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TMI Blog2021 (7) TMI 215X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted u/s. 244A[1A] of the Act, we are of the view that this matter should go back to the file of the Assessing Officer for examining the facts of the assessee in the present appeals and for application of the ratio of decision in view of the observations of their lordships on applicability of the additional interest to the present appeals. - ITA Nos. 5231, 5232 & 5233/MUM/2019, ITA NOs. 4892 & 4893/MUM/2019 - - - Dated:- 30-6-2021 - Shri C.N. Prasad, Hon'ble Judicial Member And Shri M. Balaganesh, Hon'ble Accountant Member For the Assessee : Shri Ketan Ved For hte Department : Shri Tharian Oommen ORDER PER BENCH 1. These appeals are filed by the assessee for the Assessment Years 2002-03 and 2003-04 and by revenue for the Assessment Years 2001-02 to 2003-04 against different orders of the Learned Commissioner of Income Tax (Appeals) -4, Mumbai [hereinafter in short Ld.CIT(A) ] dated 14.05.2019. 2. Revenue in its appeals raised the following common grounds: - 1. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the refund arising out of the Order Giving Effect to Order of Appellate Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct and improper to regard payment of interest when part payment is made as interest on interest. What has been elucidated and clarified by the Supreme Court is that when a refund order is issued, it should include the interest payable on the amount which is refunded. If the refund does not include interest due and payable on the amount refunded, the Revenue would be liable to pay interest on the shortfall. This does not amount to payment of interest on interest The aforesaid manner of the computation is not only applicable to cases where the Revenue has to pay interest on refund, but is equally applicable when an assessee is in default and interest is payable under section 220(2) of the Act Interest payable under section 2348 and section 234C become part of the demand notice issued under section 156 and it is on this amount, i.e., the tax payable plus interest payable under sections 234B and 234C, that interest under section 220(2) is calculated from the date mentioned in the notice of demand till the date of actual payment Under the Explanation to section 140A (1), It is stipulated where the amount paid by an assessee under self-assessment falls short of the aggregate amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the view that benefit of this section cannot be granted retrospectively and thus rejected the claim of the assessee. 8. Before us, Ld. Counsel for the assessee placing reliance on the decision of the Hon'ble Gujarat High Court in the case of Nima Specific Family Trust v. ACIT [100 taxman.com 262] submits that the Hon'ble High Court held that the provisions of section 244(1A) inserted by the Finance Act, 2016 w.e.f 01.06.2016 have retrospective effect and therefore the assessee is entitled for additional interest as provided in that section even for the assessment years prior to assessment year 2016-17 accordingly the assessee is entitled for additional interest. 9. We have heard the rival submissions, perused the orders of the authorities below and the decisions relied on. The Hon'ble Gujarat High Court in the case of Nima Specific Family Trust v. ACIT (supra) held as under: - The petitioner is a Trust. For Assessment Year 2004-2005, the petitioner had filed the return of income on 21st October, 2004 declaring total income of ₹ 3,63,92,470/=. The petitioner's tax liability on such returned income came to ₹ 50,77,588/=. The petitioner had cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in subsection (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted. Simultaneously, the legislature has also amended Section 153 of the Act which pertains to time-limit for completion of assessment, reassessment and re-computation. Entire section 153 was substituted for the original by the Finance Act 2016 w.e.f 1st June 2016. Subsection [5] of Section 153 of the Act reads as under : [5] Where effect of an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 is to be given by the Assessing Officer, wholly or partly, otherwise than by making a fresh assessment or re-assessment, such effect shall be given within a period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; as the case may be, the order under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be applicable : (a) where the refund arises as a result of giving effect to an appellate or revisional order under the sections mentioned therein. (b) is otherwise than by making a fresh assessment or re assessment; [ii] In such circumstances, in addition to interest under sub-section (1), the assessee would receive additional interest at the rate of three per cent per annum. [iii] the period during which such interest would be computed would begin from the date of expiry of the time limit referred to in sub-section (5) of Section 153 of the Act and would end on the date when the refund is granted. Sub-section (5) of Section 153 provides that where the effect to an order of appellate or revisional authority under varioous sections of the Act is to be given by the Assessing Officer, otherwise than by making a fresh assessment or reassessment; wholly or partly, such effect would be given within three months from the end of the month on which such appellate order is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, or passed by the revisional authority; as the case may be. Proviso to sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of the assessee; except for paying interest as prescribed under sub-section (1) of Section 244A. These provisions, therefore, on one hand lay down time limits for giving effect to the appellate or revisional orders and on the other hand, provide for payment of additional interest at the rate of three per cent per annum from the end of the period for passing order giving effect to such appellate or revisional orders. For obvious reasons, the inability of the Assessing Officer to pass orders giving effect to the appellate or revisional orders which had given relief to the assessee within the time prescribed under sub sec. (5) of Section 153, would not make the proceedings non-est. It is the assessee who stands to gain out of the appellate or revisonal order, and therefore, would be eager to have the Assessing Officer give effect to such order. The Assessing Officer, if for some reason cannot pass order within prescribed time, must still do so but, this would trigger the liability of the revenue to pay additional interest; as provided under sub-sec. [1A] of Section 244A. This somewhat detailed analysis of the statutory provisions was necessary in order to ascertain whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an opportunity of being heard is to be provided to an assessee, the time limit from the outset would be longer. This laying down of the time limit per se would be of no consequence unless non adherence to the time would result into some adverse consequences to the Revenue. It is therefore that sub-section [1A] of Section 244A provides for additional interest at the rate of three per cent per annum upon the Assessing Officer failing to pass an order giving effect to the appellate or revisional order withing the time frame. These provisions thus are in the nature of deterrence to the Assessing Officer's inaction. Simultaneously, the assessee would be compensated for delay by way of additional interest. These provisions are thus remedial in nature and meant to address the issue of inordinate delay in giving effect to the appellate or revisional orders made in favour of the assesses. However, minute examination of these provisions would show that the same were not meant to have retrospective effect. The computation provision for granting such interest provides for two terminal points - the beginning point is the end of the period beginning from the date following the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous construction of the statutory provisions would require that if any order giving effect to the appellate or the revisional order is not passed by the Assessing Officer within the time permitted under section 153 [5], after the amendments were made in the statute book, even though the appellate or revisional order was passed before 1st June 2016, the liability to pay additional interest under subsection [1A] of Section 244A would arise upon completion of such period as if the starting point for computing such period for passing the order was 1st June 2016. To this limited extent, the petitioner would be entitled to additional interest for limited period, but not for the entire period starting from the original order of Commissioner dated 5th March 2009. Learned counsel Shri Soparkar had, however, argued that the compensation for delayed payment of refund should be granted. This contention and claim was independent of the claim for interest on interest which he agreed would not be payable by virtue of the judgment of the Supreme Court in the case of Gujarat Flourochemicals Limited [Supra] and also independent of the additional interest under subsection [1] of Section 244A. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the delay in its payment after the lapse of statutory period. In the facts of that case, this Court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest. For subsequent year also, in the case of the same assessee Gujarat Flourochemicals Limited, a similar issue came up before the Supreme Court. Upon an appeal against the judgment passed by the High Court, the Supreme Court remanded the proceedings before the Court after making reference to its earlier judgment in the case of Gujarat Flourochemicals Limited [Supra]. It was in this background that the Gujarat High Court in the case of Gujarat Flourochemicals Limited v. Commissioner of Income tax, [2015] 377 ITR 307 [Guj.] was examining the issue of payment of interest for delayed refund made by the Revenue. The Court noticed observations of the Apex Court that the interest on the amount of refund, if provided by the statute, such would govern the field. The Court was of the opinion that in case of Gujarat Flourochemicals Limited [S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to unnecessary litigation in this respect. 10. On reading of the judgement, we observe that the assessment year for which the claim for additional interest u/s. 244(1A) of the Act was made is 2004-05. The Hon'ble High Court after analyzing provisions of section 244(1), 244(1A) and section 153 of the Act held that the claim for additional interest cannot be granted for the periods under provisions of section 244A[1A] and 153A of the Act when the same were not in the statute book at all i.e., prior to 01.06.2016. However, bringing a caveat to this proposition the Hon'ble High Court further observed as under: - There would however be a caveat to this proposition and it is this. There may be cases where the appellate or revisional order may have been passed long before 1st June 2016. Till the relevant provisions of Section 244 [1A] and 153 [5] were added by the legislature on 1st June 2016, the Assessing Officer may not have passed the consequential order. Even after such amendments, he may not have passed the order within the time provided in such amendments. Even in such a case, if the amended provision of sub-section [1A] of Section 244 of the Act is not appl ..... 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