M/S Saraf Textiles Mills v. Commissioner Of Income Tax

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 96 / 2005 M/S Saraf Textiles Mills ----Appellant Versus Commissioner Of Income Tax ----Respondent _____________________________________________________ For Appellant(s) : Mr. P.K. KasliwalFor Respondent(s) : Mr. Anuroop Singhi _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VINIT KUMAR MATHURJudgment 15/02/2017 1. By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby Tribunal has allowedthe appeal filed by the department and reversed the finding givenby the CIT(A). 2.This court while admitting the appeal on 26.5.2005 hasframed following substantial question of law:- “(i) Whether, on the facts and in the circumstancesof the case the Tribunal was justified in holding thatthe appellant is not entitled to receive interest oninterest as per the provision of Sec. 244(1A) of theI.T. Act, 1961. Whether, such conclusion is legallysustainable?” 3.Counsel for the appellant has contended that pursuant tothe order dt. 24.10.1999 passed by the SettlementCommissioner which reads as under:- “The Hon’ble Income Tax Settlement Commission,Principal Bench, New Delhi has vide its order dt.26.7.1999 in settlement application No.20/1/45/81-IT(EBDOT No.20/1/45/81-IT/589 dt. 8.10.99)modified the order dt. 27.6.95 by inserting thefollowing paragraph after para 17 as under:- “The applicant has prayed for waiver of interest, ifany, chargeable u/s 220(2). As the assessment orderwas made after filing of the settlement application,no interest is chargeable u/s 220(2). The same iswaived.” 4.He contended that appellant was entitled to the refund ofRs.10,12,744/- the interest which he claimed in his applicationdt. 2.5.2000 was Rs.5,50,386/-. However, refund was made tothe amount of Rs.10,12,744/-. 5.An order was passed by Joint Commissioner of IncomeTax, Jaipur on 1.6.2000 which reads as under:- “I have gone through the contentions of the assesseeand found that Provisions of Sec.244(1A) are notcleared about interest payment on interest. In theprovisions it is only mentioned that after order ofassessment or penalty any amount was paid by theassessee is found in excess of the amount which ispayable towards tax or penalty, interest under thisprovision should be allowed on that amount. In theassessee’s case, the amount was paid towards theliability of interest under Sec. 220(2) ofRs.10,12,744/- on various dates and now due toeffect of the order of Settlement Commission, thesame is refundable to the assessee on which interestunder sec.244(1A) has not be allowed. Thus, there isno mistake apparent on record and hence, theassessee’s application for rectification is herebyrejected.” 6.Being aggrieved against the order of the CIT(A), theDepartment preferred appeal and tribunal has reversed thefinding of CIT (A). 7.Counsel for the appellant has relied upon the decision ofthis court in D.B. Income Tax No.212/2004 decided on25.1.2017 wherein it has been held as under:- “10.Before proceeding with the matter, it will notbe out of place to mention that when the legislatureenvisaged refund, it includes advance tax or tax whichis calculated on the basis of assessment made andstatutory interest is also required to be paid on thesame since the Government is also recovering the taxwholly from the assessee. 6.Being aggrieved against the order of the CIT(A), theDepartment preferred appeal and tribunal has reversed thefinding of CIT (A). 7.Counsel for the appellant has relied upon the decision ofthis court in D.B. Income Tax No.212/2004 decided on25.1.2017 wherein it has been held as under:- “10.Before proceeding with the matter, it will notbe out of place to mention that when the legislatureenvisaged refund, it includes advance tax or tax whichis calculated on the basis of assessment made andstatutory interest is also required to be paid on thesame since the Government is also recovering the taxwholly from the assessee. 11.In that view of the matter, the amount whichhas been found due is required to be refunded to theassessee and in view of the provisions of Section 243& 244, it is very clear that the appellant is entitled forthe interest for delayed payment on the refundamount. However, endeavour made by the departmentthat the refund amount will not carry interest in viewof the observations made by the Supreme Court thathe is entitled only for refund and not interest but whenwe look into Section 243, the assessee is entitled forinterest on the refund amount. 12.In that view of the matter, the issue isanswered in favour of the assessee and against theDepartment. 13.The appeal stands allowed. It is clarified thatthe assessee will be entitled for interest @ 9 per centfrom the date of assessment till refund is made in viewof the decision of the Supreme Court in Sandvik AsiaLtd.(supra).” 8.Counsel for the respondent has contended that in view ofaverments made in the memo of appeal, the principal amountis paid and the assessee is not entitled for interest on interest. 9.He contended that in view of the judgment of SupremeCourt in Commissioner of Income Tax vs. Gujarat FluoroChemicals reported in (2013) 358 ITR 291 (SC) wherein it hasbeen held as under:- “The Legislature inserted section 244A in the IncomeTax Act, 1961, with effect from April 1, 1989, whichprovides for interest on refunds under variouscontingencies. It is only that interest provided forunder the statute which may be claimed by anassessee from the Revenue and no other interest onsuch statutory interest.Tax Act, 1961, with effect from April 1, 1989, whichprovides for interest on refunds under variouscontingencies. It is only that interest provided forunder the statute which may be claimed by anassessee from the Revenue and no other interest onsuch statutory interest. In Sandvik Asia Ltd vs. CIT (2006) 280 ITR 643 (SC), the Supreme Court was considering the issuewhether an assessee who is made to wait for refundof interest for decades should be compensated forthe great prejudice caused to it due to the delay in itspayment after the lapse of statutory period. In thefacts of that case, the court had come to theconclusion that there was an inordinate delay on thepart of the Revenue in refunding certain amountwhich included the statutory interest and, therefore,directed the Revenue to pay compensation therefor,not an interest on interest.”whether an assessee who is made to wait for refundof interest for decades should be compensated forthe great prejudice caused to it due to the delay in itspayment after the lapse of statutory period. In thefacts of that case, the court had come to theconclusion that there was an inordinate delay on thepart of the Revenue in refunding certain amountwhich included the statutory interest and, therefore,directed the Revenue to pay compensation therefor,not an interest on interest.” 10.We have heard counsel for the parties.11.The contention which has been raised by the counsel forthe appellant is that from the date he has been madepayment, he is entitled for interest. 10.We have heard counsel for the parties.11.The contention which has been raised by the counsel forthe appellant is that from the date he has been madepayment, he is entitled for interest. 12.In our opinion, the above contention is misconceivedinasmuch as his right to refund has accrued only from24.10.1999. The Settlement Commission has waived theinterest prior to that which was made towards statutorypayment, therefore, refund order will take into effect on24.10.1999 and not from the date where he had madecalculation from 11 June 1996. 13.However, department has wrongly paid the simpleprincipal amount towards refund. In our opinion, the same iswrong in view of the decision of this court. He will be entitledfor interest @ 9% from 24.10.1999 till the payment is made.14.However, if payment is not paid, he will be entitled to getcomplete amount along with interest @ 9% till then. 15.However, Mr. Singhi has objected to this observation andcontended that payment is already made. 16.It is made clear that if payment is made to the assessee,he will not be entitled for the interest beyond 31.3.2000. 17.In view of the above, the issue is answered in favour ofthe assesse partly. The appeal stands disposed of accordingly. (VINIT KUMAR MATHUR)J. (K.S. JHAVERI)J. Brijesh 125.