Ita/2/2007 Of Commissioner Of Income Tax v. M/S Assam Roofing Ltd

ITA 2/2007BEFOREHON’BLE MR. JUSTICE RANJAN GOGOIHON’BLE MR. JUSTICE B.P.KATAKEY Ranjan Gogoi, J This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ’the Act’) raises the following substantial question of law: �Whether on the facts and in the circumstances of the case, the Tribunal was justified and correct in allowing interest u/s 244-A of the Income-Tax Act, 1961 tothe assessee for the period of delay in granting refund of tax where such delayis due to reasons attributable to the assessee ? � 2.A summary of the somewhat elaborate facts will be necessary to be noticed at the outset: For the assessment year 1991-92 the respondent- assessee filed its return of income on 31.12.92 showing transport subsidy received by it as taxable income. However, in the note below the computation of income it was mentioned by the assessee that �transport subsidy is not a revenue receipt, it is a capital receipt �. The assessee paid the income tax due on the returned income. Thereafter, the return was processed and the assessment was completed on 16.5.94 under the provisions of Section 143 (3) of the Act. At no stage of the assessment proceeding any objection was raised by the respondent- assessee to the effect that the transport subsidy received by it is not taxable. However, against the assessment order dated 16.5.94 the assessee filed an appeal raising inter alia the aforesaid issue which was decided in its favour by the learned Commissioner of Income Tax (Appeals) by an order dated 27.10.94. Accordingly, it was directed thattransport subsidy amounting to Rs. 98,79,266/- be deleted from the total incomeof the assessee as determined by the Assessing Officer. The learned Commissioner of Income Tax (Appeals) in deciding the aforesaid issue had followed an order dated 4.12.92 passed by the Income Tax Appellate Tribunal, Guwahati Bench in ITANo. 421/Ghy/88 involving the respondent- assessee. 3.Pursuant to the aforesaid order of the learned Commissioner of Income Tax (Appeals) the Assessing Officer passed an order dated 13.12.94 deleting transport subsidy amounting to Rs. 98,79,266/- from the total income of the respondent-assessee and, furthermore, allowing interest under Section 244A of the Act on the amount of refund that was found due to the assessee. The interest, itmay be noticed, was allowed for a period of 33 months i.e. from 1.4.92 to 6.12.94. 4.Thereafter, on 13.3.97, the Commissioner of Income Tax (Appeals)issued notice to the respondent-assessee under Section 263 of the Act proposingto exercise the power of suo motu revision on the ground that interest on the refundable amount was wrongly allowed for the period 1.4.92 to 6.12.94. In the said notice it was mentioned that as in the return of income filed the taxable income was not computed by the assessee after deducting the transport subsidy, it is the assessee who was responsible for the delay in grant of refund and, therefore, was not entitled to interest on the refunded amount. The aforesaid proceeding under Section 263 of the Act was subsequently dropped by the learned Commissioner and, instead, a rectification proceeding under Section 154 of the Act was initiated against the respondent-assessee by notice dated 24.2.99. The said rectification proceeding was decided by the Assessing Officer by an order dated 9.3.99modifying the period for which the interest was payable to the assessee on the refunded amount. The assessee being aggrieved filed an appeal before the learned Commissioner of Income Tax (Appeals) which was allowed by an order dated 20.5.2002. The Revenue contested the aforesaid appellate order by filing an appeal before the learned Tribunal. The said appeal of the Revenue was disposed of by thelearned Tribunal on 31.7.2003 by remanding the matter to the Assessing Officer for a fresh consideration. Commissioner of Income Tax (Appeals) which was allowed by an order dated 20.5.2002. The Revenue contested the aforesaid appellate order by filing an appeal before the learned Tribunal. The said appeal of the Revenue was disposed of by thelearned Tribunal on 31.7.2003 by remanding the matter to the Assessing Officer for a fresh consideration. 5.Thereafter, by order dated 31.3.2003, the Assessing Officer tookthe view that as the assessee had raised the question of taxability of the amount of transport subsidy only at the appellate stage, the grant of refund was delayed for reasons attributable to the assessee. Consequently, interest on the refunded amount was held to be payable for a period of 8 months i.e. from 16.5.94 (date of completion of the assessment) upto 13.12.94 i.e. the date of the order of the Assessing Officer following the order dated 27.10.94 passed by the Commissioner of Income Tax (Appeals). 6.The assessee, being aggrieved, carried the matter in appeal before the learned Commissioner of Income Tax (Appeals) which authority, by order dated 4.11.2004, reversed the view taken by the Assessing Officer. In further appeal before the learned Tribunal, at the instance of the Revenue, the view taken by the learned Commissioner of Income Tax (Appeals) was affirmed. Aggrieved, the present appeal has been filed by the Revenue which has been admitted on the question of law noticed hereinabove. 7.We have heard Mr U Bhuyan, learned counsel for the appellant andDr. AK Saraf, learned senior counsel appearing for the respondent-assessee. 8.Mr Bhuyan, learned counsel for the appellant has contended that in the present case the respondent-assessee had voluntarily included the amount received on account of transport subsidy as taxable income. On the said basis the assessment was made. At no point of time in the course of the assessment proceeding the assessee had taken the stand that the amount received on account of transport subsidy is not taxable. The aforesaid issue was raised by the assessee only in the appeal filed before the learned Commissioner of Income Tax (Appeals) which was disposed of by the order dated 27.10.94. Thereafter, on 13.12.94 the amount of transport subsidy earlier included in the taxable income of the assessee was deleted and orders were passed for refund. Pointing out the provisions of Section 244A (2) of the Act, Mr Bhuyan has contended that the payment of refund was made at the particular point of time only because of the conduct of the assessee in not raising the said issue at any earlier point of time. The payment of refund, therefore, got delayed for reasons attributable to the assessee. The assessee, consequently, is not entitled for interest for the period for which he was at fault. 9.Controverting the submissions advanced on behalf of the appellant, Dr. Saraf, learned counsel for the respondent-assessee has contended that theprovisions of Chapter-XIX of the Act make it abundantly clear that grant of refund is not contingent on any application of the assessee and such refund under Section 240 of the Act is consequential to any order passed in an appeal or otherproceedings under the Act. No claim for refund is required to be lodged. Dr. Saraf has further contended that the provisions of Section 244A (2) of the Act will have no application to the present case inasmuch as the present being a case where the refund is consequential to the appellate order, no proceeding for refund can be visualized so as to hold the assessee responsible for any delay in finalization of such a proceeding. Relying on a decision of the Apex Court in Sandvik Asia Ltd. -vs- Commissioner of Income-Tax & Ors. [(2006) 280 ITR 643 (SC)], Dr. Saraf has urged that there is a compensatory element in the interest that is awardable under Section 244A of the Act and that such interest seeks to mitigate the hardship caused to the assessee on account of wrongful levy and collection of tax. A decision of the Punjab & Haryana High Court in National Horticulture Board -vs- Union of India, [(2002) Vol. 253 ITR 12] has also been relied upon to c ontend that interest on refund is automatic and consequential and does not depend on initiation of a proceeding for refund or on raising a claim for refund, as may be. ontend that interest on refund is automatic and consequential and does not depend on initiation of a proceeding for refund or on raising a claim for refund, as may be. 10.We have considered the rival submissions advanced on behalf of the parties. The relevant provisions of the Act, keeping in mind the assessment year involved, would be Section 244A and our consideration will necessarily have to be confined to the said provision of the Act. There can be no manner of doubtthat in view of the provisions contained in Section 240 of the Act, in the present case, the entitlement of the respondent-assessee to refund is not dependent on making of any claim for refund. In other words, the entitlement for refund isconsequential to the appellate order dated 27.10.94 passed in the present case.Section 244A of the Act contemplates grant of interest at the rate specified therein from the first day of April of the assessment year to the date on which refund is granted in case of payment of tax as contemplated by sub-clause (a) of sub-Section (1) or payment of interest from the date of payment of tax or penaltyto the date of grant of refund in all other cases dealt with by sub-clause (b) of sub-Section (1). Under sub-Section (2) of Section 244A if the �proceedings resulting in the refund � are delayed for reasons attributable to the assessee no interest is to be awarded for the period of such delay for which the assessee is responsible. The expression �proceedings resulting in revision � appears in sub-Section (2) of Section 244A notwithstanding the fact that under Section 240 refund following an appellate order is automatic and does not depend on a claim beinglodged to the said effect or a refund proceeding being initiated. The use of the said expression in the above context is both significant and conspicuous. To read the same only to situations covered by Sections 238 and 239 of the Act which contemplates a claim for refund to be made in the situations specified thereinwould be against the scheme under the Act. The expression �proceeding � referred to in sub-Section (2), more reasonably, would mean any proceeding as a result of which refund has become due. Viewed from the aforesaid perspective the expression �proceeding � in sub-Section (2) may take within its ambit an appeal proceeding consequential to which refund may have become due. Our above view would findsome support from the decision of the Punjab & Haryana High Court in National Horticulture Board (supra). In the said case the assessment was completed on October 2, 1998. The writ petitioner, National Horticulture Board moved an application seeking exemption from income tax under the provisions of Section 10 (23C)(iv) of the Act on February 9, 1999. The exemption was granted by the Notification dated 6.4.99. Based on the said Notification granting exemption an application for rectification of the order of assessment was filed on 9.4.99 with a consequential prayer for refund of the tax already deposited. The said rectification application was allowed on 23.4.99. Refund was accordingly granted. The claim of theassessee in that case was for interest on the refunded amount from February 9, 1999 (date of filing of the application seeking exemption from income tax) to April 23, 1999 (date of allowing the application for rectification after the exemption Notification was issued). The Punjab & Haryana High Court in the above facts took the view that there was delay on the part of the assessee in claiming refund on 9.4.99. Accordingly, interest upto the said date i.e. 9.4.99 was held to be not allowable though interest between 9.4.99 till the date of payment of the refund was held to be payable. 11.In the present case, the assessee itself declared the amount of transport subsidy received by it to be taxable and voluntarily paid the tax. No claim to the contrary was raised in the course of the assessment proceeding. It is only in the appeal filed that the issue was raised and by the appellate orderdated 27.10.94 the assessee’s contentions were upheld. Consequently, the order deleting the transport subsidy amount from the total income and for consequential refund was passed by the Assessing Officer on 13.12.94. In the above circumstances, it cannot but be held that the assessee was responsible for some delay in grant of refund. Refund being consequential to the order of the learned Commissioner of Income Tax (Appeals) dated 27.10.94 by which the assessment order dated 16.5.94 became liable to modification, it will be correct to hold that the assessee will be entitled to interest on the refunded amount w.e.f. 16.5.94 till dateof payment of the refundable amount. 12.Consequently, this appeal is allowed and the order of the learned Tribunal is reversed in the light of what has been stated above.