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TMI Blog2009 (10) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... . SIKRI and SIDDHARTH MRIDUL JJ. ITA Nos. 35, 39, 27, 29, 32, 38, 31, 33, 37, 26, 28, 34, 36 and 30/2009 Mr. O.S. Bajpai, Sr. Advocate with Mr. V.N. Jha and Mr. B.K. Singh, Advocates, for the appellant. Ms. Prem Lata Bansal, Advocate, for the respondent. JUDGMENT The judgment of the court was delivered by A.K. SIKRI, J. - These appeals are preferred by few assessees, including Motor General Finance Ltd. and Goodwill India Ltd. The appeals also relate to different assessment years, but the question involved in all these appeals is singularly common, namely, whether on the facts and circumstances of the case the Income Tax Appellate Tribunal (hereinafter referred to as the "Tribunal") was correct in law in holding that the appellant was not entitled to the interest by way of compensation to be calculated for "every month or part of the month" on the amounts of taxes paid from the date of actual payment as provided in Section 244A(1)(b) of the Income Tax Act, 1961 (for short, the "Act") for the entire period of wrongful retention as defined in the judgment of the Supreme Court in the case of Sandvik Asia Ltd. v. Commissioner of Income Tax I, Pune Ors., (2006) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well. This plea was predicated on the submission that when almost entire additions and disallowances made by the AO were ultimately deleted and wiped out by the Tribunal, the amount of tax paid by the assessee on the basis of assessment order was wrongly demanded. The payments, thus, made were retained by the Income Tax department without justification. Therefore, the interest which accrued thereupon was also retained and, in these circumstances, on the principle laid down by the Supreme Court in Sandvik Asia Ltd. (supra), the assessee was entitled to the interest upon interest. 5. The aforesaid application of the assessee was dismissed by the AO. However, the CIT(A) allowed the application and directed payment of interest upon interest. In appeal preferred by the Revenue, the Tribunal has reversed the decision of the CIT(A) holding that no such interest is payable. 6. Counsel for both the parties concede that the principles laid down in the decision of the Supreme Court in Sandvik Asia Ltd. (supra) would govern the outcome. It is the interpretation and effect of that judgment which is to be examined. 7. Before adverting to the principle of law enunciated in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The aforesaid facts bring out the following significant aspects in the said case, namely :- (a) Though the issue that the assessee was entitled to interest was covered by the decision of the Gujarat High Court and that decision was accepted by the department, no interest was given to the assessee for 17 years. (b) Though the amount was refunded, the interest which became payable on the refunded amount under Sections 214 and 244(1)(a) of the Act, was refunded after a delay of 12 to 17 years. As the amount of interest was not refunded on time, interest upon interest was claimed. 10. In the aforesaid context, the Supreme Court held that the withholding of monies/interest was unjustified and wrongful and interest on interest in case of delayed payment was admissible. The Court was also of the view that the Act recognizes the principle that a person should only be taxed in accordance with law and hence whether excess amounts of tax are collected from the assessee or any amounts are wrongfully withheld from the assessee without the authority of law, the Revenue must compensate the assessee. It noted that the word „any amount‟ appearing in Section 240, in contra-distinct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. This stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to lakhs and lakhs of assessees. Very large number of assessees are adversely affected inasmuch as the Income Tax Deparmtent can now simply refuse to pay to the assessees amounts of interest lawfully and admittedly due to them as has happened in the instant case. It is a case of the appellant as set out above in the instant case for the assessment year 1978-79, it has been deprived of an amount of Rs.40 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding on the assumption that there was no provision in the Act granting interest on unpaid interest, in favour of the appellant's contentions." 13. When we examine the facts of the present case, we feel that the aforesaid judgment of the Supreme Court would not come to the aid of the assessee and permit the assessee to claim interest on interest in the given situation. As far as the appeals at hands are concerned, it is not in dispute that on filing the return by the assessee and processing the case under Section 143(1)(a), the excess amount of TDS and advance tax paid by the assessee was refunded along with interest under Section 244(a) within the prescribed time period. When the assessment orders were passed under Section 143(3) of the Act and the assessee was called upon to make the payments as per the demand made on the basis of the assessment order, the assessee has started making the payments in instalments. It had not completed the payments till the decision of CIT(A). Though the CIT(A) reduced the demand, but even as per the reduced demands, certain payments were still due. It is only after the orders of the Tribunal that the refunds became payable. The appeal effect, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner whose decision shall be final. 244. Interest on refund where no claim is needed. - (1) Where a refund is due to the assessee in pursuance of an order referred to in Section 240 and the Income Tax Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at twelve per cent per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted. (1-A) Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee 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 sub-section (1) on the amount so found to be in exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable as refund, the question of payment of interest on interest does not arise. Present cases fall under this category. 16. In the present case, the order of the Tribunal would demonstrate that it had taken into consideration various dates on which orders were passed by the successive authorities, including the order of refund. It has also taken into consideration the interest on the basis of those orders. Summary of interest allowed along with refund to the assessee as per the calculations made by the Department is as under :- Annexure A M/s. The Motor General Finance Ltd. A.Y. 1994-95 Summary of interest allowed alongwith refund to the assessee Date of appellate order Date of its receipts by CIT office/AO Date of appeal effect/ refund Principle amount of refund Intt. u/s. 244A Total refund 1 2 3 4 5 6 ITAT's order dt.31.05.2001 Certain issues restored to AO to be decided afresh 26.3.2003 25,62,505 2,88,489 28,50,994 CIT(A)'s order dt. 28.11.2003 28.1.2004 31.3.2004 95,95,156 19,59,445 1,15,54,601 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29 0.50% 28,32,272 Less: Refund already issued On 3.8.06 1,37,33,468 97,99,446 1.8.06 to 31.1.07 6 0.5% 3,30,569 TOTAL 1,92,04,436 It is clear from the above that the assessee had been paid the refund of the amounts collected/paid within the statutorily permissible periods. 17. On the other hand, in Sandvik Asia Ltd. (supra), only refund of excess tax had been given, but no interest on refund had been given to the assessee along with that. This interest was retained by the department for a period of 12 to 17 years in respect of various assessment orders. It was under these circumstances, the Court opined that withholding of interest was also unjustified as this had become part of the refund due to the assessee along with tax, interest on this amount was also payable. 18. It is, thus, manifest that at both the stages, namely, while passing intimation under Section 143(1)(a) of the Act, refund along with interest under Section 244(a) was given of the excess TDS and advance tax. Again, after the orders of the Tribunal were p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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