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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI GAGAN GOYAL&
PER GAGAN GOYAL, A.M: These appeals by assessee are directed against the order of National Faceless Appeal Centre (NFAC), Delhi dated 17.01.2023 u/s. 250 of the Income
2 ITA No. 715/Mum/2023 & Others IDBI Bank Ltd. Tax Act, 1961 (in short ‘the Act’) for A.Y. 1994-95 and 1995-96 respectively. The assessee has raised the following grounds in ITA No. 715/Mum/2023 for AY 1994- 95:-
On the facts and in the circumstances of the case and in law, the ld. CIT(A) NFAC has erred in not granting opportunity to the Appellant Bank to present the case through video conferencing as specified under faceless appeal scheme, 2020 provided u/s. 250(6B) of the Income Tax Act, 1961 ("the Act")
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in holding that the interest granted u/s 244A in order dated 03.08.2009 could be rectified u/s. 154 on 20.03.2020 which was beyond the limitation period as per section 154(7).
2.1 Without prejudice to above contention, on the facts and in the circumstances of the case and in law, CIT (A) ought to have appreciated that the issue of method of computation of interest u/s. 244A is a highly legal and debatable issue and cannot be a matter of rectification u/s. 154 by wrongly construing the facts of the case.
On Merits
3.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the appellant is not entitled to interest u/s. 244A on the total refund due overlooking the specific provisions of the said section which provides for interest on "any amount" due.
3.2 On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in relying on the decision of Hon'ble Madras High Court in the case of Upasana Finance Ltd (TCA 1018 of 2014) where the issue was only remitted back to AO and failed to follow the direct decision of Hon'ble Karnataka High Court in case of Syndicate Bank (ITA 582 of 2013).
3 ITA No. 715/Mum/2023 & Others IDBI Bank Ltd. Your appellant craves leave to add, to amend and/or vary the grounds of appeal before or at the time of hearing.
The brief facts of the case are that assessee assessee is a banking company, filed its return of income on 13.11.1994 at a figure of Rs. 3, 611, 70, 5,680/-. Case of the assessee was selected for scrutiny and assessed u/s. 143(3) of the Act. Assessee being aggrieved with this order of AO, preferred an appeal(s), outcome of the appeal was in assessee’s favour and an order giving effect to appellate order was passed on 31.03.2016 determining total income at Rs. 3,142,05,4,292/-. In this appeal order giving effect order AO allowed interest to the assessee u/s. 244A of the Act at a figure of Rs. 1,504,7,40,044/- (Granting interest on interest) as against the figure of Rs. 1,180,6,48,910/- (Granting interest only on basic amount of refund). This as per AO resulted in excess payment of interest amounting to Rs. 32, 40, 91,134/-.
To cover this excess amount of interest granted, an order u/s. 154 of the Act was passed by the AO vide order dated: 20.03.2020 and excess amount of interest amounting to Rs. 32, 40, 91,134/- is withdrawn. Assessee being aggrieved with this order of AO u/s. 154 of the Act, preferred an appeal before the Ld. CIT (A), who in turn confirmed the order passed by the AO through his appeal order passed u/s. 250 of the Act. Assessee being further aggrieved with the order of Ld. CIT (A), preferred this present appeal before us.
We have gone though the order of AO, passed u/s. 154 of the Act alongwith calculation sheet annexed there with, Order of the Ld. CIT(A) and submissions of the assessee. It is observed that there is no question of fact is there before us and all the grounds raised and issue involved is absolutely a question of Law. For the
4 ITA No. 715/Mum/2023 & Others IDBI Bank Ltd. sake of clarity, we are reproducing the operative portion of Ld. CIT (A), which are as under:-
Jurisdiction “The issue of interest u/s. 244A arose in the order passed by AO on 24.11.2008 where the correct interest due was not granted. The appellant filed a rectification petition against the said order for grant of correct amount of interest u/s 244A. The AO passed an order u/s. 154, dated 03.08.2009 where AO accepted the appellants' submissions and granted the correct interest. A copy of the said order together with computation of interest is enclosed in annexure 1. While passing the order dated 31.03.2016 giving effect to the order of ITAT, the same method of computing the interest as was followed in the order dated 03.08.2009 was followed. A copy of the said order together with computation of interest is enclosed in annexure 2. A notice u/s. 154 was issued on 08.11.2019 proposing to rectify the purported mistake and reduce the interest granted u/s 244A.
The appellant submits that the order u/s. 154 dated 20.03.2020 passed is barred by limitation as the same was issued after 4 years from the end of the financial year in which the order originally granting interest u/s. 244A as per the correct method was passed. The order quantifying the correct interest was passed on 03.08.2009 and the same method of calculating the interest was followed in the order dated 31.03.2016 also. Accordingly, if at all any order u/s. 154 is to be passed, the same should have been issued before 31.03.2014 i.e., 4 years from the end of the financial year in which the order was passed as per the provisions of section 155(7). In the appellants case the order was passed only on 20.03.2020 and hence is beyond the limitation period as per the Act. Accordingly, it is submitted that the order needs to be struck down as invalid.
Without prejudice to the above, it is also submitted that the method of computation of interest is a highly legal and debatable issue and is accordingly, not a mistake apparent from records which can be rectified in the order u/s. 154 of the Act. Reliance for this view
5 ITA No. 715/Mum/2023 & Others IDBI Bank Ltd. is placed on the decision of Hon'ble Supreme Court in the case of T. S. Balaram Vs Volkart Bros (82 ITR 50) and other decisions.
In view of above, it can be said with certainty that order rectified u/s. 154 of the Act was passed on 31.03.2016 only, may be in continuity to earlier order passed u/s. 155(7) of the Act. But latest order was not under challenge by the assessee and duly accepted at that time. As per the jurisprudence latest order in continuation to or based on earlier order will substitute the later one. In that case order passed by AO u/s. 154 of the Act vide dated 20.03.2020 is found to be in order and not barred by any limitation as provided in section 154(7).With this reference Ground no. 2 raised by the assessee is dismissed.
Section 244A of the Income-tax Act, 1961 ("Act") provides a mechanism for grant of simple interest on refund of "any amount" which becomes due to the assessee under the Act. Ideally, the refund amount along with the interest under Section 244A of the Act should be paid together. But the taxpayers witness that the refund is granted either without interest under Section 244A of the Act or with interest which is less than the actual amount that is due under Section 244A. In such cases, a question arises, whether taxpayers are entitled to interest on delayed payment of such interest. This issue is far from settled. Taxpayer's entitlement to interest on interest has been dealt multiple times by the Courts (including the Supreme Court (SC). However, conflicting views have led to a lot of uncertainty.
The SC in Sandvik Asia Ltd., dealt with a case where the taxpayer received certain refunds from the Income-tax Department ("ITD"), without interest. The interest was later released to the assessee after a substantial delay of 12-17
6 ITA No. 715/Mum/2023 & Others IDBI Bank Ltd. years. The SC allowed interest for inordinate delay in payment of interest on refund to the assessee. The SC held that where amounts due to the assessee are wrongfully withheld, without the authority of law, then the taxpayer must be compensated. It was further held that the phrase "any amount" will also encompass interest on refund. Subsequently, a three-judge bench of the SC in H.E.G. Ltd., also held that interest accrued but not paid, partakes the character of the principal amount which gets covered under "amount due" under Section244A of the Act. However, the decision of the division bench of the SC in Sandvik (supra) was later re-considered and clarified by a three-judge bench of the SC in CIT v. Gujarat Fluoro Chemicals. The SC noted that Sandvik (supra) included a peculiar fact where refunds (including statutory interest) were released after an inordinate period of delay, thus causing great prejudice to the assessee. Hence, what was granted in Sandvik (supra) was mere compensation in the form of interest and the same cannot be construed as interest on interest. Based on this distinction, the SC in Gujarat Fluoro(supra)held that Section 244A of the Act envisages only statutory interest and not interest on such statutory interest.
In D.J. Works v. Dy. CIT [1992] 195 ITR 227/64 Taxman 91 (Guj.) and followed in Chimanlal S. Patel v. CIT [1994] 77 Taxman 277/ 210 ITR 419 (Guj.), the High Court held that though there is no specific provision for payment of interest on the interest amount refundable and which has been retained, once the interest amount becomes due, it takes the same colour as the excess amount of tax which is refundable on regular assessment. However, the Calcutta High Court, in Poddar Projects Ltd. v. Asstt. CIT [1999] 128 Taxman 832/ 240 ITR 572 declined to entertain the appeal on the ground that no substantial question of law arose from the order of the Tribunal holding that no interest on refund
7 ITA No. 715/Mum/2023 & Others IDBI Bank Ltd. of interest under section 244(1A) is payable. In Narendra Doshi v. CIT (Unreported) the Madhya Pradesh High Court followed the Gujarat High Court’s view and allowed interest on interest. The Supreme Court affirmed the Madhya Pradesh High Court’s decision in CIT v. Narendra Doshi [2002] 122 Taxman 717/ 254 ITR 606 without any discussion. It has impliedly approved the Gujarat High Court’s decision in D.J. Works’ case (supra). So many High Courts have ruled that interest is payable on refund of interest. When so many High Courts have held the same view, it appears preferable to follow the same view. However, fuelling the controversy, the Bombay High Court has recently held in Sandvik Asia Ltd. v. CIT [2004] 137 Taxman 167/ 267 ITR 78 that interest on interest is not allowable as there is no such provision in the Act. If we examine the Gujarat High Court’s decision in D.J. Works’ case (supra) which has been impliedly approved by the Supreme Court in Narendra Doshi’s case (supra), it is clear that interest was directed to be paid for wrongful withholding of refund even though there is no specific provision authorizing grant of such interest. The Bombay High Court has no doubt explained the Supreme Court’s decision in Sandvik Asia Ltd.’s case (supra) in great detail citing various rules of interpretation. Thereby the Bombay High Court has tried to explain the Supreme Court’s decision and distinguish the same. The holistic principle that the wisdom of the lower Court must yield to the wisdom of the higher Court appears to have been temporarily missed. For whatever reason the Supreme Court has upheld the Madhya Pradesh High Court’s decision, the fact remains that it approves of the principle that delayed refund of interest is entitled to interest for the period of delay.
8 ITA No. 715/Mum/2023 & Others IDBI Bank Ltd. 8. In view of above legal discussion based on various decisions of Hon’ble High Courts and Apex Court, it is amply clear that this involves a lot of confusion despite the fact that issue has reached till Hon’ble Supreme Court so many times and High Courts too, still conflicting views are there on both the sides, i.e., in favour of assessee and against the assessee. In this circumstance, we are agreed with the ground no. 2.1 raised by the assessee that issue is highly legal and debatable. Debatable issues can’t be considered in proceedings u/s. 154 of the Act. With this discussion, we are of the considered view that ground no. 2.1 raised by the assessee is entitled to be allowed and order passed u/s. 154 of the Act is liable to be set-aside.
In view of above, rest of the grounds raised by assessee became academic and no adjudication is required.
In the result, appeal of the assessee is partly allowed.
ITA No. 714/Mum/2023 for AY 1995-96
Since we have already decided the similar grounds of appeal raised by the assessee in ITA No. 715/Mum/2023 for AY 1994-94 and the facts of this appeal are exactly similar and are applicable to mutatis mutandis. Hence, this appeal of assessee is also partly allowed.
In the result, both the appeals of the assessee are partly allowed. Order pronounced in the open court on 7th day of August, 2023. Sd/- Sd/- (KULDIP SINGH) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, दिन ांक/Dated: 07/08/2023
9 ITA No. 715/Mum/2023 & Others IDBI Bank Ltd. Sr. PS (Dhananjay)
Copy of the Order forwarded to: अपील र्थी/The Appellant , 1. प्रदिव िी/ The Respondent. 2. आयकर आयुक्त CIT 3. दवभ गीय प्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 4. ग र्ड फ इल/Guard file. 5.
BY ORDER, //True Copy// (Asstt. Registrar) ITAT, Mumbai