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TMI Blog2020 (9) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we hold that the proviso to Clause (a) of Sub- Section (1) of Section 244A is applicable and has to be considered for computational purpose of the interest computable for the refund payable u/s 244A(1)(a). Whether interest is payable on the self-assessment tax paid by the assessee or not? - AO is hereby directed to pay interest on the refund eligible in accordance with the proviso to Section 244A(1)(a) with regard to the advance tax paid. With regard to the self-assessment tax paid, we hereby hold that the assessee is eligible for interest on the total amount of refund in accordance with provision of Section 244A(1)(b) as the bar contend in proviso to Clause (a) to Section 244A(1) is not applicable to the cases (A.Ys. 1999-2000 and 1994-95) before us. The ground no.3 of the assessee is treated as allowed. Computation of interest u/s 244A(1)(a) and Sec. 244A(1)(b) as well as Sec. 234A, Sec. 234B Sec. 234C , we hereby hold that the rule of collection of interest on the taxes due from the taxpayer would be applicable in the comparable way while paying interest to taxpayer on the refund. Assessee is eligible for interest Amount of ₹ 30,00,00,000/- paid on 31.01.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not twice as the interest is to be given from the date or dates of payment of tax. 4. In ITA No. 468/Del/2014, following grounds have been raised by the assessee: 1.0 That the CIT(Appeals) erred on facts and in law in confirming the action of the Assessing Officer in not granting interest under section 244A of the Income Tax Act, 1961 ( the Act ) on the amount of refund, being the excess of tax liability on the assessed income over the taxes paid under section 143(1) of the Act. 2.0 That the CIT(Appeals) erred on facts and in law in concluding that for giving effect to the provisions of section 244A(3), the l imitation as per the proviso to 244A(1)(a) of the Act would apply. 5. In ITA No. 599/Del/2014, following grounds have been raised by the revenue: 1. Whether on the facts and circumstances of the case in law, the ld. CIT (A) erred in directing the AO to al low interest u/s 244A to the assessee for the month in which payments/adjustments were made on the last day of the month? 2. Whether on the facts and circumstances of the case in law, the ld. CIT (A) erred in holding that few hours of the day constitute part of the month whereas for cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid prepaid taxes, the assessee had paid ₹ 186,78,13,935/- on various dates in compliance of demands being raised by the Revenue, pursuant to the earlier assessment order(s)/orders giving effect to appellate orders at various stages as under: Sep 2002 118,858,457 Oct 2002 2,00,000,000 Jan 2003 3,00,00,000 Feb 2003 250,000,000 Mar 2003 231,200,000 Mar 2003 300,000,000 Mar 2007 250,000,000 Refund of AY 2004-05 adjusted on 10.11.2008 217,755,478 Total (Rs.) 186,78,13,935 8. The assessee was, therefore, entitled to total income tax refund of ₹ 201,37,93,163/- (₹ 14,59,79,228 + ₹ 186,78,13,935). 9. In the impugned order dated 24.02.2009 passed by the Assessing Officer giving appeal effect to the order dated 31.10.2008, the Assessing Officer omitted to calculate and al low interest under section 244A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, simple interest thereon calculated in the following manner, namely :- (a) where the refund is out of any tax [collected at source under section 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 one 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 one 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The opening sentence of the Section 140A reads as under: (1) Where any tax is payable on the basis of any return required to be furnished u/s 139 --------- 19. This clearly gives a meaning that self-assessment tax which is payable on the basis of return do not constitute part of prepaid taxes. 20. For the purpose of embargo of 10% of the tax determined in accordance with the provisions of Section 244A(1)(a), it is clear from the provision of the Section that the self-assessment tax do not form a part of the embargo as self-assessment tax falls under sub-Section (b) of Section 244A(1). 21. Now, if one reads Section 244A(1)(b), it reads in any other case the interest shall be calculated at the rate of one-half percent . Here in any other case signifies refund out of any tax paid, other than u/s 115WJ or collected at source u/s 206 or paid by the way of advance tax which treated as paid u/s 199 which have been duly mentioned u/s 244A(1)(a). 22. The difference between sub-Section (a) and (b) is with regard to the method of computation of interest on the refund. For calculation of interest on the refund of the taxes paid u/s 115WJ, Sec. 199, Sec. 206 and Sec. 209, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest payable and to notify the assessee with a demand notice in case there is any increase in the interest payable by the assessee owing to such order. This is a procedural section to give effect to the orders passed by various authorities by the revenue. By this section, the revenue is directed to re-compute the tax due consequent to the passing of any further orders which will have an effect on the tax determined u/s 143(1) in the case of non-scrutiny cases and u/s 143(3) in the case of regular assessment. Thus, Section 244A(3) is a re-computational purvey under the Income Tax Act. 27. Provision to Section 244A(1)(a) deals with the refund determined u/s 143(1) or Section 143(3). The orders u/s 147, Sec. 154, Sec. 155 or Sec. 254, Sec. 255, Sec. 260, Sec.262, Sec. 263, Sec. 264, Sec. 245D(4) effectively directed to re-compute the refund determined u/s 143(1) or Sec. 143(3) and to pre-determine the quantum of the refund of the amount due afresh. Thus after receipt of the order under these sections, the tax payable/refund payable would be re-computed as provided u/s 244A(1). And consequently, the interest is determined as provided in the clause (a) i.e. from the first day of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sequence of computation of interest would be: Eg:1 Tax determined u/s 143(3)= 100 Tax paid - 112 Step 1: Refund determined 12 [Section 244(1)] Step 2: Refund out of advance tax payment 2[Sect ion 244(1)(a)] No interest payable as refund is less than 10% [proviso applicable] Step 3 : Refund out of self-assessment tax 10 Interest allowed from the date of payment. Eg:2 Tax payable 100 Tax paid 112 (advance tax -111, self-assessment tax -1) Tax determined u/s 143(3) 300 (demand notice issued for Rs. X) Tax paid on receipt of demand notice X On appeal, the additions deleted. The tax paid Rs. X becomes refundable. Interest on refund is eligible from the date(s) of payment of Rs. X till the date of grant of refund. That leaves us with the action on the original refund due, then the Section 244A(1) falls in and so as clause (a) and (b) as applicable. {Tax demanded of X u/s 156 Refunded along with interest} Step 1: Refund determined 12 [Section 244(1)] Step 2:Refund out of advance tax payment 11[Section 244(1)(a)] Interest is payable as refund is more than 10% of the advance tax paid Step 3 : Refund out of self-a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 244A of the Income-tax Act. Therefore, on both the aforestated grounds, we are of the view that the assessee was entitled to interest for 57 months on ₹ 45,73,528. The principal amount of ₹ 45,73,528 has been paid on December 31, 1997 but net of interest which, as stated above partook the character of amount due under Section 244A 35. Straight reading of the judgment, denotes that any where refund of any amount becomes due means any refund and on that refund simple interest is to be provided. The calculation of the simple interest is explained in the sub-Clause (a) in case of advance tax or tax u/s 206 and in sub-Clause (b) in any other case. The steps involved are determination of refund and then calculation of interest on such refund determined. The proviso kept back the interest in case the refund is less than 10% of the tax as determined under sub-Section (1) to Section 244A. 36. In the case of H.E.G, the revenue has not provided interest on the TDS i .e. the tax paid u/s 206 which the Court has ordered to pay interest on the TDS of ₹ 45,73,528/- on the original assessment till the date of payment. To reiterate the Hon ble Supreme Court di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent was entitled to the refund of ₹ 2,16,73,848/- (consisting of ₹ 1,71,00,320/- and ₹ 45,73,528/- which payment was made after 57 months and which is the only item in dispute). The assessee claimed statutory interest for delayed refund of ₹ 45,73,528/- for 57 months between 1.4.1993 and 31.12.1997 in terms of Section 244A of the Income Tax Act. Therefore, this is not a case where the assessee is claiming compound interest or interest on interest as is sought to be made out in the civil appeals filed by the Department. The next question which we are required to answer is What is the meaning of the words refund of any amount becomes due to the assessee in Section 244A? In the present case, as stated above, there are two components of the tax paid by the assessee for which the assessee was granted Refund, namely TDS of ₹ 45,73,528/- and Tax paid after Original Assessment of ₹ 1,71,00,320/-. The Department contends that the words any amount will not include the Interest which accrued to the respondent for not refunding ₹ 45,73,528/- for 57 months. We see no merit in this argument. The interest component will partake of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 206/207/199. The Hon ble Apex Court has extended the interest to TDS u/s 195 also in addition to the tax paid u/s 206/207/199. We have also gone through the judgment of Tata Chemicals Ltd. on the issue of proviso to Section 244A(1)(a). The Hon ble Apex Court having gone through the provisions of Act has nowhere held that the proviso is unwarranted. At the cost of repetition, we hereby hold that the Courts have found no illegality on the proviso below Clause (a) to Sub-Section (1) to Section 244A. 43. Vide the provisions to Section 244A(1)(a), the legislature clearly laid down that in case the refund arise out of the prepaid taxes such as TCS/TDS/Advance Tax is less than 10% of the tax no interest is allowable. The statute is to be read as a whole in its content. It is unambiguous, straight, effective and workable. The proviso to Clause (a) to Sub-Section (1) is constitutionally valid and intra wires. In the absence of any confusion, arbitrariness or vagueness, the provision has to be read as it is. There is no need to interpolate any word to give a different meaning. A taxing statute should be strictly construed even if the literal interpretation results in hardship or inconven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to refund, there is statutory liability on the Revenue is to pay the interest on such refund on general principles to pay the interest on sums wrongful ly retained. 51. The Hon ble Jurisdictional High Court in the case of Engineers India Ltd. 373 ITR 377, based on the judgment of the Hon ble Apex Court in the case of Gujarat Flora Chemicals 358 ITR 291 held that the assessee is not entitled to get interest u/s 244A on the refund of self-assessment tax which was voluntarily paid u/s 140A and did not agree with the decision of the Coordinate Bench of High Court in the case of Sutlej Industries Ltd. 325 ITR 337. 52. The Hon ble Apex Court, having gone through the different views expressed by the Hon ble Jurisdictional High Court, referred back the matter for adjudication by larger bench. 53. The Hon ble High Court of Kolkata in the case of Birla Corporation Ltd. held that clause (1)(b) of Section 244A is residual in nature which prescribes interest on refund from the date of payment of tax in cases which are not covered by Section 244A(1)(a). Necessarily, it will cover interest on refund of excess self-assessment tax paid by the assessee. The proviso to section 244A (1)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of compensation of use and retention of the money collected un-authorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much 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. 57. The question before the Hon ble Apex Court is whether the resident/deductor is also entitled to interest on refund of excess deduction or erroneous deduction of tax at source under Section 195 of the Act. The Hon ble Apex Court has ruled that the assessee is eligible to refund of excess tax deducted and also interest on such excess tax refunded. 58. The Hon ble Apex Court held that the language of the Section is precise, clear and unambiguous. Sub-Section (1) of Section 244A speaks of interest on refund of the amounts due to an assessee under the Act. The assessee is entitled for the said amount of refund with interest thereon as calculated in accordance with clause (a) (b) of sub-Section (1) of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before 01.06.2016, no interest would be paid if the amount of refund is less than 10% of the taxes determined in case the refund is out of the taxes paid other than self-assessment tax. Before 01.06.2016, in the case of refund arising out of self-assessment tax, interest would be calculated on the entire self-assessment tax refunded from the date of payment of S.A. tax. After 01.06.2016, no interest would be paid if the amount of refund is less than 10% of the taxes determined whether it is u/s 140, u/s 156, u/s 195, u/s 199, u/s 206 and u/s 207. Where refund of any amount [244A(1)] due connotes the refund of taxes paid by the assessee. Where refund of any amount [244A(1)] is due, the assessee is entitled to simple interest. The simple interest would be calculated at the prescribed percentage after determining the refund due and paid along with the principle. Even, a single day should be considered as a part of the month for the purpose of computation of interest. 64. Ergo, the AO is hereby directed to pay interest on the refund eligible in accordance with the proviso to Section 244A(1)(a) with regard to the advance tax paid. With regard to the self-asses ..... 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