9911796707
TMI Blog2007 (7) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... inadmissible under Sections 243(1)(b), 244(1A) and Section 214(2) of the Income Tax Act, 1961 ("the Act" for short); (2) the order dated January 18, 1993 passed by the Chief Commissioner of Gujarat, Ahmedabad, by which interest claimed by the petitioner on the excess amount of tax deducted at source was rejected on the ground that excess amount of tax deducted at source was not as a result of order passed by an authority under the Act and that the provisions of Section 244A(1) of the Act were not applicable since those provisions were brought into force only from the assessment year 1989-90; and, (3) the order dated April 19, 1993 passed by the Government of India by which the claim for interest advanced by the petitioner was refused on the ground that the refund was not issued in pursuance of order of assessment or penalty and, therefore, provisions of Section 244(1A) of the Act were not applicable to the facts of the case. The petitioner has further prayed to issue a writ of mandamus directing the respondents to award compensation by way of interest on the amount of refund for the period from July 1, 1987 to November 13, 1990. 2. The petitioner is a company incorporated under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter dated January 18, 1993 refused to entertain the claim of the petitioner for interest on the excess amount of tax paid on the ground that excess amount of tax deducted at source was not as a result of any order passed by an authority under the Act nor the provisions of Section 244A(1) of the Act were applicable to the facts of the case. 3. Dissatisfied by the said order, the petitioner approached CBDT by making application on February 26, 1993. The petitioner reiterated its submissions made before the Chief Commissioner of Income Tax. However, the CBDT also by order dated April 19, 1993 refused to accept the claim made by the petitioner for awarding interest on the amount of excess tax paid by it. A copy of the said letter is produced by the petitioner at Annexure-R to the petition. 4. According to the petitioner, the petitioner is entitled to refund of tax with interest as the amount of tax was paid to the treasury as per the direction of the Income Tax Officer. According to the petitioner, excess amount was wrongfully detained by the respondents and, therefore, the petitioner is entitled to interest thereon. After explaining that interest is the return of compensation for u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no question of payment of interest under Section 244(1A) as compensation. Thus, by filing the reply, Mr. R. B. Goswami, Deputy Commissioner of Income Tax, has demanded dismissal of the petition. 6. The petitioner has filed rejoinder to the affidavit-in-reply filed by Mr. Goswami and reiterated what is stated in the petition. Therefore, detailed reference to the same is avoided. 7. This Court has heard Mr. R. K. Patel, learned counsel for the petitioner, and Ms. Mona M. Bhatt, learned advocate for M/s. M. R. Bhatt & Company, for the respondents. 8. The question whether an assessee is entitled to compensation by way of interest for the delay in the payment of amounts lawfully due to the assessee, which are withheld wrongly and contrary to law, stands concluded in favour of the petitioner by the judgment of the Supreme Court rendered in Sandvik Asia Limited vs. Commissioner of Income-Tax & Ors., [2006] 280 ITR 643 (SC). In the said case, for the assessment year 1977-78 for which the assessee had paid advance tax, the assessee was granted refund of tax on the basis of the assessment order and was asked to pay additional tax after rectification. The Commissioner (Appeals) gave subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. The High Court has failed to appreciate that while charging interest from the assessees, the Department first adjusts the amount paid towards interest so that the principal amount of tax payable remains outstanding and they are entitled to charge interest till the entire outstanding is paid. But, when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. Hence, as per the stand that the Department takes they are liable to pay interest only up to the date of refund of tax while they take the benefit of the assessees funds by delaying the payment of interest on refunds without incurring any further liability to pay interest. The stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to lakhs and lakhs of assessees. Very large number of asessees are adversely affected inasmuch as the Income-tax Department can now simply refuse to pay to the assessees amounts of interest lawfully and admittedly due to them as has happened in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount was liable to be refunded in the year 1986 and even prior thereto. A copy of this judgment will be forwarded to the Hon'ble Minister for Finance for his perusal and further appropriate action against the erring officials on whose lethargic and adamant attitude the Department has to suffer financially. By allowing this appeal, the Income-tax Department would have to pay a huge sum of money by way of compensation at the rate specified in the Act, varying from 12 per cent to 15 per cent, which would be on the high side. Though we hold that the Department is solely responsible for the delayed payment, we feel that the interest of justice would be amply met if we order payment of simple interest at 9 per cent per annum from the date it became payable till the date it is actually paid. Even though the appellant is entitled to interest prior to March 31, 1986, learned counsel for the appellant fairly restricted his claim towards interest from March 31, 1986 to March 27, 1998 on which date a sum of Rs.40,84,906 was refunded." 9. In view of the abovequoted authoritative pronouncement by law of the Supreme Court, there is no manner of doubt that the petitioner is entitled to compens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the foregoing reasons, the petition succeeds. The three orders namely; (1) the order dated October 6, 1992 passed by the Commissioner of Income Tax, Baroda, declining to accept the claim of the petitioner for interest on refund on the ground that it is not admissible under Sections 243(1)(b), 244(1A) and 214(2) of the Act, produced at Annexure-N; (2) the order dated January 18, 1993 passed by the Chief Commissioner of Income Tax, Gujarat, Ahmedabad, refusing to pay interest on the excess amount of tax deducted at source on the ground that the excess amount of tax deducted at source was not as a result of any order passed by the authority under the Income Tax Act, which is produced at Annexure-P to the petition; and, (3) the order dated April 19, 1993 passed by the Government of India refusing to grant interest on refund on the ground that the provisions of Section 244(1A) of the Act would not apply to the facts of the case, which is produced at Annexure-R to the petition, are hereby set aside. The respondents are directed to grant compensation by way of interest at the rate of 9% per annum to the petitioner on the amount refunded for the period from July 1, 1987 to November 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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