Commissioner Of Income Tax Chennai v. M/S. Tvs Electronics Ltd, "Jayalakshmi Estates", 29, Haddows Rd, Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR. JUSTICE R. MAHADEVANandTHE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQTCA.Nos.656, 657, 658 & 659 of 2010and MP.Nos. 1, 1 & 1 of 2010 Commissioner of Income Tax Chennai ... Appellant in all Tax Case AppealsVs M/s. TVS Electronics Ltd, "Jayalakshmi Estates", 29, Haddows Rd, Chennai. ... Respondent in all Tax CaseAppeals Appeals preferred under Section 260A of the Income TaxAct, 1961, against the order of the Income Tax AppellateTribunal,Chennai“C”Bench,dated30.10.2009 inI.TA.No.2303/Mds/2008,.TA.No.2304/Mds/2008,I.TA.No.224/Mds/2009 and I.TA.No.225/Mds/2009 for the AssesmentYear 2000-2001 & 2001- 2002 respectively against the order ofthe Commissioner of Income Tax (Appeals)-III No.121, MahatmaGandhi Road, Chennai-600 034 dated 31.10.2008 in ITANos.460/07-08/A-III, ITA 461/07-08/A-III against the order ofthe Assistant Commissioner of Income Tax Company Circle -III(2), Chennai 600 034 dated 27.12.2007 om PAN/GIR No.AAACT2957Nfor the Assessment Year 2000-2001 & 2001-2002 respectively. For Respondent : Mr.R.Venkatanarayanan Mr.Subbaraya Iyer in all cases These tax case appeals have been filed by theappellant/Revenue, challenging the order dated 30.10.2009passed by the Income Tax Appellate Tribunal, Chennai 'C' Bench,https://hcservices.ecourts.gov.in/hcservices/inI.TA.No.2303/Mds/2008,I.TA.No.2304/Mds/2008,I.TA.No.224/Mds/2009 and I.TA.No.225/Mds/2009 respectively,relating to the assessment years 2000-01 and 2001-02. 2. On 20.08.2010, T.C.A Nos. 656 and 657 of 2010 havebeen admitted by this Court on the following substantial question of law: “Whether on the facts and circumstances of thecase the Tribunal was right in holding that thereopening of assessment was not valid in law andthereby setting aside the reassessment proceeding? 3. On the same day namely 20.08.2010, T.C.A Nos. 658 and659 of 2010 have been admitted by this Court on the followingsubstantial questions of law: “(1) Whether on the facts and circumstances ofthe case, the Tribunal was right in holding that therevenue's appeal is infructuous?(2) Whether on the facts and circumstances ofthe case assessee is entitled for deduction undersection 35(2A)? (3) Whether on the facts and circumstances ofthe case, the Tribunal was right in holding that thedirection to the Assessing Officer by thecommissioner of income Tax (Appeals) with respect to244A interest on refund was justified? (4) Whether on the facts and circumstances ofthe case, the Tribunal was right in holding that theinterest under section 234D is not leviable on theassessee? 4.1Today, when the matters were taken up forconsideration, the learned counsel for the appellant/Revenue aswell as the respondent/assessee jointly submitted that thesubstantial question of law raised in TCA Nos.656 and 657 of2010 and the substantial question of law Nos. 1 and 2 inTCA.Nos. 658 and 659 of 2010 are covered in favour of theassessee; and the fourth substantial question of law in TCANos.658 and 659 of 2010 is covered in favour of the Revenue, byjudgment dated 19.03.2019, passed in TCA.Nos.1457 and 1458 of2008, the relevant passage of which, is usefully extractedhereunder: (4) Whether on the facts and circumstances ofthe case, the Tribunal was right in holding that theinterest under section 234D is not leviable on theassessee? 4.1Today, when the matters were taken up forconsideration, the learned counsel for the appellant/Revenue aswell as the respondent/assessee jointly submitted that thesubstantial question of law raised in TCA Nos.656 and 657 of2010 and the substantial question of law Nos. 1 and 2 inTCA.Nos. 658 and 659 of 2010 are covered in favour of theassessee; and the fourth substantial question of law in TCANos.658 and 659 of 2010 is covered in favour of the Revenue, byjudgment dated 19.03.2019, passed in TCA.Nos.1457 and 1458 of2008, the relevant passage of which, is usefully extractedhereunder: "4.Mr.M.Swaminathan, learned senior standingcounsel for the appellant – Revenue, has submittedthat since the assessee did not produce therequisite approval of the Scientific Researchundertaken by him for the period in question thoughsuch approval was available for the period prior toAssessment Year 2003-2004 and for the periodsubsequent to it, the mandatory condition ofproducing the approval for the Assessment Year inquestion was not complied with by the Assessee andtherefore, the learned Tribunal erred in allowingsuch weighted deduction of expenditure incorporatedunder Section 35(2AB) of the Act. 5.On the Second Question of Levy of Interesthttps://hcservices.ecourts.gov.in/hcservices/under section 234D of the Act on the excess refundmade to the Assessee along with the Assessmentintimation sent to him under section 143(1) of the Act, the learned senior standing counsel for theRevenue drew our attention to a judgment of thiscourt in the case of Commissioner of Income Tax v.Fisher Sanmar Ltd, (2014) 361 ITR 296 (Mad),wherein, a Division Bench of this Court held that ifthe regular assessment of the Assessee is made afterthe amendment of provisions of Section 234D of theAct w.e.f. 01.06.2003, then, the provisions ofSection 234D for levy of interest on the excessrefund amount would become applicable, even thoughthe assessment period may be prior to the said dateof amendment.” “7. We do not concur with the submission madeby the learned Senior Standing Counsel for theRevenue Mr.M.Swaminathan on the First Question ofallowability of weighted deduction to the Assesseeunder Section 35 (2AB) of the Act since therequisite approval for the project on whichexpenditure was incurred by the Assessee onScientific Research was approved for the periodprior and even subsequent to Assessment Year 2003-2004. In the case before us, we are of the opinionthat the said condition of approval stoodsubstantially complied with. The Assessee hadcontended before the authorities below that approvalfrom the Ministry concerned of the CentralGovernment for the year in question was also underactive consideration and awaited. 8. The Assessee cannot be punished for thebureaucratic delay in giving such approval for theyear in question, which was in the hands of theDepartment concerned of the Central Governmentitself. On the very fact that for the periodanterior and posterior to the year in question suchapproval was very well on the record of the Revenue,the weighted deduction for the expenditure incurredon the Scientific Research could not have beendisallowed by the authorities below and, therefore,the learned Tribunal, in our view, rightly held suchScientific Research expenditure to be allowableunder Section 35 (2AB) of the Act. Therefore, firsttwo Questions of Law are answered in favour of theAssessee and against the Revenue. 8. The Assessee cannot be punished for thebureaucratic delay in giving such approval for theyear in question, which was in the hands of theDepartment concerned of the Central Governmentitself. On the very fact that for the periodanterior and posterior to the year in question suchapproval was very well on the record of the Revenue,the weighted deduction for the expenditure incurredon the Scientific Research could not have beendisallowed by the authorities below and, therefore,the learned Tribunal, in our view, rightly held suchScientific Research expenditure to be allowableunder Section 35 (2AB) of the Act. Therefore, firsttwo Questions of Law are answered in favour of theAssessee and against the Revenue. 9. As for the Question of Levy of Interestunder Section 234D of the Act, though computation ofinterest will depend upon the appeal effect order tobe passed, the quantum of net payment is to bedetermined accordingly, after allowing weighteddeduction under Section 35 (2AB) of the Act, asindicated above. The provisions of Section 234D ofthe Act have been held applicable for AssessmentYear 2003-2004 in question in terms of the decisionhttps://hcservices.ecourts.gov.in/hcservices/of the Co-ordinate Bench of this Court in the caseof Fisher Sanmar Ltd., cited supra. Accordingly,Questions of Law Nos.3 and 4 are answered in favour of the Revenue and against the Assessee. 10. Appeals of the Revenue are allowed in part,as above. No costs." 4.2In the light of the above judgment, which squarelyapplies to the facts of the present case, the substantialquestion of law in TCA Nos.656 and 657 of 2010 relating toreassessment proceedings for deduction under section 35(2A) andthe substantial question of law Nos.1 and 2 in TCA Nos.658 and659 of 2010, are answered in favour of the assessee and againstthe Revenue and the fourth substantial question of law in TCANos.658 and 659 of 2010 is answered in favour of the Revenueand against the assessee. 5.1In addition, the learned counsel for the appellant /Revenue fairly submitted that the third substantial question oflaw raised in TCA.Nos. 658 and 659 of 2010 is covered by thedecision of this court in Commissioner of Income Tax v. UpasanaFinance Ltd (2021) 129 taxmann.com 253 (Madras), wherein, thiscourt placed reliance on the judgments of the supreme court inCommissioner of Income Tax, Gujarat vs. Gujarat FluoroChemicals (2014) 42 taxmann.com 1 (SC) and the Division Benchof the Delhi High Court in CIT v. Indian Farmer Fertilizer Co-operative (2016) 71 taxmann.com 37, to the legal propositionthat “the only amount which an assessee aggrieved by delayedpayment can legitimately claim under the statute, is interestand that, no other interest on such statutory interest ispayable”; and “to the extent it directs payment of any sum overand above interest payable under section 244A(1) to theassessee cannot be upheld” and accordingly, decided the issuein favour of the Revenue. 5.2For better appreciation, the relevant passage of thejudgments referred to above, are extracted hereunder: Supreme Court in Gujarat Fluoro Chemicals (supra) 5.2For better appreciation, the relevant passage of thejudgments referred to above, are extracted hereunder: Supreme Court in Gujarat Fluoro Chemicals (supra) "6.In our considered view, the aforesaidjudgment has been misquoted and misinterpreted bythe assessees and also by the Revenue. They are ofthe view that in Sandvik Asia Ltd's case (supra),this Court had directed the Revenue to pay intereston the statutory in case of delay in the payment. Inother words, the interpretation placed is that theRevenue is obliged to pay an interest on interest inthe event of its failure to refund the interestpayable within the statutory period. 7. As we have already noticed, in SandvikAsia Ltd.'s case (supra) this Court was consideringthe issue whether an assessee who is made to waitfor refund 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 an inordinatehttps://hcservices.ecourts.gov.in/hcservices/delay on the part of the revenue in refundingcertain amount which included the statutory interestand therefore, directed the Revenue to pay compensation for the same not an interest oninterest.8.Further, it is brought to our notice thatthe Legislature 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 onlythat interest provided for under the statute whichmay be claimed by an assessee from the Revenue andno other interest on such statutory interest." Delhi High Court in Indian Farmer Fertilizer Co-operative case(supra): “8.In Sandvik Asia Ltd (supra), the Courtadmittedly was dealing with facts prior to theinsertion of Section 244A. Therefore, it would beinappropriate for this court to consider thatjudgment now as binding authority. Moreimportantly, Sandvik Asia Ltd (supra) was explainedby the larger Bench i.e., three Judge Bench decisionin Gujarat Fluoro Chemicals (supra) where thesupreme court categorically held that the onlyamount which an assessee aggrieved by delayedpayment can legitimately claim under the statute isinterest and that “no other interest on suchstatutory interest” is payable. This ruling, in theopinion of this court, rendered by a larger Bench,would have to be followed as opposed to the ratio inH.E.G Ltd (supra) where the Supreme Court hadexpressed a contrary opinion by indicating that theinterest component towards the delayed payment ofthe tax refund would partake of the character of the'amount of due' under section 244A. In other words,H.E.G Ltd. (supra) seems to suggest that there wouldbe dues on bar, refund and delayed interest.Clearly, that view has not been approved in GujaratFluoro Chemicals (supra). It was urged during thehearing that India Trade Promotion Organisation(supra) has become final since the revenue's appealwas withdrawn. This court is of the opinion thatsuch detail notwithstanding, the law declared inGujarat Fluoro Chemicals (supra) is binding andpermits no deviation”. 5.3Following the aforesaid judgments, the thirdsubstantial question of law involved in T.C.A. Nos. 658 and 659of 2010 is answered in favour of the Revenue. Accordingly, theorders passed by the Income Tax Appellate Tribunal are setaside and the matter is remitted back to the Assessing Officerfor fresh consideration, in the light of the ratio laid down bythe supreme court in Gujarat Fluoro Chemicals (supra) and passhttps://hcservices.ecourts.gov.in/hcservices/orders, after giving notice to the assessee. 6.All the Tax Case Appeals are disposed of in the aboveterms. No costs. Consequently, connected miscellaneouspetitions are closed. Sd/-Assistant Registrar(CS-CCC) //True copy// av Sub Assistant Registrar To 5.3Following the aforesaid judgments, the thirdsubstantial question of law involved in T.C.A. Nos. 658 and 659of 2010 is answered in favour of the Revenue. Accordingly, theorders passed by the Income Tax Appellate Tribunal are setaside and the matter is remitted back to the Assessing Officerfor fresh consideration, in the light of the ratio laid down bythe supreme court in Gujarat Fluoro Chemicals (supra) and passhttps://hcservices.ecourts.gov.in/hcservices/orders, after giving notice to the assessee. 6.All the Tax Case Appeals are disposed of in the aboveterms. No costs. Consequently, connected miscellaneouspetitions are closed. Sd/-Assistant Registrar(CS-CCC) //True copy// av Sub Assistant Registrar To 1. The Income Tax Appellate Tribunal, Chennai “C” Bench, Chennai.2. The Commissioner of Income Tax, Appeals(III) Chennai -600 034. 3. The Assistant Commissioner of Income Tax, Company Circle-III(2) Chennai-600 034. +1cc to Mr.Subbaraya Iyer, Advocate SR.No.64557 +2ccs to Mr.M.Swaminathan, Advocate SR.No.64553,64552 TCA.Nos.656, 657, 658& 659 of 2010 GSM(CO)GMY(04/02/2022)