THE COMMISSIONER OF INCOME TAX,COCHIN vs. M/S APOLLO TYRES LTD.,KOCHI-31.

Facts

The Revenue filed an appeal against an order of the Income Tax Appellate Tribunal (Tribunal) concerning assessment year 2001-02. The Assessing Officer (AO) initially held that Section 234D of the Income Tax Act, which provides for interest on excess refund, was not applicable as it was introduced prospectively from June 1, 2003. The Commissioner of Income Tax (Appeals) reopened the assessment under Section 263, finding the AO's order prejudicial to the Revenue and holding Section 234D applicable. The Assessee challenged this before the Tribunal, which upheld the Assessee's contentions, ruling Section 234D to be prospective. The Revenue, aggrieved by the Tribunal's decision, filed the present appeal before the High Court.

Held

The High Court held that the issue regarding the applicability of Section 234D was squarely covered by its previous decision in Commissioner of Income Tax vs. Kerala Chemicals and Proteins Ltd. [(2010) 323 ITR 584 (Ker)]. In that judgment, it was held that interest under Section 234D can only be levied with effect from June 1, 2003, which is the date of its introduction into the statute. This dictum was followed in a similar appeal, ITA No. 1468 of 2009. Consequently, the Court found no substantial question of law to invoke its powers under Section 260A of the Income Tax Act. The appeal filed by the Revenue was therefore dismissed.

Key Issues

1. Whether, in the absence of specific provisions, interest under Section 234D can be charged for the period prior to its introduction on June 1, 2003? (Question of law) 2. Whether the Tribunal was correct in holding that interest under Section 234D cannot be charged for the period from May 26, 2000, to June 1, 2003, especially in the absence of a finding that the issue was debatable? (Question of mixed law and fact) Assessee's contentions: The Assessee contended that Section 234D, being a new provision, is prospective in nature and therefore cannot be applied to periods prior to its effective date of June 1, 2003. The Tribunal's finding that the provision is prospective was supported by the Assessee. Revenue's contentions: The Revenue argued that Section 234D should be applicable and that the Assessing Officer's initial finding was prejudicial to the Revenue. They sought to invoke the provision for the period in question.