Whether refund of Self-Assessment Tax is entitled to interest u/s 244A?

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

WRIT PETITION NO.823 OF 2000

The Stock Holding Corporation of India Ltd.

Petitioner.

Versus.

N.C. Tewari, the Commissioner of Income Tax,

Mumbai City III &Ors.

Respondents.

Mr. Jitendra Jain a/w Ms. SanidhaVed Pathak, i/b. M/s. Maneksha & Sethna, for the Petitioner.

Mr. Arvind Pinto, for the Respondents.

CORAM : M.S. SANKLECHA AND

S.C. GUPTE, JJ.

DATE OF PRONOUNCEMENT: 17 NOVEMBER 2014

Oral Judgment (M.S. Sanklecha, J.) :

The challenge in this petition is to the order dated 28September 1999 passed by the Commissioner of Income Tax under Section 264 of the Income Tax Act, 1961 (“the Act”). The impugned order holds that no interest is payable under Section 244A(1)(b) of the Act on the refund of excess amount paid as tax on self-assessment under Section 140A of the Act.

2. The Assessment Year involved in Assessment Year 1994-95.

3. Briefly, the facts leading to this petition, are as under :

(a) On 23 November 1994, the petitioner filed its return of Income for Assessment Year 1994-95declaring a total income ofRs.13.12 crores. The tax payable on the declared income was Rs.6.79crores. The petitioner paid the tax by way of advance tax and credit fortax deducted at source. However as there was still a shortage of tax payable, the petitioner paid Rs.2.60 crores on 31 August 1994 as and byway of tax on self-assessment. The challan evidencing the payment of the tax on self-assessment was annexed along with the Return of Income.

(b) On 31 December 1996 the Assessing Officer completed the assessment for Assessment Year 1994-95under Section 143(3) of the Act. The above order dated 31 December 1996 determined the petitioner's income at Rs.15.27 crores. Consequent to the above, a notice of demand under Section 156 of the Act was issued to the petitioner raising a demand of Rs.1.76 crores. It appears that the demand ofRs.1.76 crores was set off against the refund due to the petitioner for Assessment Year 1995-96.

(c) Being aggrieved, the petitioner carried the matter in appeal to Commissioner of Income Tax(Appeals) (CIT)(A). On 11 September1997, the CIT(A) substantially allowed the petitioner's appeal.

(d) Consequent to the above, by an order dated 20 October1998, the Assessing Officer gave effect to the order dated 11 September1997 of the CIT(A). As a result of giving effect to the order of the CIT(A), the petitioner was granted a refund of Rs 2 crores (tax ofRs.1.71 crores and interest of Rs.29 lacs). However, no interest interalia was granted on Rs.18.24 lacs from the date of payment of tax on self-assessment, i.e. 31 August 1994 till the date of refund i.e. 24 October1998.

(e) Thus the petitioner preferred a Revision Application to the Commissioner of Income Tax under Section 264 of the Act. In its Revision Application the petitioner sought total interest of Rs.42.87 lacs. This comprised of interest of Rs.33.75 lacs payable on refund of Rs.1.53crores (adjustment of Refund for A.Y. 1995-96to meet demand for A.Y.1994-95)and interest of Rs.9.12 lacs payable on refund on tax ofRs.18.24 lacs (being the tax paid on self-assessment for A.Y. 1994-95).

(f) On 28 September 1999, the Commissioner of Income Tax partly allowed the petitioner's Revision Application to the extent it directed payment of interest on Rs.1.53 crores adjusted out of refund for A.Y. 1995-96to meet the tax demand for A.Y. 1994-95.However it rejected the petitioner's claim for interest of Rs.9.12 lacs being the interest on refund of tax paid on self-assessment of Rs.18.24 lacs.

4. For better appreciation of the rival contentions, it isnecessary to reproduce Section 244A of the Act, which reads as under :

“Interest on refunds

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 206C or] paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one percent 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 subsection(1) of section 143 or] on regular assessment;

(b) in any other case, such interest shall be calculated at the rate of one percent 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 – For the purposes of this clause, “date of payment of tax or penalty” means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.

(2) .................

(3) ................

(4) .................”

5. Mr. Jitendra Jain, learned counsel appearing for the petitioner in support submits as under :

(a) The issue of grant of interest is no longer resintegrain view of the decision of the Supreme Court in Union of India v/s Tata Chemicals [2014] 363 ITR page 658. Thus, the revenue should be directed to grant interest on the excess amount paid as tax on self-assessment under Section 140A of the Act;

(b) Section 244A (1) of the Act provides that refund of any amount due under the Act to the assessee would entitle the assessee to receive the same along with interest. This would govern refund granted both under clauses (a) & (b) of subsection(1) of Section 244A of the Act. Section 244A(1)(a) would govern refunds out of Advance tax and tax deducted at source while Section 244A(1)(b) of the Act would govern all other refunds including tax paid on self-assessment. This view is also supported by CBDT Circular No.549 dated 30 October 1989;

And

(c) The explanation to Section 244A(1)(b) would have no application to the present facts. This is particularly so as no amount has been paid in excess of the demand specified under Section 156 of the Act.

To read the full judgment, please find the attached file :

Attached file:

http://bombayhighcourt.nic.in/generatenewauth.php?auth=cGF0aD0uL2RhdGEvanVkZ2VtZW50cy8yMDE0LyZmbmFtZT1PU1dQNzE5MDAucGRmJnNtZmxhZz1O