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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R
PER KUL BHARAT, J.M: This bunch of three appeals by the assessee pertaining
to assessment years 1973-74, 1974-75 & 1975-76 against
the order of Commissioner of Income Tax(Appeals)-I, Indore
dated 18/03/2016. Since the common issue is involved, all
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore these appeals are taken up together and are being disposed
of by way of consolidated order. First we take up the
assessee’s appeal in ITANo.696/Ind/2016 for A.Y. 1973-74
The assessee has raised following grounds of appeal:
“1. That the Ld. CIT(A) erred in dismissing assessee’s claim for interest on interest for which assesseewas eligible on account of gross and unreasonable delay in granting the refund.
That the Ld. CIT(A) erred in rejecting the calculation of interest submitted by the assessee before the Assessing Officer.
That the appellant graves leave to add or amend the aforesaid grounds of appeal at any time on or before the date of hearing of the appeal.”
Further, the assessee submitted on 19.11.2019 “1. That the ground no.1 in the Memo of appeal originally reads as under:
“that the Ld. CIT(A) erred in dismissing the assessee’s claim for interest for which assessee was eligible on account of gross and unreasonable delay in granting the refund”
That an application was made on 21.03.2017 to amend the aforesaid ground No.1 reads as under:
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore “ That the Ld. CIT(A) erred in dismissing the assessee’s claim for interest on interest and/or to pay compensation for delayed payment for which assessee was eligible on account of gross and unreasonable delay in granting the refund.”
That consequent to insertion of section (1A) in section 244(A) appellant desires to further amend the said ground No.1 as under:
“That the Ld. CIT(A) erred in dismissing the assessee’s claim for interest on interest and/or Additional interest for which the assessee is eligible as per sub-section (1A) of Section 244(A) and/or to pay compensation for delayed payment for which assessee is eligible on account of gross and unreasonable delay in granting the refund.”
The above ground could not be raised in the original Memo of appeal. However, this is necessary to raise this ground in the interest of justice. Hence this application.
It is therefore, prayed that the above amendment be permitted in the Memo of Ground of Appeals.
The facts giving rise to the present appeal are that the
assessee’s vide application dated 13.08.2008 made a
request for giving effect to the orders of the Ld. CIT(A) and
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore the Tribunal. The Assessing Officer vide order dated
27.02.2008 passed an order u/s 154 of the Act.
Against this the assessee has preferred an appeal before
the Ld. CIT(A) who after considering the submissions
dismissed the appeal by observing as under:
“The assessee is claiming interest on interest on two grounds namely there was inordinate delay by the department in issuing the refunds to the assessee and also because the ratio given by Hon'ble Supreme Court in Gujarat Fluoro vs. CIT was not applicable as in this judgment Hon'ble Hon'ble Supreme Court did not consider earlier three judge judgment in the case of CIT vs. NarendraDoshi.
Assessee’s first claim is there was inordinate delay in this case by the department. By assessee’s own admission out of provision for gratuity of Rs.34.34 lac, Rs.10.56 was not paid by the assessee before 31.03.1977. As the assessee did not pay the amount of provisions, the AO rightly invoked provisions of section 40A(7)b). Since the provision made was of Rs.34.34 lac, the AO disallowed entire provision. The assessee claimed that it had paid part of the provision hence the disallowance should have been restricted to the unpaid amount. The matter was debatable. The CIT(A) was not convinced with the assessee’s arguments hence the assessee has to file appeal before I.T.A.T. against CIT(A) order. I.T.A.T. vide its order dated 11.8.1992 gave relief to the assessee to the extent of amount paid 4
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore i.e. of Rs.20,79,031/-. Up to 1992 there was no delay on the part of the department as the time was consumed in legal process and perhaps refund has not arisen.
By its own admission the assessee filed application before CBDT for condonation of delay in making balance payment. CBDT issued order u/s 119(2)(c) on 16.07.1999. that means delay was on the part of the assessee at least upto Sept. 1999 and not on the part of the department.
Effect of CBDT’s order was given by the department in 2000. The AO did not allow interest u/s 244A. the AO passed the order on 1.7.2000 but the assessee filed an appeal against the order on 13.1.2003 i.e after a delay of two year and five months, obviously it was again a delay on the part of the assessee. The assessee filed an appeal before the CIT(A) seeking interest u/s 244A. There was only one ground of appeal before the CIT(A) that the AO erred in not granting interest on refund. CIT(A) passed order directing the AO to allow interest as per the law. CIT(A) did not direct the AO to give interest on interest.
The department was of the view that the appeal before Ld. CIT(A) against order giving effect to CBDT’s order was not maintainable. So department filed appeal before I.T.A.T. against the order of CIT(A) directing the AO to grant interest as per the law. The grounds of appeal field by the department before I.T.A.T. was as under:
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore i) In entertaining the appeal as the issue involved was of non-appealable nature.
ii) The appellant craves leave to add or deduct or otherwise amend the above ground of appeal.
I.T.A.T. vide its order dated 06.10.2006 dismissed department’s appeal. In the order I.T.A.T. has discussed in detail about the allow ability of interest u/s 244A on refund arising because of order of CBDT u/s 119(2)©. There is no mention of interest on interest in I.T.A.T.’s order also. The order u/s 154 was passed on 20.8.2007 giving interest on the principal as per the provisions of section 244A. As per the grounds of appeal before CIT(A) the only ground of appeal was the AO erred in not allowing interest on refund as a result of CBDT order u/s 119(2)(c). The assessee had not asked for interest on interest in the grounds of appeal before Ld. CIT(A). It was because of this reason the CIT(A) asked to the AO to give interest as per law. Section 244A provides for interest on principal. There is no provision of interest on interest in Income Tax Act.
So it can be said that there was no delay on part of the department till 2007 when interest on refund u/s 244A was given, rather the delay was always on the part of the assessee first in depositing the provision for gratuity then in seeking condonation of delay from CBDT and finally in filing appeal before CIT(A).
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore In view of this the first argument of the assessee fails.
Now coming to Hon'ble Supreme Court decision in the NarendraDoshi case, in this case the issue before the court was interest payable u/s214(1) of the Act. Section 214 provides for payment of interest if any installment of Advance Tax exceeds the amount of assessed tax.
Issue in the present case does not arise from excess payment of advance tax, hence section 214(1) is clearly not applicable.
Section 244A was inserted w.e.f 1.4.1989 which provides for interest on refunds under various contingencies. In NarendraDoshi case interest u/s244A was not an issue which was very much there in CIT vs. Gujarat Fluoro Ltd. Hence assessee’s argument that NarendraDoshi case was binding on 3 member bench of Hon'ble Supreme Court when it was deciding CIT vs. Gujarat Fluoro Ltd. is erroneous. In CIT vs. Gujarat Fluoro Ltd. Hon'ble Supreme Court was deciding interest on interest determined u/s 244A whereas in NarendraDoshi case issue before Hon'ble Supreme Court was interest u/s 214(1) of the I.T. Act.
In the case of CIT vs. Gujarat Flouro Ltd. Hon'ble Supreme court have held as under:
“Further it is brought to our notice that the Legislature by the Act No.4 of 1988 (w.e.f. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. We clarity that it 7
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest.”
In view of CIT vs. Gujarat Fluro Ltd. of the Apex Court it is held that no interest is payable on interest determined u/s 244A of the I.T. Act 1961.”
Against this the assessee is in present appeal.
The only effective ground is against rejecting the claim of
the assessee for granting interest on interest on the delayed
refund. Ld. counsel for the assessee reiterated the
submissions as made in the brief synopsis. For the sake of
clarity, the brief synopsis of the assessee is reproduced
hereunder:
The 3 appeals namely appeal nos. 696, 697 & 698 for the Asst. Years: 1973-74, 1974-75 & 1975-76 respectively raised common questions and therefore documents relating to the Ist Asst. year i.e., 1973-74 are being annexed for ready reference, while documents for the other 2 years are also available on record and may kindly be referred to, if required. Likewise, various calculation sheets are not being filed but only basic facts, submission of the appellant on these facts and the relevant case laws are submitted in this synopsis.
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore 2. For the Asst. Year 1973-74 the provisions of Income Tax Act relating to gratuity liability was as per section 40A (7) which required:
i) making of provisions for gratuity liability ii) creating an irrevocable trust fund iii) payment of 50% of gratuity provision amount before 31.3.76 and iv) payment of balance 50% amount before 31.3.1977.
The appellant made a provision of Rs. 31.34 lacs towards gratuity liability in this year, an irrevocable trust was created on 18.12.1975, application to CIT was made on 26.12.1975, an amount of Rs 17.52 lacs was also deposited by 31.3.1976. However, in the succeeding year the appellant could deposit only an amount of Rs. 3.26 lacs before March 1977. The balance amount could not be deposited due to reasons beyond control of the appellant, namely that due to order of the State Govt. the bank refused to release the amount required for such deposit although money was available in the account of the appellant. Consequently, after the State Govt gave concurrence a sum of Rs. 7.85 lacs was paid in October 1976 and Rs.2.71 lacs was paid in August 1977.
The above facts are set out in the order of CBDT dt. 16.7.1999 passed u/s 119(2(c) of the Income tax Act, condoning delay in deposit of the said amount.
During the relevant assessment the Assessing Officer refused to give credit to the appellant for even the amount of Rs. 20,79,031/- which had been deposited well within time. Consequently, the total gratuity provisions was disallowed which resulted in a tax liability on the appellant. Copy of the assessment order for AY 1973-74 is enclosed and marked as Annexure 1.
The appeal of the appellant before the CIT (Appeals) was unsuccessful. The matter ultimately travelled to ITAT 9
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore in MA 5/Ind/92. By order dt. 11.8.1992 the Tribunal gave relief to the extent of actual payment to the appellant. Copy of this order is enclosed and marked as Annexure 2.
The Assessing Officer gave appeal effect to this order on 15.9.1992 Soon after the order of Tribunal, assessee requested the CBDT u/s 119(2) of Income Tax Act to condone the delay in deposit of balance amount of Rs. 10,55,762/-. This delay was condoned by CBDT vide order dt. 16.7.1999. Copy of this order is enclosed and marked as Annexure 3.
The Assessing Officer gave effect to this order on 22.6.2000. Copy of this order is enclosed and marked as Annexure 4. Although the AO had decided refund of principal amount by order dt. 22.6.2000 however even this refund was only issued on 27.3.2002 i.e., after nearly 2 years. A perusal of this order dt. 22.6.2000 at internal page no. 3 would show that the appellant had already been made to pay an amount of Rs. 6 lacs towards demand for the Asst. year 1973-74. While allowing refund of the amount, the A.O.held that the appellant was not entitled to any interest on this refund. The A.O. also referred to the judgment reported in 188 ITR 137 that ‘interest ordinarily is as reckonable compensation when there is retention of the amount due, particularly for an unduly long period’. A.O. also referred to an English judgment that : ‘interest is damages due to delay in payment of money’. The appellant also relies on these observations in support of its claim for interest on interest as compensation.
Since the A.O. refused to grant interest on refund, the appellant was required to file appeals before CIT (A). Due to a technical oversight, the appeals were not signed by the competent person but were signed by another officer of the company. The appellant applied for withdrawal of these appeals and consecutively filed duly signed appeals 10
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore also. CIT (A) by order dt. 1.12.2004 allowed withdrawal of this appeal no. 285. Copy of this order is enclosed and marked as Annexure 5.
On the next day i.e. 2.12.2004 the duly signed appeals which had already been filed along with application for condonation of delay were allowed by CIT (A) holding that the appellant was entitled to interest on refund as per law. A copy of this order is marked Annexure 6.
The Revenue did not accept this order and challenged it before the ITAT. By order dt. 6.10.2006 ITAT dismissed the departmental appeal. A copy of this order is marked Annexure 7. The mater was not taken in further appeal by the Department and the order for grant of interest according to law became final. In other words it was accepted as correct.
From the above, it is clear that the direction of payment of interest according to law had become final and the phrase ‘interest according to law’, would include all forms of interest / compensation which may be due. The appellant could not have claimed any interest on interests prior to this because its claim for interest itself was being disputed by the department.
After the order of CIT (A) and ITAT the appellant made various approaches to the department for grant of interest accordingly to law e.g.,
i) Representation dt. 28.7.2005 to CIT (Grievance Cell) (a copy enclosed marked Annexure 8), ii) Application dt. 13.8.2007 and 20.8.2007 claiming interest and interest on interest (copy enclosed marked Annexure 9 & 10),
The AO issued first refund order on 20.8.2007 (a copy enclosed marked Annexure 11). 11
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore
The appellant had to move an application u/s 154 of Income Tax Act on 13.8.2007 claiming interest and interest on interest. The A.O. by order dt. 27.2.2008 allowed the refund of interest but disallowed the balance amount. (a copy of this order is enclosed marked as Annexure 12).
This order of A.O. dt. 27.2.2008 was the impugned order before CIT (A).
The A.O. had rejected appellant’s claim of interest for 3 consecutive assessment years by one single order dt.27.2.2008.
Consequently, one single appeal came to be filed against this order dt.27.2.2008 before the CIT (A). When this technical objection arose, the CIT (A) allowed the appellant to withdraw its common appeal by order dt. 29.3.2010. Soon thereafter 3 separate appeals were filed on 21.6.2010 which were ultimately decided by the impugned order of CIT (A) dt.18.3.2016 which is under challenge in the instant appeal. Copy of order of CIT (A) impugned in the appeal is enclosed and marked as Annexure 13.
In the appeals before the CIT (A) out of which the recent appeal to the Tribunal arises, the only question was with regard to payment of interest on interest in any form to the appellant.
II. Submissions of the appellant before CIT (Appeals):
i) That, there was inordinate delay in issuing refund to the appellant, thereby entitling the appellant to interest on interest.
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore ii) That, the claim for interest on interest was tenable in law in the light of 3 Judges judgment in the case of CIT Vs. Narendra Doshi and subsequent judgment of 2 Judges in the case of Sandvik Asia. It was also submitted that subsequently, the case of Gujrat Fluro V/s CIT failed to take into account the earlier judgment in the case of CIT Vs. Narendra Doshi and it did not even over- rule the judgment in Sandvik Asia but only sought to explain it. Therefore the judgment in Gujarat Fluro had to be read subject to 2 earlier Supreme Court judgments.
III. Findings of CIT (A):
a) That, the Assessing Officer did not make any mistake in disallowing the whole gratuity claim of Rs. 31.34 lacsinspite of deposit of Rs. 20,79,031/-. Since the ITA order granting relief to the extent of actual payment was only passed in 1992, therefore, there was no delay on the part of the department.
b) That, CBDT had condoned delay u/s 119(2)(c ) on 16.7.1999, therefore there was no delay on the part of assessee upto September 1999.
c) That, the appellant challenged the order dt. 22.6.2000 (received by appellant on 1.7.2000) by filing appeal on 13.1.03, thus there was a delay of 2 year 5 months on the part of the assessee.
d) That, the department did not accept order of CIT (A) granting interest according to law and had unsuccessfully challenged this order before the Tribunal which appeal was dismissed on 6.10.2006, after which interest on refund u/s 244(A) was given in September 2007, therefore there was no delay on the part of the department till 2007.
“Rather, delay was always on the part of the appellant. First, in depositing the provisions of 13
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore gratuity, then in seeking condonation of delay from CBDT and finally in filing appeal before the CIT (A)”.
Pausing here for a moment, CIT (A) has relied on only 3 circumstances to blame the appellant and to say that there was delay on the part of the appellant namely:
i) in depositing the provisions of gratuity ii) in seeking condonation of delay from CBDT iii) in filing appeal before CIT (A).
These are only 3 circumstances on which CIT (A) has relied in this order.
IV. Regarding assesssee’s contention that it was entitled to interest on interest in the light of Supreme Court judgment in case of Narendra Doshi and Sandvik Asia :
The CIT (A) tried to distinguish Narendra Doshi case by mentioning that interest in that case was u/s 214 (1) of the Act but in the instant case the claim was not under that section, therefore the judgment did not apply. CIT (A) further held that in view of subsequent judgment in case of CIT Vs. Gujarat Fluro interest on refund could only be granted according to section 244(A) which had been inserted w.e.f. 1.4.1989 and therefore no interest on interest payable u/s 244(A) of the Income Tax Act.
V. Submission of the appellant on the question of delay in payment of refund:
The first question that arises is whether there is any delay in making the refund. The appellant has given breakup of delay in its letter dt.20.8.07 to the CIT along with the working out chart, a copy of which is already annexed as Annexure 10. A perusal of this chart clearly brings out the delay in making the refund to the appellant.
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore 2. Whether there is any delay on the part of the appellant in this matter:
As per CIT (A) there was delay on the part of appellant. Firstly, in depositing the provision amount of gratuity. In this connection, it is submitted that as per law 50% of gratuity amount was required to be deposited by 31.3.76 and the same has been duly deposited. In the second year, the balance 50% amount could not be deposited in full but only partly, due to refusal of bank to release the amount inspite of there being funds in the account of the appellant. Thus, this delay could not be said to be a delay on the part of the appellant.
The second delay mentioned in the order of CIT (A) is in seeking condonation of delay from CBDT. In this connection it is submitted that it was only on 11.8.1992 by Annexure 2 that Tribunal gave relief to the extent of payment namely Rs. 20,79,031/- that the appellant could move CBDT for condonation of delay in depositing the balance amount, thereafter the application remained pending before CBDT due to procedural steps. Invariably CBDT sought response of department to this application which was also delayed and in any event the delay in the matter due to pendency of application before CBDT could not be said to be delay on the part the appellant.
The third delay on which CIT (A) relies is the delay in filing appeal before CIT (A) in as much as the order of A.O. was passed on 22.6.2000 (1.7.2000) but the appeals were filed on 13.1.03. This point has already been clarified in para 8 above. The appeal against order dt. 22.6.2000 (1.7.2000) was signed by Senior Officer of the company and not by Competent person. Consequently, when this question arose, the appeals were withdrawn and fresh appeals were filed and at the most there could be attributed delay of 2 years 5 months due to this bonafide technical procedural non-observance.
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore From the above facts, it is clear that there has been a delay in payment of refund to the appellant and the appellant could not be blamed for this delay.
The third question which arises is whether there was inordinate delay on the part of the department in making the refund. A perusal of the facts of this case would show that the department has consistently been at fault in the matter. First of all, inspite of having made a deposit of Rs. 20,79,031/- towards gratuity provisions, the appellant was not given credit for this amount by the A.O. and ultimately the matter had travelled to ITAT. By order dt. 11.8.1992, credit for this amount was given. Significantly, this order of ITAT was not challenged by the department, which means that the department accepted this order, in other words conclusion of ITAT in the order Annexure 2, that appellant was entitled to benefit of gratuity provision amount actually deposited, was correct and the contrary view of the department in the assessment order was incorrect. Because of this incorrect view of the department the appellant was compelled to deposit an amount of Rs. 6 lacs which was the starting point of dispute and the total claim of refund and interest on refund and interest on interest, all arose because of the department’s mistake in not giving credit of the deposit amount of Rs. 20,79,031/- to the appellant at the initial stage.
The appellant had been claiming interest on refund according to law.
The refund due to the appellant on account of CBDT order Annexure 3 was only issued 2 years after the A.O. had passed order Annexure 4 on 22.6 .2000.
Although, the appellant was entitled to interest according to law on the amount of refund, the A.O.by order Annexure 4 refused to grant interest on refund. This mistake was required to be got corrected by filing appeal before CIT (A) 16
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore which was allowed on 2.12.2004. Instead of admitting the mistake and complying with the order, the Revenue chose to challenge the order before Tribunal which dismissed the departmental appeal. This judgment of Tribunal was accepted by the department and was not challenged before the High Court. Thus, the department wrongly refused claim of interest under order Annexure 4 and wrongly contested the matter not only before CIT (A) but even before ITAT thereby causing further delay. Even after order of CIT (A) and ITAT the appellant was required to make various approaches to the department as per Annexure s 8,9 and 10 .
Since 2007, the claim of the appellant for interest on interest is pending before the department i.e., for more than 11 years by this time.
Form the above, it is clear that there has been inordinate delay on the part of the department in the matter. Unfortunately, the learned CIT (A) has not considered this aspect of the matter and has only tried to pass on the blame for delay on the appellant, while the actual blame for delay was squarely on the department.
VI. Submission on Questions of Law:
i) Once it is established that there was inordinate delay in payment of refund and interest on refund to the appellant, the second question arises as to whether the appellant could claim interest on this amount whether by way of interest on interest or as compensation.
The learned CIT (A) tried to distinguish the earlier Supreme Court Judgments and disposed of the matter by observing that after coming into force of section 244 (A) w.e.f.1.4.1989 no question of interest arose, except where it was provided by this section. Section 244 (A)(4) provides as follows:
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore “ Section 244(A)(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”.
Thus, this section only applies in respect of assessment for assessment year commencing on or after 1.4.1989. In the instance case the dispute relates to the years 1973-74, 74-75, 75-76 and thus, section 244(A) has no application whatsoever. This aspect of the matter has apparently not been considered by CIT (A).
VII. WITH REGARD TO DECIDED CASES:
In the case of NarendraDoshi the order of High Court specifically granted interest on interest (a copy of the order is marked Annexure 14).
In appeal Supreme Court dismissed the departmental appeal upholding MP High Court order and also observing that similar judgments passed in other cases had not been challenged by the department (a copy of the order is marked Annexure 15).
Judgment in case of Narendra Doshi did not depend on the section under which refund was being granted.
Thereafter, in the judgment a Sandvik Asia (a copy of the order is marked Annexure 16) clearly turned on the fact that there was inordinate delay in making refund to the assessee and therefore the assessee was entitled to be compensated by way of interest on interest , in other words the grant of interest on interest in Sandvik Asia was in the nature of compensation.
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore Supreme Court in the case of Gujarat Fluro (copy enclosed marked asAnnexure 17) did not refer to CIT Vs Naraendra Doshi and did not over rule Sandvik Asia’s case, but merely expressed that Supreme Court had granted compensation in that case looking to the circumstances of the case. The law is well settled that if there is a 3-Judges judgment of the Supreme Court, it cannot be overruled or passed by any subsequent Bench of 2 or 3 Judges. In the event of a conflict between two judgments of 3-Judges Benches, the earlier one has to be followed.
A passing reference was made to section 244 (A) but the case was not decided on that basis. Thus, in Gujarat Fluro case Supreme Court has not held that interest on interest cannot be granted as compensation but inferentially held that it could be granted only as compensation. From the above, it is clear that the order of CIT (A) is erroneous on facts as well as law. 6. Ld. Departmental Representative (Ld. DR) opposed the
submissions and supported the orders of the authorities
below. Ld. D.R. placed reliance on the judgement of
Hon'ble Supreme Court of India in the case of CIT Vs.
Gujarat Fluoro Chemicals (2014) 42 taxmann.com 1 (SC).
In rejoinder Ld. counsel for the assessee has also placed
reliance on the judgment of the Hon'ble Supreme Court
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore rendered in the case of Sandvik Asia Ltd. Vs. S.M. Soni &
Ors in Civil Appeal No.1887 of 1992.
We have heard the rival submissions, perused the
materials available on record and gone through the orders
of the authorities below. Presently, section 244A of the Act
governs payment of interest on refund due. This provision
of law came on the statute book w.e.f. 1.4.1989. However,
section 244 of the Act was on the statute book even prior to
section 244A of the Act. As per this section, the refund
was required to be paid within a period of 3 months from
the end of the month in which the order is passed in appeal
or other proceedings. Ld. Counsel for the assessee has
heavily relied upon the judgement of the Hon'ble Supreme
Court, which was rendered in the case of CIT Vs. Narendra
Doshi (supra), the judgement dated 26.7.2001. Ld.
Counsel has also placed reliance on the judgement of the
Hon'ble High Court of Madhya Pradesh rendered in the
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore Income Tax reference No.5 of 2016 to buttress the
contention that the courts have been allowing interest on
interest. We find that the controversy regarding claim of
interest on interest in respect of the refund due has been
decided by the Hon'ble Supreme Court in the case of
CIT Vs. Gujarat Flouro Chemicals (supra). The Hon'ble
Supreme Court after considering the judgement in the case
of Sandvik Asia Ltd. clarified as under:
“Further it is brought to our notice that the legislature by the Act No.4 of 1988 (w.e.f. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest.”
It is the contention of the assessee that the Hon'ble
Apex Court did not consider its judgement rendered in the
case of CIT Vs. Narendra Doshi 259 ITR 606, wherein the
Hon'ble Apex Court held as under:
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore “The question that the High Court was called upon to answer read thus: “Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in law in upholding the order of the Deputy Commissioner of Income-tax (Appeals), Indore, directing to allow interest on interest, when the law points for grant of simple interest only?” It answered it in the affirmative and in favour of the assessee relying upon the judgements which laid down that interest was payable on the excess amount paid towards income-tax. The Tribunal, whose decision the High Court affirmed, had relied upon the decision of the Gujarat High Court in the case of D.J. Works Vs. Deputy CIT (1992) 195 ITR 227, which had been followed by the same High Court in Chimanlal S. Patel V. CIT (1994) 210 ITR 419. These decisions hold that the Revenue is liable to pay interest on the amount of interest which it should have paid to the assessee but has unjustifiably failed to do. The Revenue has not challenged the correctness of the two decisions of the Gujarat High Court. They must, therefore, be bound by the principle laid down therein. Following that principle, the question has as we find, been rightly answered in the affirmative and in favour of the assessee. The civil appeal is dismissed. No order as to costs.”
From the above, it is clear that Hon'ble Apex Court did
not rule on the correctness of the decision directing the
payment of interest on interest on refund due. Appeal of
revenue was dismissed on the sole ground that it did not
challenge the correctness of the two decisions of the
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore Hon'ble Gujarat High Court therefore, bound by the
principle laid therein. Ld. Counsel for the assessee had
submitted that the later judgement by the Hon'ble Supreme
Court did not consider this earlier order rendered by it by
its 3 Judges bench of Hon'ble Court. It is noteworthy that
the Hon'ble Apex Court in the later judgement in the case
of CIT Vs. Gujarat Fluoro Chemicals (supra) considered the
judgement of Hon'ble High Court, which were referred
before the Hon'ble Apex Court in the case of CIT Vs.
Narendra Doshi (supra), wherein the Hon'ble Supreme
Court dismissed the civil appeal filed by the revenue on the
sole ground that revenue had not challenged the
judgements of Hon'ble High Court of Gujarat in the case of
D.J. Works V. Dy. CIT 195 ITR 227 & Chimanlal S. Patel V.
CIT 210 ITR 419. It is noticed that both these judgements
were referred before the Hon'ble Supreme Court in the case
of Sandvik Asia Ltd. Vs. S.M. Soni & Others. (supra). The
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore Hon'ble Supreme Court in the case of CIT Vs. Gujarat
Flouro Chemicals (supra) after considering the judgement
ruled that assessee can claim only statutory interest.
Further, it is noticed that facts of the case laws as relied by
the assessee are clearly distinguishable. As in those cases
there was an excess payment of tax and there was
inordinate delay by the revenue for making payment for
refunding the amount u/s 214 of the Act. But in the
present case, admittedly, the claim for refund is
crystallized only after decision of the Tribunal and the
application is made by the assessee to the CBDT for
condonation of delay. Under these undisputed facts, we
find no infirmity in to the order of the Ld. CIT(A) rejecting
the claim of the assessee. However, before parting, we wish
to clarify that from the facts of the present case, it cannot
be inferred that delay was solely attributable to the
assessee. In our view, the revenue authority should settle
ITA Nos.696 to 698/Ind/2016 M/s. Hope Textiles Ltd., Indore the claim of the refund expeditiously to avoid unnecessary
litigation and harassment to the tax payer. The grounds
raised in this appeal are dismissed.
As the grounds and the facts are identical in other appeals i.e in ITA No.697/Ind/2016 & 698/Ind/2016 for the assessment years 1974-75 & 1975-76 respectively, the decision rendered in ITA No.696/Ind/2016 pertaining to the A.Y. 1973-74 would apply to these appeals as well. Therefore, following our decision in ITA No.696/Ind/2016, the grounds raised by the assessee in ITA Nos.697/Ind/2016 and 698/Ind/2016 are also dismissed. 12. In the result, all the appeals filed by the assessee are dismissed. Order was pronounced in the open court on 19.11.2019.
Sd/- Sd/- (MANISH BORAD) (KUL BHARAT) ACCOUNTANT MEMBER JUDICIALMEMBER
Indore; �दनांक Dated : 19/11/2019 Patel/P.S & VG/SPS Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. B By order
Assistant Registrar, Indore 25