of prohibition in the Act with regard to payment of interest on refund of estate duty, interest is payable. The first of these decisions is that of Executive Engineer, Dhenkanal Minor Irrigation Division v. N.C. Budharaj reported in [2001] 2 SCC 721. That was a case arising under the Arbitration Act, 1940. The question decided in that case was as to whether the arbitrator appointed under the said Act has power to award interest in respect of pre-reference period in the absence of such power either in the Act or the arbitration agreement. Counsel drew my attention to para. 8 of the judgment in that case which reads thus: "The Constitution Bench, which decided Roy case [1992] 1 SCC 508 after a critical analysis of the earlier decisions including the one is Jena case [1988] 1 SCC 418 held as follows: '43. The question still remains whether an arbitrator has the power to award interest p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case [1988] 1 SCC 418 almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law. (v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred'." Another decision cited by the petitioner is that of South Eastern Coalfields Ltd. v. State of M.P. reported in [2003] 1 RC 813 (SC); [2003] 8 SCC 648. Counsel took me to paras. 22 to 24 of the said decision which read as follows: "22. We may refer to the decision of this court in Executive Engineer, Dhenkanal Minor Irrigation Division v. N.C. Budharaj [2001] 2 SCC 721, wherein the controversy relating to the power of an arbitrator (under the Arbitration Act, 1940) to award interest for pre-reference period has been set at rest by the Constitution Bench. The majority speaking through Doraiswamy Raju J., has opined that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Life Insurance Corporation of India reported in [1963] 33 Comp Cas 513; AIR 1963 SC 1171, in which decision at paragraphs 25 to 27, the court observed as follows: "25. The last question is whether interest was payable. The Tribunal held that it had no jurisdiction to award interest because there is no provision in the Act. It followed its own decision in the order passed in an earlier case and declined to grant interest. During the arguments before us, the Corporation agreed that interest is award-able and the dispute only centred round the rate of interest, the amount on which it is payable and the date from which it should be given. There is no doubt that the Life Insurance Corporation Act and the Rules do not contain any express provisions for grant of interest. The company relied on cases of purchases of immovable property where interest is awarded as a general rule of equity if the purchaser enters into possession without having paid the purchase money to the seller. The reason of the rule was stated a long time ago by Lord St. Leonards L.C. in Birch v. Joy [1852] 3 HL Case 565; 10 ER 222 as follows: 'The parties change characters, the property remains at law just whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was called upon to answer reads thus: 'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in upholding the order of the Deputy Commissioner of Income-tax (Appeals), Indore, directing to allow interest on interest, when the law points for grant of simple interest only?' It answered it in the affirmative and in favour of the assessee, relying upon the judgments which laid down that interest was payable on the excess amount paid towards income-tax. The Tribunal, whose decision the High Court affirmed, had relied upon the decision of the Gujarat High Court in the case of D.J. Works v. Deputy CIT [1992] 195 ITR 227, which had been followed by the same High Court in Chimanlal S. Patel v. CIT [1994] 210 ITR 419. These decisions hold that the Revenue is liable to pay interest on the amount of interest which it should have paid to the assessee but has unjustifiably failed to do. The Revenue has not challenged the correctness of the two decisions of the Gujarat High Court. They must, therefore, be bound by the principle laid down therein. Following that principle, the question has, as we find, been rightly answered in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to an appellate order. This is not a question of equity. There is no right to get interest on refund except as provided by the statute. The interest on excess amount of advance tax under section 214 is not paid from the date of payment of the tax. Nor is it paid till the date of refund. It is paid only up to the date of the regular assessment. No interest is at all paid on excess amount of tax collected by deduction at source. Before introduction of section 244(1A), the assessee was not entitled to get any interest from the date of payment of tax up to the date of the order as a result of which excess realisation of tax became refundable. Interest under section 243 or section 244 was payable only when the refund was not made within the stipulated period up to the date of refund. But, if the assessment order was reduced in appeal, no interest was payable from the date of payment of tax pursuant to the assessment order to the date of the appellate order. Therefore, interpretation of section 214 or any other section of the Act should not be made on the assumption that interest has to be paid whenever an amount which has been retained by the tax authority in exercise of the statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing authority under the powers vested in the authority under the law. Refund of taxes so paid becomes legally due only when an appellate authority modifies the assessment in appeal. Therefore, the retention of the tax by the Revenue is in accordance with the statute. In such cases, the question of compensation for deprivation of money legitimately due does not arise. Therefore, there cannot be any right to interest on the amount of refund unless the statute which enables the appellate authority to annul the assessment and order refund specifically provides for payment of interest. In this connection, it should be noted that almost all taxing statutes, especially the Income-tax Act, specifically provide for payment of interest on certain amounts which become due as refund to an assessee pursuant to final assessment. Section 214 of the Income-tax Act, 1961, provides thus: "214.(1) The Central Government shall pay simple interest at fifteen per cent. per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 to 213 exceeds the amount of the assessed tax, from the 1st day of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purposes of this section." Sections 243, 244 and 244A of the Income-tax Act read thus: "243.(1) If the Assessing Officer does not grant the refund,- (a) in any case where the total income of the assessee does not consist solely of income from interest on securities or dividends, within three months from the end of the month in which the total income is determined under this Act, and (b) in any other case, within three months from the end of the month in which the claim for refund is made under this Chapter, the Central Government shall pay the assessee simple interest at fifteen per cent, per annum on the amount directed to be refunded from the date immediately following the expiry of the period of three months aforesaid to the date of the order granting the refund. 244.(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 refund due from the date immediately following the expiry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of two-third per cent. for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted: Provided that no interest shall be payable if the amount of refund is less than ten per cent, of the tax as determined under sub-section (1) of section 143 or on regular assessment; (b) in any other case, such interest shall be calculated at the rate of two-third 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." There are similar provisions in the Kerala statutes also. Section 68(4) of the Kerala Agricultural Income-tax Act, 1991 and section 44(4) of the Kerala General Sales Tax Act are cases in point. It will be advantageous to quote those provisions here: "68. Refunds.- (1) If any person satisfies the Agricultural Income-tax Officer that the amount of tax paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viding for interest in respect of certain amounts under the Act, the Legislature consciously did not want to provide for interest in other cases. This could only be in public interest. Refund of tax in accordance with a taxation statute cannot be equated with delay in payment of money legally due from one person to another. In fact, in the decision reported in CIT v. Narendra Doshi [2002] 254 ITR 606 (SC) cited by counsel for the petitioner, the ratio is that the Revenue is liable to pay interest on the amount of interest which it should have paid to the assessee but has unjustifiably failed to pay. This decision and other decisions cited may perhaps be made applicable for the period of delay in payment of the refund for the period subsequent to the order of the Tribunal. The money becomes due only when the appellate authority sets aside or modifies the assessment order and not at any time before. The decision in Modi Industries Ltd. v. CIT [1995] 216 ITR 759 (SC) is directly on point regarding the issue. The paragraphs quoted supra categorically deal with the question of payment of interest on the amount of tax paid when the tax paid is refunded pursuant to an appellate order. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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