Antony Dominic, J v. Commissioner Of Income Tax [216 Itr 759] Laying Down The Principle That “There Is No Right To Get Interest On Refund Except As Provided By The Statute”, Learned

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY MONDAY, THE 6TH DAY OF JULY 2015/15TH ASHADHA, 193 WA.No. 1932 of 2005 (D) IN OP.11259/1996 ------------------------------------------ AGAINST THE JUDGMENT IN OP 11259/1996 of HIGH COURT OF KERALA DATED 10.06.2005 APPELLANT(S)/PETITIONER IN OP:: ------------------------------------------------------------ MRS.NALINI BAI V.SARAF ACCOUNTABLE PERSON FOR LATE V.G. SARAF, SARAF HOUSE, WILLINGDON ISLAND, COCHIN-682 003. (deceased) COCHIN-682 003. (deceased) 2.LEGAL HEIR OF THE DECEASED APPELLANTASHA V SARAF, SARAF APARTMENT, 2ND FLOOR,SAHODHARAN AYYAPPAN ROAD, VYTTILA,KOCHI 682 019.ASHA V SARAF, SARAF APARTMENT, 2ND FLOOR,SAHODHARAN AYYAPPAN ROAD, VYTTILA,KOCHI 682 019. (A2 IS IMPLEADED AS THE LEGAL HEIR OF THE DECEASED APPELLANT AS PER ORDER DATED 16.02.15 IN IA.224/15) AS PER ORDER DATED 16.02.15 IN IA.224/15) BY ADVS.SRI.ANIL D. NAIR SMT.NIVEDITA A.KAMATH RESPONDENT(S)/RESPONDENT IN OP:: ---------------------------------------------------------------- THE ASST.CONTROLLER OF ESTATE DUTY ERNAKULAM. R, BY ADV. SRI.GEORGE K. GEORGE, SC FOR IT R, BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 06-07-2015, THECOURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPELLANTS EXHIBITS: EXT.P1: TRUE COPY OF THE ASSMT. ORDER ISSUED BY THE RESPONDENT TO THEPETITIONER.PETITIONER. EXT.P2: TRUE COPY OF THE ORDER ISSUED BY THE RESPONDENT TO THEPETITIONER.PETITIONER. EXT.P3: TRUE COPY OF THE ORDER ISSUED BY THE COMMR. OF INCOME TAX(APPEALS), TRIVANDRUM.(APPEALS), TRIVANDRUM. EXT.P4: TRUE COPY OF THE PROCEEDINGS OF THE RESPONDENT TO THEPETITIONER.PETITIONER. EXT.P5: TRUE COPY OF THE ORDER ISSUED BY THE COMMR. OF INCOME TAX(APPEALS), TRIVANDRUM.(APPEALS), TRIVANDRUM. EXT.P6: TRUE COPY OF THE ORDER ISSUED BY THE INCOME TAX APPELLATETRIBUNAL, COCHIN BENCH.TRIBUNAL, COCHIN BENCH. EXT.P7: TRUE COPY OF THE RODER OF THE INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH.COCHIN BENCH. EXT.P8: TRUE COPY OF THE LETTER SENT BY THE PETITIONER TO THERESPONDENT.RESPONDENT. EXT.P9: TRUE COPY OF THE PROCEEDINGS OF THE RESPONDENT SENT TO THEPETITIONER.PETITIONER. /TRUE COPY/ ANTONY DOMINIC & SHAJI P. CHALY, JJ. Antony Dominic, J. 1.This appeal is filed against the judgment inO.P.11259/96. In the original petition, challengewas against Ext.P9, to the extent interest on theamount refunded was not allowed. By the judgmentunder appeal, following the Apex Court judgment inModi Industries Ltd.v. Commissioner of Income Tax[216 ITR 759] laying down the principle that “thereis no right to get interest on refund except asprovided by the statute”, learned single Judgedismissed the OP. It is this judgment, which ischallenged before us.O.P.11259/96. In the original petition, challengewas against Ext.P9, to the extent interest on theamount refunded was not allowed. By the judgmentunder appeal, following the Apex Court judgment inModi Industries Ltd.v. Commissioner of Income Tax[216 ITR 759] laying down the principle that “thereis no right to get interest on refund except asprovided by the statute”, learned single Judgedismissed the OP. It is this judgment, which ischallenged before us. 2.We heard learned counsel for the appellant andlearned senior standing counsel appearing for therespondent.learned senior standing counsel appearing for therespondent. 3.The issue in this writ appeal arises under the EstateDuty Act, 1953, hereinafter referred to as the 'Act',for short. The deceased first appellant was the“accountable person” of late Vithal Govinda Rao SarafDuty Act, 1953, hereinafter referred to as the 'Act',for short. The deceased first appellant was the“accountable person” of late Vithal Govinda Rao Saraf WA.1932/05 2.We heard learned counsel for the appellant andlearned senior standing counsel appearing for therespondent.learned senior standing counsel appearing for therespondent. 3.The issue in this writ appeal arises under the EstateDuty Act, 1953, hereinafter referred to as the 'Act',for short. The deceased first appellant was the“accountable person” of late Vithal Govinda Rao SarafDuty Act, 1953, hereinafter referred to as the 'Act',for short. The deceased first appellant was the“accountable person” of late Vithal Govinda Rao Saraf WA.1932/05 who expired in 1984. Soon thereafter, within theperiod as provided under section 53 (3) of the Act,the deceased appellant filed a return admitting theprincipal value of his estate to be -`6,45,345/-.However, by Ext.P1 order, assessment under the Actwas completed and estate duty and interest werelevied. According to the deceased appellant, entireduty amount demanded was remitted on 28.3.1989.Subsequently, by Ext.P2 order issued under section 61of the Act, the Assessing Officer revised Ext.P1order of assessment. That amount was also paid bythe deceased appellant. Ext.P1 order was challengedby the deceased appellant and the appeal was partlyallowed by Ext.P3 order dated 22.3.1990. Stilllater, by Ext.P4 order dated 25.3.1992, theassessment was once again re-opened and the liabilitywas enhanced. By Ext.P5 order dated 30.9.1992, theappeal filed by the deceased appellant against Ext.P4order was allowed. Subsequently, by Ext.P6 orderdated 23.8.1994, her appeal against Ext.P3 order wasalso allowed and the departmental appeal filedagainst Ext.P5 was dismissed by Ext.P7 order dated24.8.1994. WA.1932/05 4.In the above circumstances, the deceased appellantsubmitted Ext.P8 letter dated 30.9.1994, claimingrefund of an amount of `42,80,167/- together withinterest. Thereafter, Ext.P9 order dated 12.12.1995was issued by the respondent giving effect to Exts.P6and P7 orders of the Tribunal and modifying theassessments in the manner as mentioned therein. Bythis order, estate duty payable was found to be 'nil'and it was ordered that `42,80,167/- shall berefunded. This order did not provide for anyinterest as claimed by the deceased appellant inExt.P8. It was in such circumstances that she filedthe original petition which came to be dismissed. 5.Contention raised by the counsel for the appellant isthat by Ext.P5 order dated 30.9.1992, the amountclaimed by the deceased appellant in Ext.P8 hadbecome due for refund. Despite that, refund wasordered only by Ext.P9 order dated 12.12.1995. It isstated that on account of the delay in refunding theamount, heavy loss was caused to the deceased andtherefore, she was entitled to be compensated bypayment of interest. In support of this contention, counsel placed reliance on the judgments of the ApexCourt in Sandvik Asia Ltd.v. Commissioner of IncomeTax[(2006) 280 ITR 643], Commissioner of income Taxv. Gujarat Fluoro Chemicals[358 ITR 291] and thejudgment of the Gujarat High Court in State ofGujaratv. Indian Petro Chemicals Ltd.(Tax AppealNo.351/15). 6.On the other hand, learned senior standing counselappearing for the respondent contended that as heldby the Apex Court in Modi Industries Ltd. (supra) andIndia Carbon Ltd.v. State of Assam[(1997) 106 STC460], unless there is a substantive provision in thestatute under which the claim for interest is made,the assessee cannot sustain a claim for interest.appearing for the respondent contended that as heldby the Apex Court in Modi Industries Ltd. (supra) andIndia Carbon Ltd.v. State of Assam[(1997) 106 STC460], unless there is a substantive provision in thestatute under which the claim for interest is made,the assessee cannot sustain a claim for interest. 6.On the other hand, learned senior standing counselappearing for the respondent contended that as heldby the Apex Court in Modi Industries Ltd. (supra) andIndia Carbon Ltd.v. State of Assam[(1997) 106 STC460], unless there is a substantive provision in thestatute under which the claim for interest is made,the assessee cannot sustain a claim for interest.appearing for the respondent contended that as heldby the Apex Court in Modi Industries Ltd. (supra) andIndia Carbon Ltd.v. State of Assam[(1997) 106 STC460], unless there is a substantive provision in thestatute under which the claim for interest is made,the assessee cannot sustain a claim for interest. 7.We have considered the rival submissions made. TheAct contemplates payment of interest only in twocontingencies. First is under the proviso to section53(3). Section 53(3) provides that every personaccountable for estate duty shall, within six monthsof the death of the deceased, deliver to theController an account in the prescribed form andAct contemplates payment of interest only in twocontingencies. First is under the proviso to section53(3). Section 53(3) provides that every personaccountable for estate duty shall, within six monthsof the death of the deceased, deliver to theController an account in the prescribed form and verified in the prescribed manner of all theproperties in respect of which estate duty ispayable. As per the proviso to this section, theController may extend the period of six monthsprovided in section 53(3) on such terms which mayinclude payment of interest as may be prescribed. 8. Section 64 provides for reference to High Court andas per sub section 7 thereof, where the amount ofany assessment is reduced as a result of anyreference to the High Court, the amount, if any,over-paid as estate duty, shall be refunded with suchinterest as the Controller may allow unless the HighCourt, on intimation being given by the controllerwithin thirty days of the receipt of the result ofsuch reference that he intends to ask for leave toappeal to the Supreme Court, makes an orderauthorizing him to postpone payment of such refunduntil the disposal of appeal in the Supreme Court.The above two sections alone being the statutoryprovisions in the Act providing for payment ofinterest, it has to be accepted that there is no substantive provision in the Act to sustain the claimfor interest on amounts refunded. for interest on amounts refunded. 9.In so far as the judgments relied on by both sidesare concerned, though it is true that in thejudgments in Modi Industries Ltd. (supra) and IndiaCarbon Ltd. (supra), the Apex Court has held thatthere is no right to get interest on refund except asprovided in the statute, the entitlement of anassessee for compensation on delayed payment ofstatutory interest was considered again by the ApexCourt in the judgment in Sandvik Asia Ltd. (supra).In that judgment, after surveying the relevantprecedents on the subject, the Apex Court laid downthe principle that the assessee was entitled tointerest on the amount of interest paid under section243 and/or section 244 and that the department wasbound to grant interest which had accrued for thoseperiods. The correctness of this judgment wasdoubted by another Bench of the Apex Court in itsorder in Commissioner of income Taxv. GujaratFluoro Chemicals[348 ITR 319]. WA.1932/05 7 10.Accordingly, in the judgment in Commissioner ofincome Taxv. Gujarat Fluoro Chemicals[358 ITR 291],the Apex Court again considered the issue and heldthat the interpretation placed in Sandvik Asia Ltd.(supra) is that the Revenue is obliged to payinterest on interest in the event of its failure torefund the interest payable within the statutoryperiod. The Apex Court clarified the position thus: WA.1932/05 7 10.Accordingly, in the judgment in Commissioner ofincome Taxv. Gujarat Fluoro Chemicals[358 ITR 291],the Apex Court again considered the issue and heldthat the interpretation placed in Sandvik Asia Ltd.(supra) is that the Revenue is obliged to payinterest on interest in the event of its failure torefund the interest payable within the statutoryperiod. The Apex Court clarified the position thus: “7. As we have already noticed, in Sandvik case(supra) this Court was considering the issuewhether an assessee who is made to wait forrefund of interest for decades be compensatedfor the great prejudice caused to it due to thedelay in its payment after the lapse of statutoryperiod. In the facts of that case, this Court hadcome to the conclusion that there was aninordinate delay on the part of the Revenue inrefunding certain amount which included thestatutory interest and therefore, directed theRevenue to pay compensation for the same not aninterest on interest. 8. Further it is brought to our notice that theLegislature by the Act No.4 of 1988 (w.e.f.01.04.1989) has inserted Section 244A to theAct which provides for interest on refunds undervarious contingencies. We clarify that it is only that interest provided for under the statutewhich may be claimed by an assessee from theRevenue and no other interest on such statutoryinterest.” 11.Reading of the above paragraphs show that theprinciples laid down by the Apex Court is thatassessee is entitled to claim interest only if it isprovided for under the statute concerned and no otherinterest on such statutory interest can be claimed.It is also clarified that where there is inordinatedelay on the part of the Revenue in refunding thestatutory interest, the Revenue can be directed topay compensation for the same which is not aninterest on interest. 12.After the judgment was rendered by the Apex Court inGujarat Fluoro Chemicals (supra), the principles laiddown by the Apex Court were considered by theDivision Bench of the Gujarat High Court in itsjudgment in State of Gujaratv. Indian PetroChemicals Ltd.(Tax Appeal No.251/15). In thisjudgment, though the issue was considered in thecontext of the provisions of the Sales Tax law prevailing in that State, the Gujarat High Court hasalso understood the judgment of the Apex Court aslaying down that interest is payable only when thestatute makes provision for it and if there isinordinate delay on the part of the revenue inrefunding the amount due, courts can, in appropriatecases, award compensation. 13.Having thus seen the statutory provisions and theprinciples laid down by the Apex Court in the matterof grant of interest and award of compensation, letus now see whether the appellant is entitled tointerest as claimed in this appeal. As we havealready seen, since the law is settled that interestis payable only if it is provided in the statute andsince the Estate Duty Act provides for payment ofinterest only in circumstances to which sections 53(3) and 64 (7) are attracted, the appellant is notentitled to claim any interest. However, if theappellant succeeds in showing us that there wasinordinate delay in the refund of amount due and ifthat delay is not satisfactorily explained by theRevenue, in view of the principles laid down by the Apex Court, a claim for compensation can besustained. Apex Court, a claim for compensation can besustained. 14. With this in view if the facts of the case areexamined, it can be seen that though it is the claimof the deceased appellant that her entitlement forrefund commences from 25.3.1992, when Ext.P4appellate order was rendered, the proceedings underthe Act pursuant to the statutory appeal filed by theRevenue before the Tribunal terminated only on24.8.1994, when by Ext.P7 order, the appeal wasdismissed. Thereafter, the claim for refund withinterest was lodged by Ext.P8 dated 30.9.1994 and theconsequential order, giving effect to the appellateorder, was issued only on 12.12.1995. This,therefore, means that even counting from 30.9.1994when Ext.P8 claim was made by the deceased appellant,it took 15 months for the Revenue to issue Ext.P9consequential order recognising her entitlement forrefund of `42,80,167/-. There is absolutely noexplanation whatsoever why it took more than 15months to issue the consequential order. This meansthat even if a reasonable time of three months is conceded to the Revenue, there was an inordinatefurther delay of 12 months in issuing Ext.P9 and forthat period, the deceased appellant was entitled tobe compensated. Therefore, we direct the respondentto pay interest at the rate of 9%, the rate ofinterest allowed by the Apex Court in Sandvik AsiaLtd. (supra), on `42,80,167/-, the amount refunded,from 1.1.1995 till the date of refund pursuant toExt.P9. This amount will be paid at any rate withinthree months from the date of receipt of a copy ofthis judgment. Appeal is disposed of as above. Sd/- ANTONY DOMINIC, Judge. Sd/- SHAJI P. CHALY, Judge. kkb.