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TMI Blog2023 (10) TMI 1225X X X X Extracts X X X X X X X X Extracts X X X X ..... e adjusted towards the tax component. Thus, with these directions, the appeal of the assessee is allowed The assessee would be entitled for interest on the unpaid refunds in accordance with the principle laid out in the aforesaid decision of Union Bank of India [ 2016 (8) TMI 688 - ITAT MUMBAI] AO is hereby directed to compute the interest on refund u/s 244A of the Act as per the plea of the assessee. Accordingly, the grounds raised by the assessee are allowed and that of the revenue are dismissed. - SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER For the Appellant : Shri Ketan Ved For the Respondent : Shri Paresh Deshpande ORDER PER BENCH : All these six appeals filed by the Revenue are directed against the orders passed by the learned Commissioner of Income Tax (Appeals) (NFAC), Delhi (in short Ld. CIT(A) ) and they relate to Assessment Years 2006-07 to 2009-10 and 2012-13 2013-14. In all these appeals, Revenue is aggrieved by the decision of Ld. CIT(A) in directing the Assessing Officer to adjust the refund already granted by the Assessing Officer first against the interest amount and thereafter adjust the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artakes the character of principal portion of amounts payable by the revenue to the assessee on which interest is eligible. There is no need to segregate the refunds granted into tax portion and interest portion and subsequently reduce the tax portion of the refund alone from the refund originally granted for calculation of interest u/s 244A of the Act for the period subsequent to 4.7.1997. This action of the Id AO in our considered opinion, is against the spirit of the provisions of the scheme of taxation. The provisions of section 140A of the Act specifically provides that any part payment of self assessment tax paid by the assessee would first be appropriated towards the interest portion thereon and thereafter remaining would get adjusted towards the tax portion, meaning thereby, the exchequer should never be deprived of its legitimate dues payable by the assessee in time. The same analogy would equally apply when the refund is to be granted to the assessee with interest u/s 244A of the Act. In the instant case, the entire confusion had arose due to the fact that the full amount of refund as determined by the Id AO was not actually granted to the assessee, thereby making the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at amount paid by the assessee shall first we adjusted against interest payable and then balance amount shall be adjusted the tax payable. It was contended that similar procedure has not been prescribed u/s. 244A. It was also contended that in view of judgment of Hon'ble Supreme Court in the case of Gujarat Fluoro Chemicals (supra), Ld. CIT (A) has rightly declined to follow the order of the Tribunal for earlier years. 3.4 We have gone through the facts of this case and submissions made by both sides, provisions of law as well as judgments placed before us. It is noted that the only issue to be decided by us is that while granting the refund in pursuance to the appeal effect order, whether the amount of refund granted earlier should be adjusted first against the interest component of the earlier refund and thereafter the balance amount should be adjusted against the principal component of tax in the refund granted earlier order OR vice-versa as has been done by the AO. It is noted that this issue is not coming for the first time before the Tribunal as the same has arisen for A.Ys. 1988-89, 2001-02 2005-06. Copies of the orders were placed before us and it was contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, if any, shall be adjusted towards lax payable (in the instant case tax refundable to the assessee). 5. Learned counsel, appearing on behalf of the assessee, pleaded accordingly. On the other hand learned Departmental Representative submitted that the assessee is not entitled to interest on interest. However with regard to the plea of the assessee that ii does not amount to payment of interest on interest but only adjustment of the refund from the Revenue against interest component first and thereafter against tax component, in which event u/s. 244A assessee is entitled to interest on the tax component, learned Departmental Representative could not place any decision contrary to the decision of Hon'ble Delhi High Court cited by learned counsel for the assessee. 6. We have carefully considered the rival submissions. As rightly pointed out by the assessee Hon'ble Delhi High Court rightly explained that the amount refunded by the Revenue has to be adjusted towards interest payable to the assessee and the balance, if any, shall be adjusted towards tax. On this principle there is no contrary decision placed before us, we therefore agree, with the plea of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 244A. 15. A reading of the aforesaid passage from the decision of the Supreme Court in HEG Limited (supra) indicates that it would be incorrect 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 refund order is issued, the same 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. An example will clarify the situation and help us to understand what is due and payable under Section 244A of the Act. Suppose Revenue is liable to refund Rs. 1 lac to an assessee with effect from 1 st April, 2010, the said amount is refunded along with interest due and payable under Section 244A on 31 st March, 2013, then no further interest is payable. However, if only Rs. 1 lac is refunded by the Revenue on 31 st March, 2013 and the interest accrued on Rs. 1 lac under Section 244A is not refunded, the Revenue would be liable to pay interest on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect to adjustment of refund issued earlier for computing the amount of interest payable by the revenue to the assessee on the amount of refund due to the assessee. Thus, the law is silent on this issue. Under these circumstances, fairness and justice remands that same principle should be applied while granting the refund as has been applied while collecting amount of tax. The revenue is not expected to follow double standards while dealing with the tax payers. The fundamental principle of fiscal legislation in any civilized society should be that the state should treat its citizens (i.e. tax payers in this case) with the same respect, honesty and fairness as it expects from its citizens. It is further noted by us that Hon'ble Delhi High Court has already decided this issue in clear words which has been followed by the Tribunal in assessee's own case in the earlier years. It is further noted by us that assessee is not asking for payment for interest on interest. It is simply requesting for proper method of adjustment of refund and for following the same method which was followed by the department while making collection of taxes. Under these circumstances, we find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident/deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/foreign company. 38. Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been receive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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