Commissioner Of Income Tax Chennai v. Cholamandalam Inv. & Finance Co. Ltd., Date House

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 06.06.2007 CORAM THE HON'BLE MR.JUSTICE P.D.DINAKARAN AND THE HON'BLE MR.JUSTICE P.P.S.JANARTHANA RAJA T.C.(A).No.430 of 2007 Commissioner of Income TaxChennai. ..Appellant/PetitionerVs. Cholamandalam Inv. & Finance Co. Ltd.,Date House, 2, NSC Bose Road,Chennai 600 001...Respondent/Respondent Appeal under Section 260A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal, Madras 'A' Bench dated1.12.2006 in ITA No.1967/Mds/2005 for the assessment year 1997-98, againstthe order of the Commissioner of Income Tax (A) I Chennai 600 034 inITA.No.205/2003-2004 dated 29/6/2005 against the order of the AssistantCommissioner of Income Tax, Central Circle (1) 4, Chennai -34 in PANo.AAACC 4226H/97-98 dated 27.1.2004. (Delivered by P.D.DINAKARAN, J.)The above tax case appeal is directed against the order of theIncome-tax Appellate Tribunal in ITA No.1967/Mds/2005 dated 1.12.2006. https://hcservices.ecourts.gov.in/hcservices/ 2. The Revenue is the appellant. The relevant assessment year is1997-98. The Assessing Officer in a rectification proceedings dated27.1.2004 made under Section 154 of the Income Tax Act withdrew theinterest amounting to Rs.39,38,684/- granted under Section 244A on thereason that the refund arose on account of payment of self assessment taxmade under Section 140A. However, on appeal, the Commissioner of Income-Tax (Appeals) by order dated 29.6.2005 allowed the interest on refund andthe same was confirmed by the Income-tax Appellate Tribunal in the orderdated 1.12.2006. 3. Aggrieved by the same, the Revenue has preferred the above appealraising the following substantial question of law:"Whether in the facts and circumstances of the case,the Tribunal was right in holding that the assessee isentitled to interest under Section 244A as per clause(i)(b) of that section when the refund had arisen onaccount of payment of self assessment tax? 4. The substantial question of law referred to above revolves on thecommon issue as to whether the assessee is entitled to interest on therefund of tax paid under Section 140A made on self assessment, bringingthe same within the purview of any other case under Section 244A(1)(b). 5.1 Before proceeding further, it is apt to refer Section 140A, whichprovides for payment of tax on self assessment and Section 244A whichprovides for the payment of interest on refund. 140A. Self-assessment.--(1) Where any tax is payable on thebasis of any return required to be furnished under section115WD or section 115WH or section 139 or section 142 orsection 148 or section 153A or, as the case may be, section158BC, after taking into account the amount of tax, if any,already paid under any provision of this Act, the assesseeshall be liable to pay such tax together with interestpayable under any provision of this Act for any delay infurnishing the return or any default or delay in payment ofadvance tax, before furnishing the return and the returnshall be accompanied by proof of payment of such tax andinterest. Explanation:-- Where the amount paid by the assessee underthis sub-section falls short of the aggregate of the tax andinterest as aforesaid, the amount so paid shall first beadjusted towards the interest payable as aforesaid and thebalance, if any, shall be adjusted towards the tax payable. (1A) For the purposes of sub-section (1), interestpayable,--(i) under section 234A shall be computed on the amount ofthe tax on the total income as declared in the return asreduced by the advance tax, if any, paid and any taxdeducted or collected at source; (ii) under section 115WK shall be computed on the amount oftax on the value of the fringe benefits as declared in thereturn as reduced by the advance tax, paid, if any. Explanation:-- Where the amount paid by the assessee underthis sub-section falls short of the aggregate of the tax andinterest as aforesaid, the amount so paid shall first beadjusted towards the interest payable as aforesaid and thebalance, if any, shall be adjusted towards the tax payable. (1A) For the purposes of sub-section (1), interestpayable,--(i) under section 234A shall be computed on the amount ofthe tax on the total income as declared in the return asreduced by the advance tax, if any, paid and any taxdeducted or collected at source; (ii) under section 115WK shall be computed on the amount oftax on the value of the fringe benefits as declared in thereturn as reduced by the advance tax, paid, if any. (1B) For the purposes of sub-section (1), interest payableunder section 234B shall be computed on an amount equal tothe assessed tax or, as the case may be, on the amount bywhich the advance tax paid falls short of the assessed tax. Explanation:-- For the purposes of this sub-section,"assessed tax" means the tax on the total income as declaredin the return as reduced by the amount of tax deducted orcollected at source, in accordance with the provisions ofChapter XVII, on any income which is subject to suchdeduction or collection and which is taken into account incomputing such total income. (2) After a regular assessment under section 115WE orsection 115WF or section 143 or section 144 or an assessmentunder section 153A or section 158BC has been made, anyamount paid under sub-section (1) shall be deemed to havebeen paid towards such regular assessment or assessment, asthe case may be. (3) If any assessee fails to pay the whole or any part ofsuch tax or interest or both in accordance with theprovisions of sub-section (1), he shall, without prejudiceto any other consequences which he may incur, be deemed tobe an assessee in default in respect of the tax or interestor both remaining unpaid, and all the provisions of this Actshall apply accordingly. 244A. Interest on refunds.--(1) Where refund of any amountbecomes due to the assessee under this Act, he shall,subject to the provisions of this section, be entitled toreceive, in addition to the said amount, simple interestthereon calculated in the following manner, namely:-- (a) where the refund is out of any tax paid undersection 115WJ or collected at source under section 206C orpaid by way of advance tax or treated as paid under section199, during the financial year immediately preceding theassessment year, such interest shall be calculated at therate of one half per cent for every month or part of a monthcomprised in the period from the 1st day of April of theassessment year to the date on which the refund is granted: Provided that no interest shall be payable if the amount ofrefund is less than ten per cent of the tax as determinedunder sub-section (1) of section 143 or on regularassessment; (b) in any other case, such interest shall becalculated at the rate of one-half per cent for every monthor part of a month comprised in the period or periods fromthe date or, as the case may be, dates of payment of the taxor penalty to the date on which the refund is granted. Explanation.--For the purposes of this clause, "date ofpayment of tax or penalty" means the date on and from whichthe amount of tax or penalty specified in the notice ofdemand issued under section 156 is paid in excess of suchdemand. (2) If the proceedings resulting in the refund are delayedfor reasons attributable to the assessee, whether wholly orin part, the period of the delay so attributable to himshall be excluded from the period for which interest ispayable, and where any question arises as to the period tobe excluded, it shall be decided by the Chief Commissioneror Commissioner whose decision thereon shall be final. Explanation.--For the purposes of this clause, "date ofpayment of tax or penalty" means the date on and from whichthe amount of tax or penalty specified in the notice ofdemand issued under section 156 is paid in excess of suchdemand. (2) If the proceedings resulting in the refund are delayedfor reasons attributable to the assessee, whether wholly orin part, the period of the delay so attributable to himshall be excluded from the period for which interest ispayable, and where any question arises as to the period tobe excluded, it shall be decided by the Chief Commissioneror Commissioner whose decision thereon shall be final. (3) Where, as a result of an order under sub-section (3) ofsection 115WE or section 115WF or section 115WG or sub-section (3) of section 143 or section 144 or section 147 orsection 154 or section 155 or section 250 or section 254 orsection 260 or section 262 or section 263 or section 264 oran order of the Settlement Commission under sub-section (4)of section 245D, the amount on which interest was payableunder sub-section (1) has been increased or reduced, as thecase may be, the interest shall be increased or reducedaccordingly, and in a case where the interest is reduced,the Assessing Officer shall serve on the assessee a noticeof demand in the prescribed form specifying the amount ofthe excess interest paid and requiring him to pay suchamount; and such notice of demand shall be deemed to be anotice under section 156 and the provisions of this Act shall apply accordingly. (4) The provisions of this section shall apply in respect ofassessments for the assessment year commencing on the 1stday of April, 1989, and subsequent assessment years.Provided that in respect of assessment of fringe benefits,the provisions of this sub-section shall have effect as iffor the figures "1989", the figures "2006" had beensubstituted. 5.2. Even though the short title to Section 140A reads as Self-assessment, the charging phrase employed in Section 140A namely "Where anytax is payable on the basis of any return required to be furnished underSection 115WD or Section 115WH or Section 139 or Section 142 or Section148 or Section 153A as the case may be; "the assessee shall be liable topay such tax together with interest payable under any provision of thisAct for any delay in furnishing the return", makes it clear that there isno difference between: (i) the tax paid under Section 115WJ, which deals with Advance tax inrespect of fringe benefits; or (ii) the tax collected at source under Section 206C; or(iii) any tax paid by way of advance tax or any tax treated as paidunder Section 199, which deals with Credit for tax deducted, which areprovided under Section 244A(1)(a). 5.3. Proviso to Section 244A(1)(a) makes it clear that no interestshall be payable if the amount of refund is less than 10% on regularassessment with regard to the refund of advance tax paid under Section115WJ in respect of fringe benefits; (ii) tax collected at source underSection 206C; and (iii) advance tax or any tax treated as paid underSection 199. But, with respect to other tax as per Section 244A(1)(b),the interest shall be payable even if the amount is less than 10% of thetax as determined under Section 143(1) or on regular assessment, becausethere is no proviso to Section 244A(1)(b) as provided under Section 244A(1)(a). 5.4. That apart, the law is well settled that even for the refund oftax paid under Section 140A on self assessment, the assessee is entitledto interest as held by this Court in Commissioner of Income-tax vs. AshokLeyland Ltd. (2002) (254 ITR 641). 5.5. It is also trite law that wherever the assessee is entitled torefund, there is a statutory liability on the Revenue to pay interest onsuch refund on general principles to pay interest on sums wrongfullyretained. 5.4. That apart, the law is well settled that even for the refund oftax paid under Section 140A on self assessment, the assessee is entitledto interest as held by this Court in Commissioner of Income-tax vs. AshokLeyland Ltd. (2002) (254 ITR 641). 5.5. It is also trite law that wherever the assessee is entitled torefund, there is a statutory liability on the Revenue to pay interest onsuch refund on general principles to pay interest on sums wrongfullyretained. 5.6. We are also strengthened by the decision of the Apex Court forthe above view taken in Sandvik Asia Ltd. vs. Commissioner of Income-tax(2006) (280 ITR 643), wherein it is held as follows:"In view of the express provisions of the Income-taxAct, 1961, an assessee is entitled to compensation by wayof interest for the delay in the payment of amountslawfully due to the assessee which are withheld wrongly andcontrary to law. The Government is liable to pay interest,at the rate applicable to the excess amount refunded to theassessee." 5.7. Finding no substantial question of law that arises for ourconsideration, the appeal is dismissed. ATR Sd/- Asst.Registrar /true copy/ Sub Asst.Registrar To, 1. The Asst.Registrar Income Tax Appelate Tribunal Bench "A" Rajaji Bhavan, 3rd Floor, Besant Nagar, Madras-90 (5 Copies) 2. The Commissioner of InCome Tax (A) I, Chennai-34. 3. The Asst.commissioner of Income Tax, Central Circle I (4), Chennai- 600 034. 4. The Commissioner of Income Tax, Chennai. +1 cc to Mrs.Pushya Sitaraman, Standing Counsel for IT, Sr.No.32691. NTK(CO)dcp/27.6.07 T.C.(A).No.430 of 2007