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TMI Blog2023 (12) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course In the present case, it is not in doubt that petitioner was entitled to refund of Rs. 4,23,60,940/- because the amount has been paid after the petition was filed. Since the excess amount has been paid over by petitioner on various dates during Financial Year 2017-2018, in our view, the refund ought to have been processed and paid latest by 31st July 2018. The interest, therefore, of course, will become payable from 1st April 2018 if we apply the principles prescribed in Section 244A of the Act. The amount, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied service means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government on this behalf. 7. The equalisation levy under Chapter VIII of the Finance Act, 2016 came to be introduced due to exponential increase in digital economy, which due to digital presence, without any physical presence in India posed challenges in levy of tax under the Act. Due to absence of any physical presence, the Act was unable to bring within the ambit of tax all such transactions. The Organization for Economic Co-operation and Development (OECD) has recommended, in Base Erosion and Profit Shifting (BEPS) project under Action Plan 1, several options to tackle the direct tax challenges, including levy of a final withholding tax on certain payments for digital goods or services provided by a foreign e-commerce provider or imposition of a equalisation levy on consideration for certain digital transactions received by a non-resident from a resident or from a non-resident having permanent establishment in other contracting state. Accordingly, the Legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualisation levy and, therefore, the question of payment of any interest does not arise. Mr. Gandhi, at the outset, submitted that Section 170 of the Finance Act, 2016 provides for every assessee, who fails to credit the equalisation levy or any part thereof as required under Section 166 to the account of the Central Government within the period specified in that section, shall pay simple interest at the rate of one percent of such levy for every month or part of a month by which such crediting of the tax or any part thereof is delayed and, therefore, if the assessee has paid the amount in excess of what was due and liable to be paid should equally be compensated with interest. Mr. Gandhi relied upon the judgment of the Apex Court in Union of India V/s. Tata Chemicals Ltd. (2014) 43 taxmann.com 240 (SC), Universal Cables Ltd. V/s. Commissioner of Income Tax, Jabalpur (2020) 113 taxmann.com 353 (SC) and also Circular No. 11/2016 dated 26th April 2016 issued by CBDT accepting the view expressed by the Apex Court in Tata Chemicals Ltd. (Supra) and an order passed by this Court in UPS Freight Services India Pvt. Ltd. V/s. Deputy Commissioner of Income Tax, Central Circle 3(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at source under Section 195 of the Act, no interest was payable. The same stand is taken before us also. 13. The Apex Court, in Tata Chemicals Ltd. (Supra), observed that the Tribunal and the High Court granted interest on the amount of tax deducted by the resident/deductor from the date of payment on the grounds that the Revenue for having retained the sum by way of tax has to compensate the person who had deposited the tax. The Court also held that a tax refund is a refund of taxes when the tax liability is less than the tax paid. The deductor/assessee having paid taxes pursuant to a special order passed by the Assessing Officer/Income Tax Officer, when the amount is refunded it should carry interest in the matter of course. In the case before us also the deductor/assessee has paid taxes pursuant to Section 165 of the Finance Act, 2016 and, therefore, when the said amount is refunded it should carry interest in the matter of course. The Apex Court went on to hold, as held by the Courts while awarding interest, that it is a kind of compensation for use and retention of the money collected unauthorizedly by the Department. 14. When the collection is illegal, there is corresp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT 237 ITR 889 , wherein this Court has observed that the circulars issued by the Board in exercise of its powers under Section 119 of the Act would be binding on the income tax authorities even if they deviate from the provisions of the Act, so long as they seek to mitigate the rigour of a particular Section for the benefit of the assessee. Therefore, we cannot be taking exception to the reasoning and conclusion reached by the authorities under the Act. However, the Tribunal and the High Court, have granted interest on the amount of tax deposited by the resident/ deductor from the date of payment on the ground, firstly, the refund of tax is directed by the first appellate authority in the appeal filed by the deductor/ resident under Section 240 of the Act and secondly, the Revenue for having retained the sum by way of tax has to compensate the person who had deposited the tax. 36. Section 240 of the Act provides for refund of any amount that becomes due to an assessee as a result of an order in appeal or any other proceedings under the Act. The phrase other proceedings under the Act is of wide amplitude. This Court has observed, that, the other proceedings under the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course. 39. In the present case, it is not in doubt that the payment of tax made by resident/ depositor is in excess and the department chooses to refund the excess payment of tax to the depositor. We have held the interest requires to be paid on such refunds. The catechize is from what date interest is payable, since the present case does not fall either under clause (a) or (b) of Section 244A of the Act. In the absence of an express provision as contained in clause (a), it cannot be said that the interest is payable from the 1st of April of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey deposited. Even the Department has understood the object behind insertion of Section 244-A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a resident/deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/foreign company. 3. From the dictum in this judgment, it is clear that there is no reason to deny payment of interest to the deductor who had deducted tax at source and deposited the same with the Treasury. In our opinion, this observation squarely applies to the appellant. 4. As a result, we allow this appeal and direct the Department to pay interest as prescribed under Section 244-A of the Income Tax Act as applicable at the relevant time at the earliest. 17. In UPS Freight Services India Pvt. Ltd. (Supra) also the stand taken was the DTVSV Act does not provide for any interest on excess amount under Section 244A of the Act. The Court, while rejecting the stand of the Revenue, held that simple interest at 6% has to be paid wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with it the right to interest. 8. It will be apposite to re-produce paragraphs 37 and 38 of Tata Chemicals Ltd. (Supra) and the same reads as under : xxxxxxxxxxxxxxxxxxxxxx 9. In the present case, it is not in doubt that Petitioner was entitled to refund of Rs. 62,81,983/- which ought to have been processed and paid latest by 31st July 2021. The amount as stated in the affidavit-in-reply has been paid only on 26th May 2023. Consequently, we are of the view that Petitioner is entitled to interest on this amount of Rs. 62,81,983/- from 1st August 2021 upto 26th May 2023 at the rate of 6% p.a. which is the rate prescribed under Section 244A of the Act. Since the Circular No. 11 of 2016 relied upon by Mr. Gandhi has already been reproduced in UPS Freight Services India Pvt. Ltd. (Supra), we are not reproducing the same here again. 18. In the present case, it is not in doubt that petitioner was entitled to refund of Rs. 4,23,60,940/- because the amount has been paid after the petition was filed. Since the excess amount has been paid over by petitioner on various dates during Financial Year 2017-2018, in our view, the refund ought to have been processed and ..... 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