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Judgment
Ashim Kumar Banerjee, J.
Subject controversy:
Both the appellants were assessees under the Income Tax Act, 1961 (hereinafter referred to as the said "Act"). By virtue of the order of the appellate authority being the Commissioner of Income Tax (Appeals) they got the refund of a part of the tax paid and/or deposited through tax deducted at source (TDS). Subject controversy was with regard to payment of interest. The assessee claimed interest on such refund because of delayed payment. Such prayer was rejected by the authority on the ground that interest was not payable in terms of Section 244A(4) of the said Act. The order of refusal of payment of interest on such refund was challenged in a writ petition which was dismissed by the learned single judge. The order of dismissal by the learned single judge was impugned in this writ petition. The learned single judge held, inter alia, as follows:
After hearing the parties and after analysing the decisions cited before me by the learned advocates appearing on behalf of the parties I do not have any hesitation to hold that as has been held by the High Courts that there is no enabling provision in the Act to direct payment of interest on the tax deducted at source. As has been submitted by the learned advocate appearing on behalf of the respondent authority I do not have any hesitation to endorse the same view as has been expressed by the different High Courts. I also do not have any hesitation to accept the contention of the learned advocate appearing on behalf of the respondent authority and in my opinion, at the relevant assessment year, there is no specific provision conferring any right upon the assessee to get interest on the excess amount paid by way of tax deducted at source. The differential treatment had been set at rest after enactment of the provisions of Section 244A which became effective and applicable from the assessment year 1989. Such section cannot be interpreted in such a manner which would enable the assessee to claim interest contrary to the provisions of the said Act which was prevailing at the time of the assessment years. In the absence of any statutory provisions and/or any contract to the contrary, the general law of the land is that nobody is entitled to interest as a matter of right and the Assessing Officer under the Income Tax Act cannot be called upon to pay interest in violation of the provisions of the said Act. The court can only direct the Assessing Officer to act in accordance with law and/or to follow the provisions of law and without any specific provisions of law. The court has no power, in my opinion, to direct payment of interest in contravention of the provisions of law.
On a perusal of the paragraph quoted (supra) it appears that the learned judge found no enabling provision which could give right to the assessee to claim interest on the refund which was paid as and by way of tax deducted at source.
Relevant provision of the statute
Sections 214, 240, 243, 244(1A), 244A being relevant herein are quoted below:
214.(1) The Central Government shall pay simple interest at fifteen per cent. per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 to 213 exceeds the amount of the assessed tax, from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year during which it is payable by reason of the provisions of Section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment:
Provided that in respect of any amount refunded on a provisional assessment u/s 141A, no interest shall be paid for any period after the date of such provisional assessment.
(1A) Where as a result of an order u/s 147 or Section 154 or Section 155 or Section 250 or Section 254 or Section 260 or Section 262 or Section 263 or Section 264 or an order of the Settlement Commission under Sub-section (4) of Section 245D, the amount on which interest was payable under Sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the amount of the excess interest payable and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice u/s 156 and the provisions of this Act shall apply accordingly.
(2) On any portion of such amount which is refunded under this Chapter, interest shall be payable only up to the date on which the refund was made.
(3) This section and sections 215, 216 and 217 shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment year and, in the application of the said sections to the assessment for any earlier assessment year, references therein except in Sub-section (1A) and Sub-section (3) of Section 215 to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year."
"240. Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf:
Provided that where, by the order aforesaid,-
(a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment;
(b) the assessment is annulled, the refund shall become due only of the amount, if any of the tax paid in excess of the tax chargeable on the total income returned by the assessee.
(1) If the Assessing Officer does not grant the refund,-
(a) in any case where the total income of the assessee does not consist solely of income from interest on securities or dividends, within three months from the end of the month in which the total income is determined under this Act, and
(b) in any other case, within three months from the end of the month in which the claim for refund is made under this Chapter,
the Central Government shall pay the assessee simple interest at fifteen per cent. per annum on the amount directed to be refunded from the date immediately following the expiry of the period of three months aforesaid to the date of the order granting the refund ....
(2) Where any question arises as to the period to be excluded for the purposes of calculation of interest under the provisions of this section, such question shall be determined by the Chief Commissioner or Commissioner whose decision shall be final.
(3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment years.
244.(1A) Where the whole or any part of the refund referred to in Sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in Sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted:
Provided that where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted:
Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding:
Provided also that where any interest is payable to an assessee under this sub-section, no interest under Sub-section (1) shall be payable to him in respect of the amount so found to be in excess.
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 paid u/s 115WJ or collected at source u/s 206C or paid by way of advance tax or treated as paid u/s 199, during the financial year immediately preceding the assessment year, 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 from the 1st day of April of the assessment year 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 the tax as determined under Sub-section (1) of Section 115WE or 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 on which the refund is granted.
Explanation.-. . .
(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final.
(3) Where, as a result of an order under Sub-section (3) of Section 115WE or Section 115WF or Section 115WG or Sub-section (3) of Section 143 or Section 144 or Section 147 or Section 154 or Section 155 or Section 250 or Section 254 or Section 260 or Section 262 or Section 263 or Section 264 or an order of the Settlement Commission under subsection (4) of Section 245D, the amount on which interest was payable under Sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice u/s 156 and the provisions of this Act shall apply accordingly.
(4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years:
Provided that in respect of assessment of fringe benefits, the provisions of this sub-section shall have effect as if for the figures ''1989'', the figures ''2006'' had been substituted.
On a composite reading of the aforesaid sections it appears to us that the Legislature thought it fit that when the assessee is burdened with payment of interest on a delayed payment of tax there should be a corresponding provision for payment of interest in case any refund is made at a belated stage by the Revenue.
u/s 214 the Central Government was obliged to pay interest on the amount of advance tax during any financial year from April 1 of the next financial year to the date of regular assessment. This would mean that in the case of advance tax paid by an assessee in excess of the actual tax payable for a particular financial year he would be entitled to interest on such excess advance tax so refunded from April 1 of the next financial year till the date of regular assessment.
u/s 240 in case an order of assessment is modified so merged in the order of the appellate authority and any refund becomes due under such order the refund is to be made to the assessee without insisting upon an application to be made on that count.
u/s 243 in case the refund is not granted within the stipulated period the Central Government is to pay interest at the stipulated rate on the amount directed to be refunded from the date immediately on the expiry of three months period. However, if such delay is attributable to the assessee wholly or in part such period would be excluded and on such score the decision of the Chief Commissioner is considered to be final.
u/s 244(1A) when any amount paid by the assessee after March 31, 1975, and before April 1, 1989, in pursuance of an order tax or penalty is found in an appeal or other proceeding under the said Act in excess the amount to be found in excess would be refunded along with interest. However, no interest shall be payable on the said amount of refund if the money is refunded within one month from the date of passing of the said order.
u/s 244A which was introduced on April 1, 1989, the process of payment of interest was simplified to the extent that if any refund is made whether paid as advance tax or treated as paid u/s 199 interest would accrue on belated refund. The procedure as to how the interest would be calculated on refund, was simplified elaborately under various sub-sections of Section 244A. We, however, do not deal with such provision as most of the refunds in these two appeals are during the period April 1, 1975, and March 31, 1989, which is not covered by Section 244A.
Law on the subject so decided by the courts.
The parties cited the following decisions:
(i) Chloride India Ltd. Vs. Commissioner of Income Tax and Others,
(ii) Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another,
(iii) Commissioner of Income Tax Vs. Mohta Constructions Co., ;
(iv) CESC Ltd. Vs. Commissioner of Income Tax, and
(v) Deputy Commissioner of Income Tax and Others Vs. Central Concrete and Allied Products Limited and Another, .
(i) Chloride India Ltd. Vs. Commissioner of Income Tax and Others, : The words "regular assessment" in terms of Section 214 were defined by the learned single judge of this Court in this case where his Lordship held that obligation u/s 214 to pay interest on the advance tax would be calculated from 1st April from next financial year till the date of assessment made by the Income Tax Officer pursuant to the direction of the Appellate Assistant Commissioner. His Lordship explained that in case there was no appeal the regular assessment would be the assessment by the Income Tax Officer, however, when there was an appeal the order of reassessment so passed by the Income Tax Officer in terms of direction of the appellate authority would be the date of regular assessment.
(ii) Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, : The three-judge Bench decision of the apex court while dealing with the subject controversy virtually upset the decision of the learned single judge in the case of Chloride India Ltd. Vs. Commissioner of Income Tax and Others, Their Lordships interpreted regular assessment as an assessment made u/s 143 or 144 meaning thereby the original assessment and not any assessment made in terms of the order of the appellate authority. Their Lordships put emphasis on the definition as stipulated in Section 2(40) and held that regular assessment could only mean the original assessment made under Sections 143 and 144 and not for any other purpose. The decision in the case of Chloride India Ltd. Vs. Commissioner of Income Tax and Others, was virtually upset by the apex court in Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, . On the issue of interest the apex court in this judgment observed that if any refund is made as a result of any appeal or other order interest on such refundable amount should be paid u/s 244(1A) and not u/s 214. Their Lordships further held that with effect from April 1, 1985, interest payable u/s 214 would increase or decrease in accordance with the variation of the quantum brought about by orders passed.
(iii) Commissioner of Income Tax Vs. Mohta Constructions Co., : The Division Bench of the Rajasthan High Court held that interest is not allowable u/s 214 on the excess amount of tax deducted at source u/s 194C.
(iv) CESC Ltd. Vs. Commissioner of Income Tax, : By this decision the apex court affirmed the decision of this Court in the case of Calcutta Electric Supply Corporation Ltd. Vs. Commissioner of Income Tax, . While doing so the apex court observed that the first order of assessment u/s 143 or 144 would be a regular assessment and any order passed on the direction of a higher authority will not be a regular assessment as held by the learned single judge in the case of Chloride India Ltd. Vs. Commissioner of Income Tax and Others, . The apex court also observed that the date up to which interest u/s 214 has to be paid is the date of the regular assessment being the first order of assessment u/s 143.
(v) Deputy Commissioner of Income Tax and Others Vs. Central Concrete and Allied Products Limited and Another, : The Division Bench of this Court held that while interpreting a fiscal statute the court cannot invoke the principle of purposive construction by widening the scope of Section 214. The Division Bench held that the right to get interest on tax deducted at source is guided by Section 244A. The Division Bench, however, found that the subject assessment involved in the said appeal was not covered by Section 244A and as such the interest was not payable to the assessee.
Our view
Upon a close reading of the relevant sections including the preamble for introduction of Section 244(1A) as reported in [1976] 102 ITR 18, and introduction of Section 244A as reported in [1990] 182 ITR 48, we feel that u/s 214 interest was payable on advance tax refunded from the date of the next financial year till the date of the first assessment. The refund in appeal payable u/s 240 read with Section 243 was not guided u/s 214 and his Lordship was right in observing so. However, the subject controversy, in our view, was guided u/s 244(1A) during the period April 1, 1975, and April 1, 1989, and thereafter u/s 244A. Section 244A cured the lacunae as explained in the preamble. Most of the refund in the instant case was a result of the orders passed in terms of the order of the appellate authority after March 31, 1975, and before April 1, 1989. Hence, this was to be guided u/s 244(1A). The order impugned in the writ petition was passed by the authority expressing inability to pay interest in view of the provisions of Section 244A(4). The authority was right to the extent that since the period of assessment order was prior to April 1, 1989, the assessee was not entitled to interest u/s 244A(4). The authority, however, did not appreciate that the subject issue was covered u/s 244(1A) and not Section 244A. The authority should have examined the claim for refund u/s 244(1A) to find out whether the assessee was entitled to interest or not. Such attempt was not made while rejecting the prayer for refund. The matter proceeded on a wrong footing from the initial stage. The authority rejected the prayer on the ground that it was not covered u/s 244A(4). The assessee pressed its claim on the basis of a decision of this Court reported in Central Concrete and Allied Products Ltd. and Others Vs. Deputy Commissioner of Income Tax and Others, which was subsequently reversed in the case of Deputy Commissioner of Income Tax and Others Vs. Central Concrete and Allied Products Limited and Another, , where the challenge was made on the ground of discrimination with a prayer that the benefit of Section 244A should be also extended for the assessment order prior to April 1, 1989. Such view was earlier accepted by the learned single judge which was upset by the Division Bench subsequently. In the instant case the petitioner claimed refund for a period prior to April 1, 1989. Hence, in no stretch of imagination it could be covered by Section 244A which came into force on April 1, 1989. Before us Dr. Pal appearing for the assessee/appellant did not contend so. He fairly conceded that the subject controversy could only be examined u/s 244(1A) and not under either Section 214 or Section 244A. Before the learned single judge the appellant advanced the argument that the claim for interest was made u/s 214 as the refund was allowed on the basis of the order passed u/s 251. Argument was advanced that the benefit of Section 244A should be extended to the assessee in view of the decision in the case of Central Concrete and Central Concrete and Allied Products Ltd. and Others Vs. Deputy Commissioner of Income Tax and Others, . The learned judge after considering the rival contentions came to a conclusion that since Section 244A came after 1989 the benefit of such section could not be extended to the appellant. Such view of the learned judge is absolutely correct. The entire matter was proceeded with from the Departmental stage up to the learned single judge on a wrong footing. The subject controversy in our view is covered neither u/s 214 nor u/s 244A.
Law on the subject was decided by the apex court in the case of Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, . The summary of the said judgment as made by the apex court is quoted below (headnote):
The position that emerges from the above analysis can be summarised finally as under:
(i) Up to March 31, 1975, interest u/s 214 is payable from the first day of April of the relevant assessment year to the date of the first assessment order. The amount on which the interest is to be paid is the amount of advance tax paid in excess of the tax payable by the assessee as calculated in the regular assessment (the first assessment order). The amount on which interest was payable did not vary due to reduction or enhancement of tax as a result of any subsequent proceeding. But with effect from April 1, 1985, while the period for which interest was payable remained constant, the amount on which the interest was payable, varied with the variation in the quantum of refund as a result of any subsequent orders.
(ii) If any tax paid pursuant to an assessment order after March 31, 1975, (which will include tax deducted at source and advance tax to the extent the same has been retained and treated by the Income Tax Officer as payment of tax in discharge of the assessee''s tax liability in the assessment order), becomes refundable wholly or in part as a result of any appellate or other order passed, the Central Government will have to pay the assessee interest on the refundable amount u/s 244(1A). For the purpose of this section, the amount of advance payment of tax and the amount of tax deducted at source must be treated as payment of Income Tax pursuant to an order of assessment on and from the date when these amounts were set off against the tax demand raised in the assessment order, in other words the date of the assessment order.
(iii) With effect from April 1, 1985, interest payable u/s 214 will increase or decrease in accordance with the variation in the quantum of the excess payment of tax brought about by orders passed subsequent to the regular assessment as mentioned in Sub-section (1A).
Conclusion
To resolve the subject controversy we only reproduce the guidelines framed by the apex court quoted (supra).
We only add that the subject controversy would be guided u/s 244(1A) and the authority must reconsider the issue of payment of interest and examine the same u/s 244(1A) to find out whether the appellants were entitled to interest of refund or not. We wish to add further that tax deducted at source was also a tax paid and the refund so allowed at the appeal stage was a quantum which was paid and/or credited on account of the assessee in excess and we do not find any stipulation in the Act as to whether differential treatment was suggested in the case of tax deducted at source from the advance tax or tax paid by another mode. Tax deducted at source is credited to the assessee''s account on account of tax payable by him. Once the regular assessment is made it is considered as a tax paid and once refund is contemplated after an appellate order the amount of refund would be a composite sum which might contain a portion of the advance tax or tax deducted at source or tax paid by any other mode and interest on such amount would be guided in accordance with Section 244(1A) irrespective of its mode or source of payment.
The judgment and orders in both the appeals are quashed and set aside. The orders impugned in the writ petitions are quashed and set aside. Both the writ petitions are allowed. The concerned authority before whom the application for refund was made, are directed to consider the application for refund afresh applying the summary laid down in the case of Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, quoted supra and in the light of the observations made by us herein. Both the appeals are disposed of accordingly without any order as to costs.
Urgent xerox certified copy will be given to the parties, if applied for.
Tapan Mukherjee, J.
I agree.