Ita/164/2008 Of Venkatesh Dutt v. Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BANGALOREDATBD THIS THR 17 DAY OF JUNE 2014| PRESENT THR HON'BLEK MR.JUSTICE N. KUMAR ANTI THR HON'BLEK MR.JUSTICE B. MANOHAR L.T.A. NO.164/2008 BBRTWERE VENKATEBSH DUTTNO.5, BRUNTON ROAD CROSS.BANGALORE-560 OO1. — APPRLELLANT | (BY SMT.S.R.ANURADHA, ADV.) AND: COMMISSIONER OF INCOME TAX,KARNATAKA-II,CENTRAL REVENUE BUILDING,QUEENS ROADBANGALORE - 1]. _... RESPONDENT (BY SRI.K.V.ARAVIND, ADV.) THIS INCOME TAX APPBKAL IS UNDER SEC. 260-A OFINCOME TAX ACT 19601, ARISING OUT OF ORDER DATED21/09/2007 PASSED IN ITA NO.162/BANG/2007, FOR THEASSESSMENT YRBAR 2004-05. PRAYING THIS HON'BLECOURT TO: inFORMULATE THE SUBSTANTIAL QUESTIONS OFLAW STATBD THEREIN AND TO Il.ALLOW THER APPBKAL AND SET ASIDE THR ORDEDATED|21-9-200(/PASSEDBY|THERITAT, BANGALORE IN ITA NO.162/BANG/2007 FOR THEASSKSSMEBNTYBRARS2004-2005ANI)THER ORDER DATED 10/1/2007 PASSED IN ITAT'NO.4/2-1(1)/CIT(A)I/ 06-07BY|THECOMMISSIONBR OF INCOME TAX APPBALS ANDASSESSMENT ORDER DATED 24.3.2006 PASSED|BY THE ITO, WARD-1(1). THIS APPEAL COMING ON FOR FINAL HEARING,THIS DAY,N.AUMAR, J.,DELIVERED THR FOLLOWING: JU DBoGMENT The assessee has preferred this appeal against|the order passed by the Tribunal affirming the orderof the Income Tax Appellate Authority who leviedtax on the interest received by the assessee onaccount ot refund. — 2. The assessee iS an individual. The assessee did not file any return of income for the assessmentyear 2004-2005. In response to a notice undersection 142(1) of the Income Tax Act, 1961 (forshort ‘the Act), a return was filed on 4.2.2005declaring an income of Rs.45,000/- and agricultural income of Rs.2,10,000/-. The Assessing Officernoted that the assessee had received interest oft Rs.87,81,443/- under Section 244A of the Actduring the previous year relevant to the assessmentyear 2004-2005. The assessee had not includedthis income in the return of income. When this waspointed out, the asessee relied on a judgment of theTribunal, where, it was held that interest undersection 244-A of the Act cannot be brought to taxtill a finality is reached regarding the issue relatingto the assessment of income. The Assessing Officerdid not agree with the said stand. Therefore, heproceeded to include the amount of Rs.87,81,443/-in the total income of the assessee and determinedthe total income of Rs.90,36,440/-. The said orderottheTribunalWa Schallengedbefore|theCommissioner of Income Tax (Appeals). TheCommissioner was also ot the same view and heldthat the interest on refund under Section 244A(1) ofthe Act would be assessable in the year in which itwas granted and not in the year in which proceedingsunder.Section|143(1)(a).attained|finality. Following the judgment of the SpecialBench of the Tribunal, the appeal came to bedismissed. Agegrieved by the said order, theassessee preferred an appeal to the Tribunal. | 3. The Tribunal held that the interest granted|to the assessee on account of excess tax paid to theGovernment has to be brought to tax in the yearreceived by the assessee. The interest for the periodhad accrued to the assessee irrevocably insofar asthe assessee had increased its bank cofiers by thelike amount. The assessee accepted the refundvouchers by crediting the same to its bank account.Therefore, the interest refund to the assessee onaccount of excess tax paid by it in the assessmentyears 1986-87 to 1988-89 was rightly brought totax in the year it was received i.e., 2004-05 andneither of the parties thereto i1.e., the income tax 5 department or the assessee could hold back thesame pending the decisions of a higher forum. | 3. The Tribunal held that the interest granted|to the assessee on account of excess tax paid to theGovernment has to be brought to tax in the yearreceived by the assessee. The interest for the periodhad accrued to the assessee irrevocably insofar asthe assessee had increased its bank cofiers by thelike amount. The assessee accepted the refundvouchers by crediting the same to its bank account.Therefore, the interest refund to the assessee onaccount of excess tax paid by it in the assessmentyears 1986-87 to 1988-89 was rightly brought totax in the year it was received i.e., 2004-05 andneither of the parties thereto i1.e., the income tax 5 department or the assessee could hold back thesame pending the decisions of a higher forum. | 4. Interest is certain over a period of time and|cannot be said to be contingent which facts are notdisputed. Sub-section (3) of Section 244A (1) of theActalsocontainsquantificationincertain|circumstances and not the right of interest.Therefore, the Tribunal did not find any infirmity inthe order passed by the Commissioner of IncomeTax (Appeals) as well as the order passed by theAssessing Officer and accordingly, dismissed theappeal. Against the said order, the assessee isbefore this Court. | oO. This appeal came to be admitted on 23.10.2010 to consider the following substantialquestion of law: HWhether or not the quthorities below|were correct in holding that the interest received by the assessee on account ITAToraer 1s liable to tax?| 6. The learned counsel for the asseSSeEeassailing the impugned order, contended that theproceedings under which the order for refund waspassed had not attained finality on the day thenotice under Section 142(1) of the Act was issuedand therefore, there was no obligation cast on theassessee to file a return or mention in such returnthe interest received as his income. Even if anincome is to be assessed under the Act, as the said.income had accrued by virtue of the order passed bythe Tribunal on 18.2.2003, it has to be accountedfor in the previous year to that year namely1.4.2003 to 31.38.2004 and not in the year1.4.2004 to 31.3.2005. She further submitted that.merely because the amount was received on9.3.2004, it cannot be taxed for the assessment.year 1.4.2003 to 31.3.2004. Further it was contended that if the order of the Tribunal is upsetand the assessee is directed to refund the amountreceived, the assessee would be compelled to returntheaAamounreceivedwithouttaking1ntoconsideration the tax paid on the said amount.section 194 of the Act on which reliance was placedby the authorities applies only in the case of errorapparent on the face of the record and anycorrections in the nature of levying the interest onrefund under Section 244A(1) would be assessablein the year in which it is granted and not in the yearin which the proceedings under Section 143(1)(a)attain finality. She also contended that the interestincome has to be distributed for the period from1986 till the date of receipt of the said amount. Insupport of her contentions, she relied on variousdecisions of this Court as well as the Apex Court.Therefore, she submits that seen from any angle,the impugned order needs to be interfered. 7. Per contra, the learned counsel for the.revenue supporting the impugned order contendedthat in view of Section 4 of the Act, the interestincome is liable to tax in the year in which it isreceived. There is no dispute that the tax is payableon the interest income accrued. Therefore, hecontends that merely because an appeal is pendingagainst the order, is not a justification for theassessee not to pay any tax when the assesseereceived the amount by way of interest. Therefore,he submits that no case for interference 1s made.out. He also submitted that the judgments relied onby the learned counsel for the appellant, are allarising in the context of payments of compensationmade under the Land Acquisition Act and also theprice of sugar fixed by the Government and has noapplication to the facts of the case. Further, herelied on judgment of the Madras High Court in theCaSEotTamilnadu IndustrialInvestmentCorporationLtd. Vs.Deputycommissionerof Income Taxreported in(2004) 192 CTR (Mad) 521TO |Support his contention that the interest underSection 214 of the Act is revenue in the nature ot.chargeable tax in the year of receipt. /. Krom the aforesaid facts and the rival|contentions, it is clear that the assessee did not file’any returns for the assessment year 2004-05 as hehad no taxable income. In response to notice undersection 142(1) of the Act, he filed return of 4.2.2005declaring an income of Rs.45,000/- and agriculturalincome of Rs.2,10,000/- which again is within thetaxable limit. It is also not in dispute that theTribunal, by its order, allowed the appeal of theassessee, deleted certain additions and directed thedepartment to pass consequential orders. In termsof the said order of the Tribunal, the departmentrefunded a sum of Rs.1,90,43,489/- 1.e., the excesstax collected and paid a sum of! Rs.87,81,443/-interest on the said tax component. This payment was made on 9.3.2004. The amount is dulyreceived and acknowledged by the assessee. It isalso not in dispute that aggrieved by the order dated18.5.2003passedbytheTribunal,TEVEeETLpreferred an appeal to this Court. It is in thisbackground, the Assessing Officer took exception tothe assessee in not declaring the interest income of87,81,443/-. The lability was denied by theassessee on the ground that the appeal is pendingand the amount is not finally determined. 8. Section 244A of the Act provides, where|refund of amount becomes due to the assesseeunder the Act, he shall, subject to the provisions ofthis section, be entitled to receive, in addition to thesaid amount, simple interest thereon calculated inthe manner stipulated in the said Act. The saidinterest received by the assessee could be income inthe hands of the assessee. Section 4 of the Actwhich is the charging section levies tax under the Act on such interest. The income received on9.3.2004 is to be assessed for the years 1.4.2003 to31.3.2004 which is previous year as the assessmentyear being 1.4.2004 to 31.3.2005. When once theassessee receives the income by way of interest, theliability to pay tax under the Act arises. As thatincome is received prior to 31.3.2004, it has to bedeclared for the year commencing from 1.4.2003 to31.3.2004 and it has to be assessed during theperiod from 1.4.2004 to 31.3.2005. The date onwhich the order of the Tribunal is passed, thoughdetermined the rights of the parties, on that day, noincome is received by the assessee. It 1S on receiptof the income, the liability to file return under theAct would arise. Therefore, the contention that thesaidincomeshouldhavebeentaken1ntoconsideration for the year from 1.4.2003 to31.3.2004 is not correct. Similarly, the question ofdistributing the said amount from 1986 onwards till the amount received also would not arise. [Insofaras the contention that it is not a ascertainableliability, the appeal was pending and hence there isno liability to pay tax 1s concerned, when once thedepartment|has”refunded theamount,notwithstanding the fact that the pendency of theappeal and the assessee has received the saidamount, the lability to pay tax arises. If in theappeal the department were to succeed andconsequently the assessee is directed to refund thisamount, while refunding the said amount certainlythe assessee could take into account the amount.paid by way of tax. It would not be a case of doublepayment. Under these circumstances, we do notfind any error in the orders passed by the threeauthorities. Insofar as the decisions relied on by theassessee is concerned, they are all cases arisingunder the Land Acquisition Act, where, afteracquisition of the land the land acquisition officer passed award making an offer of payment ofcompensation. The law provides tor a reference tothe civil court if the compensation awarded by theland acquisition officer, in the opinion of the landowner, is not sulficient and the reference court has.jurisdiction to enhance the compensation and alsoto award interest on the said compensation. Thesaid order is also subject to appeal and secondappeal. In that context, it has been held that unlessa competent court determines the liability to payenhanced compensation and the compensation ispaid in pursuance of such determination, theliability to pay tax on such compensation or theinterest which is a component of interest would notarise. In the instant case, we are not dealing withany compensation. It is a simple case of payment ofinterest on the amount of refund which departmentfounddueTO theAaSSECSSEsubject.TO|the.determinationbytheAppellateAuthority. | Therefore, no fault can be found in the order passedby the authorities. Hence, the substantial questionot law 1s answered in favour oft the revenue andagainst the assesseee. The appeal is dismissed.Ordered Accordingly. RS/*, sD/-JUDGEsD/-JUDGE|