UNION OF INDIA THROUGH DIRECTOR OF INCOME TAX vs. M/S TATA CHEMICALS LTD.

CIVIL APPEAL No. 6301/2011Supreme Court[2014] 3 S.C.R. 29826 February 2014Bench: 2 JudgesAuthor: H.L. DATTU, S.A. BOBDE B24 pages
AI SummaryDismissed

What were the facts?

The Supreme Court was considering a batch of appeals concerning the Union of India (Revenue) and M/s Tata Chemicals Ltd. (Assessee/Deductor). The assessment years in question were on and after April 1, 1989. The core issue revolved around the Revenue's liability to pay interest on tax refunds made to a resident/deductor under Section 240 of the Income Tax Act, 1961. The appeals arose from judgments of the High Court of Judicature at Bombay. The specific context involved excess tax deducted at source by a resident deductor under Section 195, which was subsequently ordered to be refunded.

What did the Supreme Court hold?

The Supreme Court held that the Revenue is legally responsible for payment of interest on tax refunds made to a resident/deductor under Section 244A of the Income Tax Act, 1961. The Court emphasized that the language of Section 244A is precise, clear, and unambiguous, granting a substantive right to interest on refunds. The Court reasoned that the object behind Section 244A is to compensate for money remaining with the government, and there is no reason to restrict this benefit solely to assessees, excluding resident/deductors who have deposited excess tax. The obligation to refund money received and retained without right implies a corresponding right to interest. Regarding the period for which interest is payable, the Court held that since the present case did not fall under clause (a) or (b) of Section 244A, and the payment was not made pursuant to a notice under Section 156, interest is payable from the date of payment of tax, as per the opening words of clause (b) referring to 'as in any other case'. The Court affirmed that CBDT Circulars issued under Section 119 are binding on income tax authorities, even if they deviate from the Act, provided they mitigate the rigour for the benefit of the assessee. The appeals were dismissed.

What were the issues?

1. Whether the Revenue is legally responsible under Section 244A of the Income Tax Act, 1961, for payment of interest on the refund of tax made to a resident/deductor under Section 240 of the Act? Assessee's Contentions: The assessee argued that Section 244A clearly mandates payment of interest on refunds. They contended that the object of Section 244A was to compensate for money retained by the government, and this benefit should extend to resident/deductors who have deposited excess tax. They relied on the principle that the obligation to refund money received without right carries with it the right to interest. They also pointed to CBDT Circulars clarifying the purpose of Section 244A. The assessee argued that interest should be payable from the date of payment of tax when the case does not fall under specific clauses (a) or (b) of Section 244A. Revenue's Contentions: The judgment does not explicitly record the Revenue's arguments. However, the appeals filed by the Union of India suggest they contested the entitlement to interest or the period from which it should be calculated.

Which sections of the Income-tax Act were involved?

Section 244-A,Section 240,Section 195,Section 119,Section 156

AI-generated summary — verify with the full judgment below

A B c [2014] 3 S.C.R 298 UNION OF INDIA THROUGH DIRECTOR OF INCOME TAX v. M/S TATA CHEMICALS LTD. (Civil Appeal No. 6301 of 2011 etc.) FEBRUARY 26, 2014 [H.L. DATTU AND S.A. BOBDE, JJ.] INCOME TAX ACT, 1961: s.244-A - Liability of Revenue for payment of interest on refund of tax made to resident/deductor uls 240 - Held: The language of s. 244-A is precise, clear and unambiguous - Sub-s. (1) of s.244A speaks of interest on refund of the D amounts due to an assessee under the Act - Assessee is entitled for the said amount of refund with interest thereon as calculated in accordance with clauses (a) and (b) of sub-s. (1) of s.244A - In calculating the interest payable, the Section provides for different dates from which the interest is to be calculated - Interest payment to assessee is a statutory E obligation and non-discretionary in nature - s. 244-A grants substantive right of interest and is not procedural - The principles for grant of interest are the same as under the provisions of s.244 applicable to assessments before 01.04.1989, albeit with clarity of application as contained in F s. 244A - Department has also issued Circular clarifying the purpose a

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