Wp(C)/19283/2007 Of State Bank Of Travancore v. Chief Commissioner Of Income Tax And Oth

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE FRIDAY, THE 23RD DAY OF SEPTEMBER 2016/1ST ASWINA, 1938 WP(C).No. 19283 of 2007 (U) ---------------------------- PETITIONER(S):-------------- STATE BANK OF TRAVANCORE, HEAD OFFICE, POOJAPURA, THIRUVANANTHAPURAM - 695 012, REPRESENTED BY ITS DEPUTY GENERAL MANAGER, (FINANCE AND ACCOUNTS). BY ADVS.SRI.P.BALAKRISHNAN SRI.V.SREEKUMAR RESPONDENT(S) :--------------- 1. CHIEF COMMISSIONER OF INCOME TAX, AYAKAR BHAVAN, THIRUVANANTHAPURAM - 695 003. 2. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I (1), THIRUVANANTHAPURAM - 695 003. 3. DEPUTY COMMISSIONER OF INCOME TAX (ASSESSMENT), SPECIAL RANGE, THIRUVANANTHAPURAM. 4. THE CENTRAL BOARD OF DIRECT TAXES, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI - 110 001. BY ADVS. SRI.GEORGE K. GEORGE, SC SRI.P.K.R.MENON,SR. COUNSEL SRI.JOSE JOSEPH, SC THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 11-08-2016 THE COURT ON 23-09-2016, DELIVERED THE FOLLOWING: WP(C).No. 19283 of 2007 (U) --------------------------- APPENDIX PETITIONER(S)' EXHIBITS----------------------- EXHIBIT P1 TRUE COPY OF THE ORDER BEARING NO.F.NO.244/G2/CC-TVM/2004-2005 FOR ASSESSMENT YEAR 1995-1996DTD.31.1.2006 ISSUED BY THE 1ST RESPONDENT.CC-TVM/2004-2005 FOR ASSESSMENT YEAR 1995-1996DTD.31.1.2006 ISSUED BY THE 1ST RESPONDENT. EXHIBIT P2 TRUE COPY OF ORDER BEARING F.NO.244/G3/CC-TVM/2004-05FOR ASSESSMENT YEAR 1993-1994 DTD.31.1.2006 ISSUED BYTHE 1ST RESPONDENT.FOR ASSESSMENT YEAR 1993-1994 DTD.31.1.2006 ISSUED BYTHE 1ST RESPONDENT. EXHIBIT P3 TRUE COPY OF THE ORDER BEARING F.NO.244/G9/CC-TVM/2004-05 FOR ASSESSMENT YEAR 1992-1993DTD.31.1.2006 ISSUED BY THE 1ST RESPONDENT.CC-TVM/2004-05 FOR ASSESSMENT YEAR 1992-1993DTD.31.1.2006 ISSUED BY THE 1ST RESPONDENT. EXHIBIT P4 TRUE COPY OF ORDER BEARING NO.244/G8/CC-TVM/2004-2005DTD.27.6.2005 ISSUED BY THE 2ND RESPONDENT.DTD.27.6.2005 ISSUED BY THE 2ND RESPONDENT. EXHIBIT P5 TRUE COPY OF LETTER DTD.6.9.2006 ISSUED BY THE 4TH RESPONDENT TO THE PETITIONER.4TH RESPONDENT TO THE PETITIONER. RESPONDENT(S)' EXHIBITS ----------------------- EXT.R1(A): COPY OF THE ORDER SHEET. //TRUE COPY// Msv/ P.S.TO JUDGE A.M.SHAFFIQUE, J * * * * * * * * * * * * W.P.C.No.19283 of 2007 ---------------------------------------- Dated this the 23[rd] day of September 2016 J U D G M E N T Petitioner, an assessee under the Income Tax Act, 1961, hasfiled this writ petition challenging Ext.P1, P2, P3, P4 and P5 andfor a direction to the respondents to pay the petitioner interest onthe refund. 2.Ext.P1 is an order dated 31/01/2006 passed by theChief Commissioner of Income Tax considering an application filedby the petitioner under Section 244A of the Act. By the saidorder, the Chief Commissioner came to a finding that interest isnot payable to the petitioner for the period of delay whichoccurred in curing defects in the TDS certificates. In the return ofincome for the assessment year 1995-96, petitioner declared atotal income of Rs.22,14,47,788/- and a revised return was filedon 27/02/1996 declaring total income of Rs.26,29,72,328/-. Thereturn was processed on 09/10/1996. On scrutiny under Section143(3), the assessment was completed on 02/03/1999. Howeveras per order dated 22/02/2004 and 27/05/2004, interest was notgranted under Section 244A on account of the delay in curing the W.P.C.No.19283/2007 W.P.C.No.19283/2007 defects in the TDS certificates. Assessee therefore filed anapplication dated 15/04/2004 before the Chief Commissioner togrant interest under Section 244A on the TDS amount refunded tothem as per proceedings dated 27/05/2004. This came to berejected by the Chief Commissioner on the ground that the delaywas attributable to the assessee. Exts.P2, P3 and P4 are similarorders passed with reference to assessment years 1993-94, 1992-93 and 2001-02. The petitioner appears to have taken up thematter before the Government of India, Ministry of Finance whoinformed the petitioner that they cannot directly interfere in thematter. It is, in these circumstances, inter alia contending thatthe delay cannot be attributable to the petitioner that this writpetition is filed. 3.Counter affidavit has been filed by the respondentsupporting the stand taken in the matter. It is inter aliacontended that submitting TDS certificates without any defect isthe obligation of the assessee. When substantial time has beentaken to cure the defects and resubmitting the same, the delaycan only be attributed to the assessee. Paragraph 6 of thecounter affidavit is relevant which reads as under: “6. For the assessment year 1992-93interest under Section 244A was not granted for27 months from January 1993 to March 1995 forthe TDS certificates resubmitted after curingdefects. For the Asst.year 1993-94, interest u/s244A was not granted from August 1994 toDecember 1994 for the TDS certificatesresubmitted after curing defects. For theAsst.Year 1995-96 also, interest u/s 244A wasnot granted for various dates as the TDScertificates were resubmitted on various datesafter curing defects. This is strictly in accordancewith the provisions of Section 244A(2) whichstipulates that if the proceedings resulting inrefund are delayed for reasons attributable to theassessee wholly or in part the period of delay soattributable to him shall be excluded from theperiod to which interest is payable. In this casethe delay in proceedings granting refund wasattributable to the assessee in filing proper TDScertificates after curing defects. While passingthe order for these assessment years, the ChiefCommissioner of Income Tax has not merelyrelied on the order for Assessment year 2001-02but after considering all the facts and affordingan opportunity of being heard to the applicant.The contentions of the assessee's representativewere dealt with in great detail in these orders. The reference to the order for the assessmentyear 2001-02 was made only to state that therewas no material to take a different view from thattaken for that assessment year 2001-02. Theorders for the assessment years 1992-93, 93-94and 94-95 were passed after due application ofmind and considering all the facts brought onrecord and mentioning the order for theassessment year 2001-02 was only incidental.” 4.Learned counsel for the petitioner places reliance onthe judgment of the Apex Court in Sandvik Asia Ltd. v.Commissioner of Income Tax and Others [(2006) 280 ITR643] (SC). Specific reference is made to paragraph 79 whichreads as under: “The facts and the law referred to inparagraph (supra) would clearly go to show thatthe appellant was indisputably entitled to interestunder Sections 214 and 244 of the Act as held bythe various High Courts and also of this Court. Inthe instant case, the appellant's money had beenunjustifiably withheld by the Department for 17years without any rhyme or reason. The interestwas paid only at the instance and theintervention of this Court in Civil Appeal No. 1887of 1992 dated 30.04.1997. Interest on delayed 4.Learned counsel for the petitioner places reliance onthe judgment of the Apex Court in Sandvik Asia Ltd. v.Commissioner of Income Tax and Others [(2006) 280 ITR643] (SC). Specific reference is made to paragraph 79 whichreads as under: “The facts and the law referred to inparagraph (supra) would clearly go to show thatthe appellant was indisputably entitled to interestunder Sections 214 and 244 of the Act as held bythe various High Courts and also of this Court. Inthe instant case, the appellant's money had beenunjustifiably withheld by the Department for 17years without any rhyme or reason. The interestwas paid only at the instance and theintervention of this Court in Civil Appeal No. 1887of 1992 dated 30.04.1997. Interest on delayed payment of refund was not paid to the appellanton 27.03.1981 and 30.04.1986 due to theerroneous view that had been taken by theofficials of the respondents. Interest on refundwas granted to the appellant after a substantiallapse of time and hence it should be entitled tocompensation for this period of delay. The HighCourt has failed to appreciate that while charginginterest from the assessees, the Department firstadjusts the amount paid towards interest so thatthe principle amount of tax payable remainoutstanding and they are entitled to chargeinterest till the entire outstanding is paid. Butwhen it comes to granting of interest on refund oftaxes, the refunds are first adjusted towards thetaxes and then the balance towards interest.Hence as per the stand that the Departmenttakes they are liable to pay interest only upto thedate of refund of tax while they take the benefitof assessees funds by delaying the payment ofinterest on refunds without incurring any furtherliability to pay interest. This stand taken by therespondents is discriminatory in nature andthereby causing great prejudice to the lakhs andlakhs of assessees. Very large number ofassessees are adversely affected inasmuch asthe Income Tax Department can now simplyrefuse to pay to the assessees amounts of interest lawfully and admittedly due to that ashas happened in the instant case. It is a case ofthe appellant as set out above in the instant casefor the assessment year 1978-79, it has beendeprived of an amount of Rs.40 lakhs for no faultof its own and exclusively because of theadmittedly unlawful actions of the Income TaxDepartment for periods ranging up to 17 yearswithout any compensation whatsoever from theDepartment. Such actions and consequences, inour opinion, seriously affected the administrationof justice and the rule of law.” 5.It is argued that under Section 244A, the interest isstatutorily payable and non-payment of interest can only be onaccount of any delay being caused by the assessee whileconsidering the refund application. 6.On the other hand, based on Section 244A, learnedStanding Counsel appearing on behalf of the revenue contendsthat the TDS certificates without any defects were to besubmitted within a reasonable time for processing the applicationand if any delay is caused by the assessee, the assesee cannotclaim any interest on the amount of refund. There is no disputeregarding the obligation on the part of the Income Tax W.P.C.No.19283/2007 Department (for short 'Department') in giving simple interest onthe amount of refund as provided under Section 244A(1) of theAct. However, Section 244A(2) indicates that if the proceedingsresulting in the refund are delayed for reasons attributable to theassessee, the period of delay so attributable shall be excludedfrom the period for which interest is payable. 244A(1) and (2) ofthe IT Act reads as under: “244A. Interest on refunds. (1)Where refund of any amountbecomes due to the assessee under this Act, heshall, subject to the provisions of this section, beentitled to receive, in addition to the saidamount, simple interest thereon calculated in thefollowing manner, namely:- W.P.C.No.19283/2007 Department (for short 'Department') in giving simple interest onthe amount of refund as provided under Section 244A(1) of theAct. However, Section 244A(2) indicates that if the proceedingsresulting in the refund are delayed for reasons attributable to theassessee, the period of delay so attributable shall be excludedfrom the period for which interest is payable. 244A(1) and (2) ofthe IT Act reads as under: “244A. Interest on refunds. (1)Where refund of any amountbecomes due to the assessee under this Act, heshall, subject to the provisions of this section, beentitled to receive, in addition to the saidamount, simple interest thereon calculated in thefollowing manner, namely:- (a)where the refund is out of any taxpaid under section 115WJ or collected at sourceunder section 206C or paid by way of advancetax or treated as paid under section 199, duringthe financial year immediately preceding theassessment year, such interest shall becalculated at the rate of one-half per cent forevery month or part of a month comprised in theperiod from the 1[st] day of April of the assessmentyear to the date on which the refund is granted:Provided that no interest shall be payable if the amount of refund is less than ten per cent of thetax as determined under sub-section (1) ofsection 115WE or sub-section (1) of section 143or on regular assessment; (b)in any other case, such interest shall becalculated at the rate of one-half per cent forevery month or part of a month comprised in theperiod or periods from the date or, as the casemay be, dates of payment of the tax or penalty tothe date on which the refund is granted.Explanation.-For the purposes of this clause,“date of payment of tax or penalty” means thedate on and from which the amount of tax orpenalty specified in the notice of demand issuedunder Section 156 is paid in excess of suchdemand. (2)If the proceedings resulting in the refundare delayed for reasons attributable to theassessee, whether wholly or in part, the period ofthe delay so attributable to him shall be excludedfrom the period for which interest is payable, andwhere any question arises as to the period to beexcluded, it shall be decided by the ChiefCommissioner or Commissioner whose decisionthereon shall be final.” 7.As provided under the Statute, if any question arisesregarding the period to be excluded, it has to be decided by the Chief commissioner or Commissioner, whose decision is said to befinal. 8.The question is whether in the facts of the presentcase, the Chief commissioner was justified in rejecting interest forthe period of delay. The factual aspects are not in dispute.However, the contention urged by the petitioner is two fold. The1[st] contention is that the words 'proceedings resulting in therefund' as stated in Section 244A(2) can only mean theproceedings which culminated in Ext.P1 order and not the entireproceedings by which the return had been processed. Secondly,as far as the claim for refund is concerned, it becomes due at themoment the TDS certificates, after curing the defects, has beenaccepted. Once it is accepted, it is a confirmation that theamount had come to the account of the Income Tax Department.The delay for curing the defects in the TDS certificates does notamount to a delay in the proceedings resulting in the refund. 9. The Statute clearly indicates that where refund of anyamount becomes due with the assessee, he shall be entitled toreceive simple interest as stated therein, in addition to theamount of refund. The question is, as to when the amount 9. The Statute clearly indicates that where refund of anyamount becomes due with the assessee, he shall be entitled toreceive simple interest as stated therein, in addition to theamount of refund. The question is, as to when the amount becomes due. The amount becomes due only when all theprocedures are completed. It does not become due on the datewhen the amount is deposited by the deductor to theDepartment. It becomes due only after finalisation of the returns.Of course, if the delay is on the part of the Department infinalizing the returns, interest is payable from the date on which itbecomes due, i.e. from the 1[st] day of April of the assessment yearto the date on which the refund is granted. However, sub Section(2) draws a slight deviation from 244A(1) by which the assessee isdeprived of the interest, if the delay in the proceedings resultingin refund is attributable to the assessee whether wholly or in part.Therefore the first contention is totally out of place. The delay inthe proceedings resulting in refund is definitely with reference tothe finalisation of returns and not in regard to the proceedings forrefund. 10.The other contention urged by the petitioner is thatcuring defects in the TDS certificates cannot be a reason whichcould be attributable to the assessee. TDS certificates are issuedby the deductor and defects, if any, can be corrected by themonly. If mistakes are noted, the same are sent for correction and the time spent for obtaining the corrected TDS certificates andpresenting the same before the Income Tax Department shall notbe a reason for denying interest. 11.The finding of the Department in Ext.P5 is that therewas enough time between the date of obtaining of the certificatesand filing of the return for the assessee with its network of officersand infrastructure to get the defects cured. 12.In the counter affidavit filed by the 1[st] respondent it issubmitted that for the assessment year 2001-02, interest was notgranted from November 2001 to April 2004. For the assessmentyear 1992-93, interest was not granted for the period fromJanuary 1993 to March 1995. In respect of the assessment year1993-94 interest was not granted from August 1994 to December1994 and for the assessment year 1995-96 interest was notgranted for various dates as TDS certificates were resubmitted onvarious dates after curing the defects. It is stated that the orderswere passed after due application of mind. 13.Under Section 199, any deduction made in accordancewith the provisions of Chapter XVII and paid to the CentralGovernment shall be treated as payment of tax on behalf of the person from whom income tax deduction was made. Section 200deals with the duty of the person deducting tax. Any persondeducting any sum in accordance with the provisions of theChapter shall pay within the prescribed time the sum so deductedto the credit of the Central Government or as the Board directs.They have also filed a statement in terms of Sub Section (3).Section 201 relates to the consequences of failure to deduct orpay. Section 203 further indicates that every person deductingtax in accordance with the provisions of the Chapter shall withinsuch period as may be prescribed from the time of credit orpayment of the sum, furnish to the person to whose account thecredit is given or to whom such payment is made. A certificate tothe effect that tax has been deducted and specifying the amountso deducted, rate of tax and such other particulars, as may beprescribed. Therefore, there cannot be any dispute about the factthat the obligation to provide a certificate for deducting tax is onthe deductor. The question is, if there is any defect in suchcertificate, and the petitioner fails to get it cured before filing ofthe return, petitioner can be termed as a person who had causedthe delay. No doubt, as rightly held by the respondent, if the defect is noticeable on receipt of the certificate, it is for thedeductee who makes a claim on the basis of the certificate to getthe defects cured. This is an instance where substantial time hadelapsed for curing the defects, which according to theDepartment, is attributable to the assessee. When such a view ispossible and the claim for interest is denied on that specificperiod, I do not think that this Court will be justified in taking adifferent view. No doubt, as rightly contended by the learnedcounsel for the petitioner, once the defect is cured, the partieshave to go back to their original position, but the question iswhether there is an obligation on the part of the Department topay interest on the amount to be refunded. When a statute in theform of Section 244A(2) clearly specifies that interest need not bepaid if the proceedings of refund is delayed for reasonsattributable to the assessee, in that event, the respondentshaving refused interest on the basis of factual finding relyingupon the statutory provision, I do not think that this Court will bejustified in interfering with the said orders. 14.Coming to the judgment in Sandvik Asia Ltd. (supra),that was a case in which the question that had arisen was whether the assessee was entitled to interest on the amounts ofinterest paid under Section 214 or 244 of the IT Act. Questionconsidered was whether an assessee was entitled to becompensated by the Department for the delay in paying to theassessee all amounts admittedly due to it, the delay ranging from12 to 17 years. I do not think that the factual issues arising in thepresent case and the judgment in Sandvik Asia Ltd. (supra) hasany resemblance. Even otherwise, this is an instance whereinterest has been paid but denied only for certain period forreasons stated in the impugned orders, since the delay has beenattributed to the assessee. The writ petition is, therefore, dismissed. (sd/-) (A.M.SHAFFIQUE, JUDGE) jsr