Ubsequently? v. Cit’, 280 Itr 643 (Sc).Held That Cit Had The Authority To Consider The Claim Oftheass@C@Sscandremittedthematter Co Thecommissioner Of Income Tax (Appeals), Who

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE / DAY OF OCTOBER 2020| PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD LT.A. NO.582 OF 2013 BETWEEN: 1.COMMISSIONER OF INCOME TAX. MANGALORE-5/5001.. 2.|DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-1, UDUPI-576101.| ... APPELLANTS (BY Mr. E.I. SANMATHI, ADV.,) AND: M/S. SYNDICATE BANK| H.O. MANIPAL-5 /6104. ... RESPONDENT (BY Mr. T. SURYANARAYANA, ADV.,) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,196L ARISING OUT OF ORDER DATED 12.0/7.2013 PASSED IN ITANO.367/BANG/2010 FOR THE ASSESSMENT YEAR 1987-88,|PRAYING THAT THIS HON’BLE COURT MAY BE PLEASED TO: (1) DECIDE THE FOREGOING QUESTION OF LAW AND/OR-SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON’ BLE COURT AS DEEMED FIT. (II) SET ASIDE THE APPELLATE ORDER DATED 12-7-2013.PASSED IN ITA NO.367/BANG/2010 BY THE INCOME TAX)APPELLATE TRIBUNAL, ‘B’ BENCH, BANGALORE FOR A.Y. 1987-88|AS SOUGHT FOR, IN THE ABOVE CASE. THIS ITA COMING ON FOR HEARING, THIS’ DAY, | ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax|Act, 1961 (hereinafter referred to as the Act for short)has been preferred by the revenue. The subject matterof the appeal pertains to the Assessment year 1987-88.The appeal was admitted by a bench of this Court videorder dated 10.10.2014 on the following substantialquestions of law:| (1)Whether on the facts and in thecircumstances of the case, the Tribunal was|justified in law in dismissing the appeal|preferred Dy Revenue by not appreciating|the fact that interest on delayed refund|interest cannot be granted since there is nospecific provision in the Act for payment of|interest on the amount of Interest and In not|considering the fact that the Department hasnot wrongly retained the refund amount? (ii) Whether on the facts and in the.circumstances of the case, the Tribunal Is-right in law in relying upon the case of CIT v|Sandvik Asia Ltd. (SC) wherein interest isnot granted when it Is due and granted|subsequently? 2.|Facts leading to filing of the appeal brieflystated arethat| Commercial Bank. The assessee filed return of Incomefor Assessment Year 1984-85 on 29.06.1984 declaring a_total loss of Rs.2.29 Crores. The assessee filed thereturn for the Assessment Year 198/-88 on 26.06.198 /and declared a total loss of Rs.6.9 Crores. TheassessmentswerecompletedON|21.03.1986|and|30.01.1989, by which total income of the assessee forAssessment.Years1984-85and|198 7-88WasSdetermined at Rs.30.68 Crores and 427.44 Crores. Theassessee filed appeal against the order passed by theAssessing Officer and while giving effect to appellateorder, the interest was granted on excess tax paid. Thereupon, the assessee filed an application underSection 154 of the Act on 24.10.2005 and soughtinterest, which according to the assessee became dueon account of giving effect to the orders passed by theappellate authority. The Assessing Officer, by an orderdated 19.12.2005 rejected the applications underSection 154 of the Act. The assessee thereuponapproached the Commissioner of Income Tax (Appeals)who Dy an order dated 26.03.2007 dismissed the appealon the ground that no appeal lies under Section 246A ofthe Act against non payment of interest. The assesseethereuponapproachedtheIncome.TaxAppellateTribunal (hereinafter referred to as ‘the Tribunal’ forShort). The Tribunal by an order dated 27.06.2008 byplacing reliance on the decision of the Supreme Court in“SANDVIK ASIA LIMITED VS. CIT’, 280 ITR 643 (SC).held that CIT had the authority to consider the claim ofthe|aSS@C@SSCandremittedthematter CO theCommissioner of Income Tax (Appeals), who by an order dated 08.01.2010 directed the assessing authorityto consider the claim of the assessee for determinationof the amount refundable including interest while givingeffect to the orders passed by the appellate authority.Being aggrieved, the revenue filed an appeal before theIncome Tax Appellate Tribunal, which by an order dated12.07.2013 has dismissed the appeal. In the aforesaidfactual background, this appeal has been filed. 3.Learned counsel for the revenue submittedthat there is no provision in the Act to pay interest oninterest. However, the aforesaid crucial aspect of thematter hasneither|beenappreciatedby theCommissioner of Income Tax (Appeals) as well as theIncome Tax Appellate Tribunal. It is further submittedthat even Section 243(1) of the Act also does notprovide for grant of interest on interest and the sameonly deals with interest on delayed payment. It is alsourged that even Section 244(1) of the Act does notprovide for interest on interest and the decision of the SupremeCourt|In‘SANDVIKASIA.LTD,Vs.COMMISSIONER OF INCOME-TAX AND OTHERS’|(2006) 280 ITR 643 (SC)is not an authority forproposition that interest on interest is payable. It ispointed out that in the aforesaid decision, a petitionunder Article 2276 of the Constitution of India was filedand in the aforesaid petition, the Court had awarded theamount to the assessee by way of compensation asthere was a delay in payment of the amount which wasdue to the assessee. It is also pointed out that thedecision in the case of|SANDVIK, SUPDT, Nas been|considered by the Supreme Court in‘COMMISSIONEROF INCOME-TAX, GUJARAT Vs. GUJARAT FLOUROCHEMICALS’ (2014) 42 TAXMANN.COM 1 (SC)andour attention has been invited to paragraphs 6, 7 and 8of the aforesaid decision and it has been pointed outthat in the said decision, the Supreme Court has heldthat refund of certain amount was directed by theSupreme Court in the case ofSANDVIK, SUDTa, which was paid by way of compensation and not on interest oninterest. It is also pointed out that the aforesaid decisionhasbeenfollowedby Delhl|HighCourt|In|‘COMMISSIONER OF INCOME-TAX Vs. INDIANFARMER FERTILIZER CO-OPERATIVE’ (2016) 7/7TAXMANN.COM 37 (DELHI)and by High Court of|KeralaIn“JOSEPHKORAH|Vs.INCOMETAXOFFICER’ (2015) 229 TAXMAN O331 (KERALA)Lastly, it is urged that in the absence of any statutoryprovisions on delayed interest, the assessee is notentitled to interest on delayed payment. In_ thisconnection, reference has been made to the decision ofthe Supreme Court in‘UNION OF INDIA & ORS. Vs.ORIENT ENTERPRISES ETC.’ (1998) 146 CTR 546. 4On the other hand, learned counsel for theassessee submitted that in SANDVIK ASIA LIMITEDSupra, it has been held that the Act recognizes theprinciple that a person should only be taxed inaccordance with law and nence, where excess amounts of tax are collected from an assessee or any amountsare wrongfully withheld from the assessee without anyauthority of law, the revenue must compensate theassessee. Learned counsel for the assessee has alsoinvited tne attention of this court to a three judge Denchdecision of the Supreme Court in‘COMMISSIONER OFINCOME TAX VS. NARENDRA DOSHI'’, 254 ITR 60and has submitted that the decisions of Gujarat HighCourt In|‘D.J,.WORKS vs. DEPUTY CIT’, (1992) 195ITR 22/7which was followed by the same High Court in“CHIMANLAL S PATEL VS. CIT’, (1994) 210 ITR419,wherein it nas been neld tnat the revenue Is liableto pay interest on the amount of interest, which had tobe paid to the assessee Dut nad unjustifiably failed to doso, Nas not been challenged py the revenue andtherefore, the question of law framed in the case ofNARENDRA DOSHI supra has been answered in favour ofthe assessee. Our attention has also been invited to!another three judge bench decision of the Supreme Court In|‘COMMISSIONER OF INCOME TAX VS. H.E.GLTD’, (2010) 324 ITR 331 (SC)and has submitted.that the interest component partakes the character ofamount due under Section 244A of the Act. Referencehas also been made to the decision of the Delhi HighCourtIn|.INDIATRADEPROMOTIONORGANISATION VS. COMMISSIONER OF INCOME-TAX’, (2013) 38 TAXMANN.COM 233 (DELHI)_ Ourattention has also been invited to paragraph 8 of theorder in GUJARAT FLUORO supra and it has beenSubmitted that Section J44A of the Act has beeninserted, which provides for interest on refunds undervarious contingencies and it is only the interest providedunder the statute which may be claimed by the assesseeand no other interest on such statutory interest. It isalso urged that GUJARAT FLUORO supra only clarifiesthe decision of the Supreme Court in SANDVIK ASIALTD. Reference has also been made to Circular No.549dated 31.10.1989 and reliance has been placed on decision of the Supreme Court in.‘UNION OF INDIA|VS. TATA CHEMICALS LTD.’, (2014) 363 ITR 658(SC). 5.|By way of rejoinder, the learned counsel forthe revenue submitted that sub-section 244-A of the Actwas inserted with effect from 1.4.1989, whereas, in theinstant appeal,theassessment.pertainstO.theassessment years 1984-85 and 1987-88. Therefore, thedecision relied upon by the counsel for the assessee inthe case of HEG Ltd. (Supra) and Narendra Joshi (supra)do no apply to the factual situation of the case as theaforesaid case deals with Section 244-A of the Act and it is not applicable to the case of the assessee. It isfurther submitted that computation which has beenhanded over to us by the learned counsel for theassessee does not apply to the factual! situation of thecase as the aforesaid computation nas been made bytaking into account Section 244-A(i) of the Act. It is notapplicable to tne case of the assessee. It IS also submitted that the Division Bench of the Gujarat High)Court in the case of.Gujarat Flora Chemicals -v-|Commissioner of Income Tax (377 ITR 307)has|directed refund of the amount by way of compensationin exercising the powers under Article 226 of theConstitution of India. The learned counsel for theRevenue further submitted that in the case of.Tata.Chemicals (supra),the Hon’ble Supreme Court wasdealing with the interest on refund and not interest oninterest. Therefore, the aforesaid decision has noapplication to the facts of the case. 6.|We have considered the submissions madeby learned counsel for the parties and have perused therecord. Previously, the interest was payable to anassessee under Section 214, 243 and 244 of the Act.However, by Direct Tax Laws (Amendment) Act, 1987,Section 244A was inserted witn effect from 01.04.1989and was made applicable for Assessment Year 1989-90onwards. Jne Central Board of Direct Taxes issued Circular No.549 dated 31.10.1989. The relevant paragraph of the Circular, reads as under: 11.7 Insertion of a new Section 244A In.lieu of Section 214, 243 and 244 - Under the provisions of Section 214, interest was|payable to the assessee on any excess|advance tax paid by him tn a financial year|from the 1 day of April next following the|said financial year to the date of regular|assessment. In case tne refund wes notsgranted within three months from the end ofthe month in which the regular assessment|was completed, Section 243 provided for|furtner payment of interest. Under Section|244, interest was payable to the assessee|for delay in payment of refund as a result ofan order passed in appeal etc., from the|date following after the expiry of three|months from the end of the month [n which|such order was passed to the date of which|refund was granted. The rate of interest|under all the three sections was 15 per cent|annum. Section J44A of the Act reads as under: 244A. (1) Where refund of any amount.becomes due to the assessee under this Act, he shall, subject to the provisions of this|section, be entitled to receive, in addition to.the said amount, simple interest thereon|calculated in the following manner, namely| Section J44A of the Act reads as under: 244A. (1) Where refund of any amount.becomes due to the assessee under this Act, he shall, subject to the provisions of this|section, be entitled to receive, in addition to.the said amount, simple interest thereon|calculated in the following manner, namely| (a) where the refund is out of any tax.collected at source under section ZO6C orspaid by way of advance tax or treated as|paid under section 199, during the financialyear immediately preceding the assessment|year, such interest shall be calculated at therate of one-half per cent for every month or part of a month comprised in the period, — (i) from the 1st day of April of the:assessment year to the date on which the|refund is granted, if the return of income hasbeen furnished on or before the due date|specified under sub-section (1) of section|139; or (ii) from the date of furnishing ofreturn of income to the date on which the)refund is granted, in a case not covered| under sub-clause (1); (aa) where the refund is out of any taxpaid under section 140A, such interest shallbe calculated at the rate of one-half per cent|for every month or part of a _ montcomprised in the period, from the date of|furnishing of return of income or payment oftax, whichever is later, to the date on which.the refund is granted: Provided that no interest under clause(a) or clause (aa) shall be payable, if the|amount of refund is less than ten per cent ofthe tax as determined under sub-section (1)of section 143 or on regular assessment; (b) in any other case, such interest:Shall be calculated at the rate of one-half per|cent for every month or part of a month|comprised in the period or periods from the|date or, as the case may 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 payment of 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. J |Thus, the language of the Section is precise,clear and unambiguous. Sub-Section (1) of Section 244A speaks of interest on refund of the amounts due to anassessee under the Act. The assessee is entitled for theSaid amount of refund with interest thereon ascalculated in accordance with clause (a) and (b) of sub-Section (1) of Section 244A. In calculating the interestpayable, the section provides for different dates fromwhich the interest is to be calculated. 8.|A three Judge Bench of the Supreme Court in|NARENDRA DOSHI supra upheld the decisions renderedby Gujarat High Court, which held that the revenue isliable to pay interest on the amount of interest andupheld the order of the High Court, which had answeredthe substantial question of law framed in favour of theassessee. Thereafter, a three judge bench of the| Supreme Court in H.E.G. Ltd. supra while dealing withthe expression ‘refund of any amount becomes due to.the assessee’, held that the interest component willpartake the character of amount due under Section.244A of the Act. When an order of refund is issued, theSame should include interest payable on the amount,which ts refunded. If the refund does not include interestdue payable on the amount refunded, the revenue.would be liable to pay interest on the short fall. Thisdoes not amount to payment of interest on interest. Inview of aforesaid enunciation of law by a three judgebench of the Supreme Court, which is binding on us, it isnot necessary for us to deal with the decision of theSupreme Court in SANDVIK ASIA LIMITED which hasbeen rendered by a two judge bencn of the Supreme,Court and which has been subsequently clarified inGUJARAT FLUQRO CHEMICALS supra. It is pertinent tomention here that if the interest has to be computedafter 01.04.1989, the same has to be computed in. accordance with Section 244A of the Act only and theassessee Is entitled to interest in terms of Section 244Aof the Act only. accordance with Section 244A of the Act only and theassessee Is entitled to interest in terms of Section 244Aof the Act only. In view of preceding analysis, the substantial|questions of law are answered in the aforesaid terms. Inthe result, we do not find any merit in this appeal, thesame fails and is hereby dismissed. © SS| Sd/-—JUDGE. Sd/-—JUDGE.