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TMI Blog2021 (9) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... f recompense for the unauthorized use or retention of money; refund due payable to an assessee is a debt owed; Parliament has enacted this principle in Section 244A of the 1961 Act; in Aluminium Corporation of India Ltd. v UOI [ 1975 (8) TMI 45 - SUPREME COURT] the Apex Court observed that a good government involves not only diligent collection of taxes, but also ready refunds of excess levies. In CIT v. Purshottamdas T. Patel [ 1993 (8) TMI 21 - GUJARAT HIGH COURT] the Hon'ble High Court of Gujarat has observed that, the word assessment cannot be confined to the act of making an order of assessment; there is a certain legal difference between the terms assessment assessment order ; it can be stated that the use of the word assessment would mean the whole process of determination of income and the same should not be restricted to a mere passing of an assessment order. As to meaning of the term setting aside or cancelling an assessment - A second proviso is added to sub-section (5) of section 153 by the Finance Act, 2017. The said proviso states that where an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fresh claim for additional interest at the rate of 3% per annum for the period envisaged in section 153(5) r/w section 244A(1A), within eight weeks. ii) A Writ of Mandamus issues to the respondents to compute the interest amount till date and pay it to the petitioner- Assessee within eight weeks next following. iii) If delay is brooked in complying the above direction, the Revenue shall pay to the petitioner - Assessee an extra interest, at the rate of 1.5 % per month and this amount, after payment, may be recovered personally from the erring officials of the Department. - WRIT PETITION NO.20040/2019 (T-IT) - - - Dated:- 25-8-2021 - HON BLE MR. JUSTICE KRISHNA S. DIXIT PETITIONER (BY SHRI S. GANESH, SR. COUNSEL A/W. SHRI VENKATESH S. ARBATTI, ADVOCATE) RESPONDENTS (BY SHRI K.V. ARAVIND, ADVOCATE) ORDER The tone for this judgment may be set by quoting what Richard Brinsley Sheridan , an acclaimed Irish dramatist of 18th century, on being asked by his tailor for at least the interest of his bill had retorted: It is not my interest to pay the principal, nor my principle to pay the interest . 2. Petitioner Assessee inter alia engaged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed the order dated 4.1.2017 u/s 254 of the Act partly favouring the Assessee and remitted the case to TPO with a direction for re-computation of the Transfer Pricing Adjustment (hereafter 'TPA'); accordingly, the TPO re-computed the said adjustment in terms of direction of ITAT; the JCIT to give effect to the ITAT order, on 28.12.2017 determined the total income of the Assessee at ₹ 693,88,05,177/- and the tax payable thereon was determined at ₹ 206,69,34,730/-; however, the tax on book profit was higher at ₹ 316,85,23,810/-; the above calculations eventually resulted in a refund of ₹ 1057,45,30,057/- which included interest payable u/s 244A amounting to ₹ 267,54,62,251/-. (c) The files of the Assessee were transferred to another Assessing Officer i.e., second respondent-DCIT before whom Rectification Application dated 18.01.2018 was moved u/s 154; on a similar application being moved, the TPO made rectification of the adjustment u/s 92C(A) of the Act; since the Rectification Application dated 18.01.2018 was still pending, further Rectification Applications were also filed, followed by their summarization vide letters dated 17.05.2018 22. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax amount was paid based on book profit, as provided u/s 115JB; the entitlement of the assessee for interest u/s 244A(1A) is intended to bring parity in the converse situation where the Revenue levies interest on delayed payment of taxes as provided u/s 234B. So arguing, learned Senior Counsel appearing for the assessee seeks allowing of the Writ Petition. 7. SUBMISSIONS MADE ON BEHALF OF REVENUE: (a) A plain reading of the provisions of section 244A(1A) makes it clear that an assessee is entitled to an additional interest only in cases where there is no requirement of fresh assessment or re-assessment in terms of appellate orders; assessment or re-assessment cannot by their very nature be done in piecemeal or in a truncated way; the total income of an assessee can be determined only after the fresh assessment or re-assessment is accomplished, consistently with section 4 of the Act r/w the extant CBDT Explanatory Notes dated 20.1.2017; an argument to the contrary amounts to asking the AO to undertake the exercise even after he becomes functus officio and therefore is unsustainable. (b) Section 240 contemplates refund, only after the accomplishment of the exercise manda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the Revenue have filed their Written Submissions and have pressed into service a catena of decisions, relevant of which have been adverted to; having heard the learned counsel for the parties and having perused the Petition Papers, this Court is inclined to grant indulgence in the matter as under and for the following reasons: I. Some legal principles morals which are to animate levy of tax and refund of un-taxable: (i) A great Indian poet Kalidasa (500 CE) in his epic poem Raghuvamsham (1-18) states: The King Dilip collects from his subjects only 1/6th of their income as tax for the welfare of State, indeed like the sun taking earthly water drops, only to indemnify her with multiples of rain-drops Chanakya in his acclaimed work Arthashastr advises the Rulers: Collect taxes from the citizens as honeybees collect nectar from the flowers, gently and without inflicting pain ; (ii) A renowned jurist of yester-decades late Mr. Nani Palkhivala, in the concluding paragraph of Preface to the Eighth Edition of The Law and Practice of Income Tax said Every Government has a right to levy taxes. But no Government has the right, in the process of extractin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an assessee is a debt owed; Parliament has enacted this principle in Section 244A of the 1961 Act; in Aluminium Corporation of India Ltd. v UOI 1978 (2) ELT 452 (SC) the Apex Court observed that a good government involves not only diligent collection of taxes, but also ready refunds of excess levies. II. As to meaning of assessment ; difference between assessment assessment order (i) The DCIT has stated in the impugned order As this is the case of fresh assessment/re-assessment, an additional interest u/s. 244A(1A) will not be applicable ... ; much has been argued on behalf of the assessee that his is not a case of fresh assessment/re-assessment, and therefore the impugned order is liable to be voided, whereas the Revenue has contended to the contrary; therefore, it becomes necessary to discuss these concepts. While juxtaposing contextual construction qua literal interpretation of statutes, Justice Krishna Iyer in CIT vs. ARAVIND REDDY, AIR 1980 SC 96 observed: The significance of a word of a plural semantic shades may, in a given text depend on the pressure of the context or other indicia. Absent such compelling mutation of sense, the speech of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der in writing whereby the total income of the assessee is assessed and the tax payable by him is determined; thus, the passing of an assessment order is only an integral part of the process of assessment and therefore, the word assessment cannot be confined to the act of making an order of assessment; there is a certain legal difference between the terms assessment assessment order ; it can be stated that the use of the word assessment would mean the whole process of determination of income and the same should not be restricted to a mere passing of an assessment order. III. As to meaning of the term setting aside or cancelling an assessment (i) Ordinarily, when an assessment is set aside or cancelled, a fresh assessment follows; a perusal of the following sections reveals that making of a fresh assessment invariably precedes setting aside or cancelling an assessment: Section 153(2A) prior to substitution by Finance Act, 2016 with effect from 01.06.2016. Section 153(3) post substitution by Finance Act, 2016 with effect from 01.06.2016. Proviso (a) to Section 240; Explanation 1(iii) to section 245A(b) Section 251(1)(a) words as omitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases the time limit has been increased to 12 months 153(4) Notwithstanding sub-sec, (1), (2) (3), where a reference has been made to Transfer Pricing Officer during the proceeding for assessment, reassessment made. The period as specified in subsection (1)(2) (3) shall be further extended by 12 months. 153(5) To give effect to the order of the higher authorities i.e. CIT (A), ITAT, HC and SC orders To give effect to an order passed by higher authorities other than those orders which require fresh assessment or reassessment and such order requires verification of any issue by way of submission of any document by the assesse or an opportunity is required to be provided to the assessee. Effect to the order to be given within 3 months from the end of the month in which order is received. PCIT or CIT may allow an additional period of six months. [subject to certain conditions] If the order which has to be given effect to requires verification of any issue then the time limit of 9 months is appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sub-section (4) states that where a reference under section 92CA(1) is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections (1),(2) and (3) shall be extended by twelve months. This would apply only when the reference is made in the course of proceeding for assessment or reassessment and not otherwise. Sub-section (5) deals with time-limit to give effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264, wholly or partly, otherwise than by making a fresh assessment or reassessment. Sub-section (6) deals with time-limit for making assessment, reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order under section 250, Section 254, section 260, section 262, section 263, or section 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under the Act. The said sub section is subject to subsection (3) and (5). Sub-sections 7 and 9 deal with transition provisions as section 153 is subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be given effect to by the Writ Courts on being moved by the assesses grieving against denying or delaying of refund of tax, The Parliament presumably having taken cognizance of the difficulties faced by the prudent assesses has through the amendment has obviated the principle of judicial discipline in a hierarchical structure that, orders of the higher ups in the hierarchy have to be unreservedly followed by the lower authorities, as has been explained by the Apex Court in UOI vs. KAMALAKSHI FINANCE CORPORATION, 1991 (55) ELT 433; the Parliament by the subject amendments has prescribed a time limit for making refund of tax and has also provided for the payment of interest on the delayed refunds. V. Difference between assessment', 'reassessment' or 'recomputation and fresh assessment (i) The words assessment, reassessment or recomputation have been used in the following sections of the 1961 Act: Section 147 (prior to substitution vide Finance Act, 2021 with effect from 01.04.2021) and section 147 (post substitution vide Finance Act, 2021 with effect from 01.04.2021) Explanation to section 147 (post substitution vide Finance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various provisions of the Act may take their colour from their context and at times, in variance with the statutory definitions; The maxim expressio unius exclusio alterius with all its arguable limitations also lends support to the above view to some extent; Maxwell on The Interpretation of Statutes 12th Edition, LexisNexis at page 293 explains this maxim as under: By the rule usually known in the form of this Latin maxim, mention of one or more things of a particular class may be regarded as silently excluding all other members of the class: expressum facit cessare tacitum. Further, where a statute uses two words or expressions, one of which generally includes the other, the more general term is taken in a sense excluding the less general one: otherwise there would have been little point in using the latter as well as the former. (iv) It is pertinent to note that section 153(3) [post substitution vide Finance Act, 2016 w.e.f. 01.06.2016] does not use the word reassessment alongside fresh assessment ; however, the said word has been used alongside fresh assessment in section 153(5) [post substitution vide Finance Act, 2016; accordingly, reassessment is not envisag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld mean the whole order of assessment being set at naught and not some issues comprised in the assessment order; when the assessment order is set aside on some issues only and confirmed on other, it is not a case of setting aside or cancelling the assessment . c. That Section 153(5) would apply where the assessing officer has to give effect to the order of the higher authorities in whole or in part provided that no fresh assessment i u/s.153(3) or a reassessment u/s. 153(2) relating to income escaping assessment, is to be undertaken. d. Therefore, if the orders to be given effect to are to be made by following the principles already laid down by the higher forum, it would not be a case pf fresh assessment in terms of Section 153(3) or a reassessment in terms of Section 153(2); it would simply mean that the orders of the higher forum are to be applied followed by the assessing officer; . it may be borne in mind that longer time limits are provided in Section 153(3) second proviso to Section 153(5) because it may entail doing the entire process once over or where detailed evidences may be required for accomplishing the task; however where a shorter time limit is prescr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal but, at the same time, the appeal effect has to be given. There is a practice that appeal effect orders are passed under section 250, read with section 143(3), and issues which have become final are dealt in such order and accordingly, fresh demand, if any, is raised. There is no bar in the Act for raising the demand and, therefore, there is nothing wrong in this practice being followed by the revenue authorities. [Para 8] However, difficulties would arise only where some of the additions are confirmed and/or deleted and some issues are set aside for fresh examination by the Assessing Officer, as in the instant case. [Para 9] Piecemeal assessment is not possible under section 143(3), however, while giving appeal effect in the present kind of situation, the Assessing Officer was performing two functions, namely, carrying out the directions of the appellate authority in respect of the issues which had become final and secondly, re-examining the issues which had been set aside to him. Each of these functions seemed to be independent and there is no bar in the Act to carry out these functions separately. There was no infirmity in the practice being followed by the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order dated 29.10.2010 for AY 2006-07 as being barred by limitation u/s.153(2A) [presently section 153(3)]; similar view is expressed by a Bench of this Court in Paul Noel Rodrigues [2015] 57 taxmann.com 12 (Karnataka); an assessee may challenge an adverse OGE as being barred by time; while the similar principle applies to favourable OGE as well, the Department cannot take advantage of its own lapse both on the first principle of doctrine against unjust enrichment and on the statutory mandate that it has to grant the refund to an assessee as a functional consequence of an appellate order even without the assessee having to make any claim [section 240]; the right to receive interest on the delayed refund does not depend on the application of the assessee, but follows as a natural corollary to the right to receive refund vide NATIONAL HORTICULTURE vs. UNION OF INDIA, 253 ITR 12; this can be likened to centuries-old-principle that the debtor should find the creditor and pay the debt. VII. Payment of interest on delayed refunds u/s. 244A(1A): (i) This provision has been brought on the statute book vide Finance Act, 2016 w.e.f. 01.06.2016; entitlement of an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y invoking proviso to sub-section (5) of section 153, the period of additional interest, if any, shall begin from the expiry of such extended period. Similar legislative intent is forthcoming from the Notes on Clauses to the Finance Bill, 2016 and paragraph 60.4 of the Circular No. 3 of 2017 dated 20.01.2017. (iii) Interest u/s 244A(1A) would not accrue in cases of fresh assessment or reassessment; use of words wholly or partly therein would again indicate that the bar of interest accrual is confined only to that part of the assessment that are occasioned by remittance/remand and would not extend to other concluded issues that give rise to refund u/s 153(5); employment of identical language in section 153(5) and section 244(1A) too supports this analogy; it is clear that section 244A(1A) would apply to cases covered u/s 153(5); thus where, in respect of certain issues, order giving effect to be passed u/s 153(5), otherwise than by making a fresh assessment or reassessment is passed beyond the prescribed time-limit, interest u/s 244A(1A) has to be granted in respect of refund arising on such issues that are concluded and that the pendency of consideration on remitted issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for further verification, and it is not clear as regards guidelines to AO on rental income. 7. Issue of taxability of interest received u/s. 244A was remitted to the record of AO for limited purpose of computation of interest. 8. Issue of deemed export turnover for purpose of section 10A was held against the assessee. 9. Issue of exclusion of VAT/GST from export turnover was held against the assessee. 10. Issue of exclusion of communication charges and other reimbursement of expenses from export turnover, it was held that the same shall be reduced from the total turnover as well. 11. Issue of denial of section 10A relief in respect of amount of export turnover not remitted into India within six months was held in favour of the assessee. 12. Issue of denial of section 10A relief in respect of undertaking established prior to 1993 was held in favour of the assessee but to the extent of extended capacity. The matter was remitted to AO to verify the same if necessary. 13. Issue of allocation of corporate overhead to section 80IB unit beyond what was already allocated by the assessee was held in favour of the assessee. 14. Issue of denial of deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to ITAT order which relates to the Transfer Pricing Adjustment constitutes a fresh assessment; as a corollary of that, the balance portion of the order which otherwise warranted giving effect to the ITAT order, does not amount to a fresh assessment or reassessment; both the TPA and the other substantial portion of giving effect were completed by one order giving effect to ITAT, dated 28.12.2017; if refund was granted immediately thereafter, the claim for additional interest in terms of section 244A(1A) would not have arisen, as rightly argued by the assessee; the actual refund having been made only on 04.05.2019, even when the assessment in respect of one issue of TPA as early as 28.12.2017, delay has been brooked in granting refund. (ii) The above apart, case of the assessee becomes stronger since his book profit is far greater than its profit as per the normal provisions and that the refund arises only because tax paid by the assessee was more than the tax payable on the book profit; therefore, it can be safely stated that no part of the refund payable arose because of the reduction in the TPA; added to this, the demand attributable to the TPA as finally made is miniscule ie. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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