Ita v. On The Other Hand, Learned Counsel For The Assessee On Thestrength Of The Judgments 1N National Horticulture Board's Case (Supra),Cit Vs. Sutle} Industries Limi

IN THE HIGH COURT OF PUNJAB AND HARYANA.AT CHANDIGARH ITA No.153 of 2007 (O&M) Date of decision: 25.8.2014 Commissioner of Income Tax, Chandigarh II Appellant Vs, M/s Punjab Chemical and Crop Protection Limited, Chandigarh ..Respondent CORAM: HON BLE MR. JUSTICK AJAY KUMAR MITTALHON’ BLE MR. JUSTICE FATEH DEEP SINGH Present: Ms. Urvashi Dhugga,Advocate for the appellant. Ms. Manisha Gandhi, Sr. Advocate with Mr. Tarurag Gaur, Advocate for the respondent. Ajay Kumar Mittal,J.. 1. This appeal has been preferred by the revenue under section260A of the Income Tax Act, 1961 (in short, “‘the Act’) against the ordedated 31.8.2006, Annexure A.3 passed by the Income Tax AppellateTribunal, Chandigarh Bench ‘A’ (in short, “the Tribunal’) in ITANo.236/Chandi/2005 for the assessment year 1989-90, claiming following substantial questions of law:- 1) Whether the Hon'ble ITAT was right in directing to allow interestunder section 244A(1)(b) by treating the tax paid on self assessmentas pre paid tax for the purpose?under section 244A(1)(b) by treating the tax paid on self assessmentas pre paid tax for the purpose? 2) Whether on the facts and in the circumstances of the case, theHon'ble ITAT 1s correct in law in holding that the explanation belowclause (b) of sub section (1) of section 244A 1s merely to stipulatethe period for which the interest 1s to be granted?Hon'ble ITAT 1s correct in law in holding that the explanation belowclause (b) of sub section (1) of section 244A 1s merely to stipulatethe period for which the interest 1s to be granted? 3) Whether on the facts and in the circumstances of the case for thepurpose of the explanation below clause (b) of sub section (1) ofSection 244A, date of payment of tax can be understood to meandate of payment of self assessment tax’purpose of the explanation below clause (b) of sub section (1) ofSection 244A, date of payment of tax can be understood to meandate of payment of self assessment tax’ 4)Whether on the facts and circumstances of the case, the inferencedrawn by the Hon'ble I'TAT from the Explanation below clause (b) osub section (1) of section 244A 1s correct?”drawn by the Hon'ble I'TAT from the Explanation below clause (b) osub section (1) of section 244A 1s correct?” 2. A few facts relevant for the decision of the controversy involvedas narrated in the appeal may be noticed. The assessee company wasallowed interest under section 244A of the Act at Rs.7,02,044/- whilegiving effect to the order of the Tribunal. The interest was allowed on therefund due for the period from 1.4.1989 to the date of issue of refund,However, later on the interest allowed under section 244A of the Act waswithdrawn vide order dated 11.7.2003 under section 154 of the Act.|Agerieved by the order, the assessee filed appeal before the Commissionerof Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal videorder dated 30.12.2004, Annexure A.2 and sustained the order of theAssessing officer withdrawing interest under section 244A of the Act. Stillnot satisfied, the assessee filed appeal before the Tribunal. Vide order dated31.8.2006, Annexure A.3, the Tribunal partly allowed the appeal. It was heldthat in terms of clause (b) of Section 244A(1) read with Explanation thereof,the period for which the interest can be granted is from the date on whichthe self assessment tax was adjusted against the assessed income and uptothe date of actual grant of refund. Hence the instant appeal by the revenue. 3. We have heard learned counsel for the parties and perused the record. 3. We have heard learned counsel for the parties and perused the record. A. Learned counsel for the revenue submitted that the revenue wasnot liable to pay interest on the self assessment tax which was deposited bythe assessee under section 140A of the Act. Reference was made tojudgments reported in Saurashtra Cement and Chemical IndustriesLimited vs. Income Tax officer,(1992) 194 ITR 659 (Guj.) (FB),CIT vs. J,Pitambardas and Co.» (1995) 216 ITR 172(Bom.), Saraya Sugar MillsLimited vs. Income Tax officer and others,(1997) 226 ITR 475(Allahabad), E.Philip Joseph vs. ITO and another,(1998) 234 ITR 846(Ker. ),National Horticulture Board vs. Union ofIndia and others,(2002)253 ITR 12 (P&H), |CIT vs. Ashok Leyland Ltd., (2002) 254 ITR 641(Mad.), CIT vs. Shelly Products and another,(2003) 261 ITR 367 (SQ),|Kerala State Civil Supplies corporation Limited vs. Joint Commissionerof Income Tax (Assessment),(2006) 282 ITR 647 (Ker.) andCIT ys.Cholamandalam Investment and Finance Co. Limited,(2007) 294 ITR438 (Mad.). 5. On the other hand, learned counsel for the assessee on thestrength of the judgments 1n National Horticulture Board'S case (Supra),CIT vs. Sutle} Industries Limited,ITA No.1204 of 2005, decided on15.3.2010 (Del.)CIT vs. M.M.T.C. Limited,(2000) 246 ITR 725 (Del.) andCholamandalam Investment and Finance Co. Limited'S case (supra),contended that the assessee was entitled for interest under section 244A(1)(b) of the Act on tax deducted at source, advance tax as well as Selfassessment tax. The Tribunal had rightly held that the assessee was eligiblefor interest under section 244A(1)(b) of the Act on the refund. 6. The primary question that arises for adjudication in the present ITA No.153 of 2007 (O&M) appeal is whether the assessee is entitled to interest under Section 244A(1)(b) of the Act on the amount of refund which was deposited by it by way ofself assessment tax under Section 140A of the Act. 7. Chapter XIX of the Act deals with “Refunds' and containsvarious provisions relating to refund of the amount paid by an assessee andpayment of interest thereon.section 244A(1) and (2), which finds place inthis Chapter and which governs the award of interest on refund, at therelevant time, reads as under: "244A. Interest on refunds.(1) Where refund of any amountbecomes due to the assessee under this Act, he shall, subject tothe provisions of this section, be entitled to receive, inaddition to the said amount, simple interest thereon calculatedin the following manner, namely : (a) where the refund is out of any tax collected at source undersection 206C or paid by way of advance tax or treated as paidunder section 199, during the financial year immediatelypreceding the assessment year, such interest shall becalculated at the rate of one per cent for every month or part ofa month comprised in the period trom the Ist day of April ofthe assessment 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 determined undersub-section (1) of section 143 or on regular assessment ;(b) in any other case, such interest shall be calculated at therate of one per cent for every month or part of a monthcomprised in the period or periods from the date or, as the casemay be, dates of payment of the tax or penalty to the date onwhich the refund is granted. Explanation.For the purposes of this clause, ‘date of paymentof tax or penalty’ means the date on and from which theamount of tax or penalty specified in the notice of demand granted : Provided that no interest shall be payable if the amount ofrefund is less than ten per cent of the tax as determined undersub-section (1) of section 143 or on regular assessment ;(b) in any other case, such interest shall be calculated at therate of one per cent for every month or part of a monthcomprised in the period or periods from the date or, as the casemay be, dates of payment of the tax or penalty to the date onwhich the refund is granted. Explanation.For the purposes of this clause, ‘date of paymentof tax or penalty’ means the date on and from which theamount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.Explanation.For the purposes of this clause, ‘date of paymentof tax or penalty’ means the date on and from which theamount of tax or penalty specified in the notice of demandissued under section 156 is paid in excess of such demand.(2) If the proceedings resulting in the refund are delayed forreasons attributable to the assessee, whether wholly or in part,the period of the delay so attributable to him shall be excludedfrom the period for which interest is payable, and where anyquestion arises as to the period to be excluded, it shall bedecided by the Chief Commissioner or Commissioner whosedecision thereon shall be final." 8. The aforesaid provision came up for interpretation andconsideration in.National Horticulture Board'scase (supra) wherein it washeld as under:- :A conjoint reading of the provisions quoted above showsthat the assessee is entitled to receive interest on the amountof refund at the rates prescribed in clauses (a) and (b) of sub-section (1) of section 244A. The rationale underlying thisprovision is tO compensate the assessee in lieu of thedeprivation of his property right by virtue of unlawtulcollection of tax. If the proceedings resulting in the refundare delayed due to reasons attributable to the assessee, thenthe period of delay has to be excluded from the period forwhich the interest is payable. In other words, if the assessee isresponsible for the delay in the finalisation of the proceedingson the basis of which he becomes entitled to refund, then theperiod of delay is to be excluded from the total period forwhich interest becomes payable. However, there is nothing inthe plain language of sub-section (1) and (2) of section 244Afrom which it can be inferred that the assessee can bedeprived of the interest in respect of the period during whichhis application for refund remains pending before thecompetent authority.” Qg. The issue whether refund of self assessment tax on account ofexcess amount of tax paid by the assessee would entitle an assessee to claiminterest thereon at the time of refund was considered by the Delhi HighCourt 1n-Sutley Industries Limited'scase (supra). Following the judgmentof the Madras High Court inCholamandalam [Investment and Finance Co Limited'scase (Supra), 1t was observed as under:- Q In the case of Commissioner of Income Tax v.CholamandalamInvestment and Finance Co. Ltd, 294 ITR 438, the Madras HighCourt dealt with the question of whether the assessee is entitledto interest under Section 244A as per Clause (1)(b) of thatSection, when the refund arises on account of payment of self-assessment tax. The Madras High Court observed as under: "6. Even though the short title to section 140A reads as self-assessment, the charging phrase employed in section 140Anamely "Where any tax is payable on the basis of any returnrequired to be furnished under section 115WD or section1LL5WH or section 139 or section 142 or section 148 or sectio153A, as the case may be; the assessee shall be liable to pay suchtax together with interest payable under any provision of this Actfor any delay in furnishing the return", makes it clear that there isno difference between: (i) the tax paid under section 115WJ, which deals with advancetax in respect of fringe benefits; or (11) the tax collected at source under section 206C; or "6. Even though the short title to section 140A reads as self-assessment, the charging phrase employed in section 140Anamely "Where any tax is payable on the basis of any returnrequired to be furnished under section 115WD or section1LL5WH or section 139 or section 142 or section 148 or sectio153A, as the case may be; the assessee shall be liable to pay suchtax together with interest payable under any provision of this Actfor any delay in furnishing the return", makes it clear that there isno difference between: (i) the tax paid under section 115WJ, which deals with advancetax in respect of fringe benefits; or (11) the tax collected at source under section 206C; or (111) any tax paid by way of advance tax or any tax treated as paidunder section 199, which deals with credit for tax deducted,which are provided under section 244A(1 )(a 7. The proviso to section 244A(1)(a) makes it clear that nointerest shall be payable if the amount of refund is less than 10per cent on regular assessment with regard to the refund ofadvance tax paid under section 115WJ in respect of fringebenefits; (11) tax collected at source under section 206C; and (111) advance tax or any tax treated as paid under section 199. But,with respect to other tax as per section 244A(1)(b), the interestShall be payable even if the amount is less than 10 per cent of thetax as determined under section 143(1) or on the regularassessment, because there is no proviso to section 244A(1)(b) asprovided under section 244A(1 )(a). The Madras High Court further observed:- "It is also trite law that wherever the assessee is entitled torefund, there is a statutory liability on the Revenue to pay theinterest on such refund on general principles to pay the intereston sums wrongfully retained (reference Sandvik Asia Ltd)." 10. The Supreme Court dismissed the Special Leave Petition(SLP) No. 16877/2008 tiled by the Revenue against the decisionin Cholamandalam Investment and Finance Co. Ltd (supra), videorder dated 3rd December, 2009. The Supreme Court has also,recently, in the case of Commissioner of Income Tax, Bhopal v,H.E.G. Limited, vide its order dated 3rd December, 2009, heldthat the expression "refund of any amount” would includeinterest under Section 244A (on refund of tax deducted atsource) to which the assessee was lawfully entitled but had beenwrongly withheld by the Department.” 10. It was further held that the amount of tax due on the returnedincome is to be paid by way of tax deducted at source (Section 199),advance tax (Section 209) or by way of self assessment tax (Section 140A).In the event of refund, the assessee is entitled to payment of interest on theexcess amount of tax paid. It was noticed as under:- :12. The tax due on the returned income has to be paid by way oftax deducted at source (Section 199), advance tax (Section 209)or by way of self-assessment tax (Section 140A). In addition,where the assessment is completed at an income higher than thereturned income, the tax payable by the assessee is specified inthe notice of demand issued under Section 156 of the Act. Where there is a shortfall in payment on tax vis-a-vis the taxfinally due on the assessed income, the assessee is liable to payinterest under Section 234B of the Act. Conversely, where theRevenue makes a high-pitched assessment which is subsequentlyreduced/modified in appeal, any payment of taxes made, whichare subsequently refunded as a consequence of relief obtained inappeals etc., are monies legitimately belonging to the tax payersand wrongly withheld by the Government. This is based on theprinciple that if the Revenue had, in the first instance, madecorrect assessment of the tax liability of the assessee, theassessee would not have been deprived by the use of money. Insuch a situation, where pre-paid taxes are in excess of theassessed tax, the assessee is entitled to refund of such tax alongwith interest thereon. 13. Where an assessee out of abundant caution pays self-assessment whilst staking a claim in the return, which claim isaccepted, resulting in refund of self-assessment tax, the assesseeshould be equally entitled to interest thereon, 14. Section 244A was inserted in the statute as a measure ofrationalization to ensure that the assessee is duly compensatedby the Government, by way of payment of interest for monieslegitimately belonging to the assessee and wrongfully retainedby the Government, without any gaps, 15. Theretore, in our view where the self-assessment tax paid bythe assessee under Section 140A is refunded, the assessee shouldbe, on principle entitled to interest thereon since the self-assessment tax falls within the expression "refund of anyamount”. Similar view was expressed by Delhi High Court inMMTC Limited'S CaSe (supra). ll. It may be observed that in so far as nature of payment of tax 1sconcerned, the tax deducted at source, advance tax and also tax paid by way of self assessment, after its adjustment in the tax liability of the assessee on ITA No.153 of 2007 (O&M) regular assessment loses its original character and becomes tax paid inpursuance to the liability. Once that 1s so, 1t cannot be held that the assesseeis only entitled to interest under Section 244A (1) (b) on tax deducted atsource or advance tax and not on self assessment tax paid under Section140A of the Act which was found to be paid in excess. The assessee shallbe entitled to interest under section 244A(1)(b) of the Act on the refund ofself assessment tax as well. | 12. The Tribunal while adjudicating the issue had noticed as under:- :6. We have considered the rival submissions carefully on thisissue. Section 244A deals with the grant of interest on refund ofany amount of tax which becomes due to the assessee in termsof the provisions of Act. Clauses (a) and (b) of sub section (1)of section 244A deal with two different situations. Clause (a)deals with refund of taxes which have been paid under section|115 WJ or collected at source under section 206C or paid byway of advance tax or treated as paid under Section 199 of theAct. Clause (b) deals with refund of taxes in any other case,Clearly, in so far as the present case 1s concerned, theprovisions of clause (a) are not attracted in as much as it 1sundisputed that the refund accruing to the assessee by the orderof the Assessing Officer dated 12.12.2001 was not of taxes,which have been paid in the manner stated 1n clause (a). The taxrefunded in the instant case has been paid as self assessment taxunder section 140A of the Act and thus, as per assessee, clause(b) governs the field. The revenue contends that Clause (b) 1sconfined to situations where the tax refunded has been paid in|terms of a notice of demand issued by the Assessing Officerunder section 156. In our view, the implication of clause (b) asis understood by the department, is not borne out of thelanguage of the statute. No doubt, self assessment tax 1s paid byan assessee on the basis of the income declared in the return| Once the tax so paid gets adjusted against the tax determined bythe Assessing Officer upon assessment, such self assessment taxtakes the imprint of a tax paid in pursuance to an assessment,Infact a similar issue was considered by the Ahmedabad Benchof the Tribunal in the case of Dhanvi Trading and Investment(P) Limited (supra) relevant portion of which we reproduceherein:- Once the tax so paid gets adjusted against the tax determined bythe Assessing Officer upon assessment, such self assessment taxtakes the imprint of a tax paid in pursuance to an assessment,Infact a similar issue was considered by the Ahmedabad Benchof the Tribunal in the case of Dhanvi Trading and Investment(P) Limited (supra) relevant portion of which we reproduceherein:- ‘So long as the self assessment tax possesses and retainsthe character of self assessment, there 1s no question ofreckoning the same for the purposes of treating it as excesspayment and allowing interest as envisaged under section244A till the regular assessment 1s made under section 143 or144, it 1s only on the date the assessment is made that thedeeming fiction contained under section 244A(2) comes intoplay and the self assessment tax is deemed to have been paidtowards the regular assessment. It is therefore, on the date ofthe regular assessment that the self assessment tax loses itsidentity and assumes the character of the tax paid for thepurpose of quantification of any excess of tax payment inresponse to notice of demand issued under section 156. Theexplanation appended to section 244A(1) amply clarifies theposition as explained above.' From the above, it therefore, follows that tax paid under section140A 1s also taken as paid in pursuance of an assessment afterthe completion of assessment. 7. Moreover, the rationale of the provisions of section 244A hasbeen a subject matter of review by the Hon'ble Jurisdiction HighCourt of Punjab and Haryana in the case of NationalHorticulture Board (supra). It has been opined that the rationaleunderlying the provision was to compensate the assessee fordeprivation of his property right which was by virtue of anunlawful collection of tax. Infact, tested on such anvil, interestunder section 244A on refund of tax paid as self assessment taxcannot be considered as outside the purview of section 244A of the Act. The significance of the Explanation below Clause (b) 1smerely to stipulate the period tor which the interest has to begranted. For the purpose of clause (b), the interest 1s payable forthe period starting from the date of the payment of tax endingupto the date on which such refund is granted. Therefore, inprinciple, we uphold the stand of the assessee that it waseligible for interest under section 244A(1)(b) on the refundaccruing to it as a result of the order of the giving appeal effecton 12.12.2001. However, while computing the eligibleinterest,1t appears that the period was considered from Ist ofApril 1989 upto the date of refund. Whereas in terms of clause(b) of Section 244A(1)(b) read with explanation thereof theperiod for which the interest can be granted 1s the date on whichthe self assessment tax was adjusted against the assessedincome and upto the date of actual grant of refund. Therefore, tothis extent, we find that there was a mistake apparent in theorder of the Assessing Officer dated 12.12.2001 by way ofwhich interest under section 244A amounting to Rs.7,02,044/-was allowed to the assessee. We, therefore, set aside the orderof lower authorities and direct the Assessing Officer torecompute the interest eligible to the assessee in the mannerindicated above.” 13. Learned counsel for the assessee had made reference to plethoraof judgments noticed in para 4 hereinbefore. A careful perusal of the saidjudgments clearly spells out that the issue in these judgments was differentin the light of the factual matrix involved therein and 1n none of the cases,the 1ssue whether the assessee was entitled to interest on refund of selfassessment tax paid under Section 140A of the Act 1n terms of Section 244Aor not, was under consideration. Thus, no advantage can be derived by thelearned counsel for the revenue from the aforesaid pronouncements. 14. In view of the above, the substantial questions of law are ITA No.153 of 2007 (O&M) answered accordingly and finding no merit in the appeal, the same standsdismissed. (Ajay Kumar Mittal)Judge August 25, 2014 (Fateh Deep Singh)JudgeHgS.