COMMISSIONER OF INCOME TAX vs. M/S. HYNOUP FOOD & OIL INDUSTRIES LTD.

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TAXAP/1959/2006HC GujaratGJHC24038921200606 August 2008Bench: HONOURABLE MR. JUSTICE K.A.PUJ,HONOURABLE MR. JUSTICE BANKIM.N.MEHTA7 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Appellate Tribunal was right in dismissing the Revenue's appeals. Regarding the first issue concerning the low tax effect, the Court answered the question in the affirmative, in favour of the assessee and against the Revenue, noting that this issue was heard at length and decided in favour of the assessee. The Court also took the same view in other group matters. Concerning the second issue, the Court found that the Tribunal had followed the Supreme Court's decision in Sandvik Asia Ltd. Vs. CIT & others. Since the issue of interest on interest was concluded by the Supreme Court's decision, the Court decided this issue in favour of the assessee and against the Revenue, affirming that the Tribunal was correct in confirming the CIT(A)'s order directing the Assessing Officer to grant interest on interest withheld for the period claimed. The appeals were dismissed.

What were the facts?

The Revenue filed five Tax Appeals against the Income Tax Appellate Tribunal's (ITAT) orders for assessment years 1989-90 to 1992-93 and 1994-95. The assessee, M/s. Hynoup Food & Oil Industries Ltd., had applied under Section 154 for balance interest on a refund of Rs. 2,73,23,200, which was issued in November 2001 after a stay. The Assessing Officer calculated interest only up to December 31, 2000, leading the assessee to claim interest for the subsequent 10 months. The CIT(A) directed the Assessing Officer to grant this interest, relying on this Court's decision in D.J. Works Vs. DCIT. The ITAT confirmed the CIT(A)'s order, dismissing the Revenue's appeals.

What were the issues?

1. Whether the Appellate Tribunal was right in law and on facts in dismissing the Revenue's appeal without adjudicating on merits, solely on the ground of low tax effect (below Rs. 1 lakh) as per CBDT instructions, thereby precluding a decision on merits? (Question of law and fact, concerning the maintainability of appeal based on tax effect and CBDT instructions). 2. Whether the Appellate Tribunal was right in law and on facts in confirming the CIT(A)'s order directing the Assessing Officer to grant interest on interest withheld for the period claimed by the assessee? (Question of law, concerning the entitlement to interest on withheld interest under Section 244A). Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The Revenue contended that the ITAT erred in dismissing the appeal due to low tax effect and in confirming the CIT(A)'s order regarding interest on interest. The Revenue's appeals were admitted on these substantial questions of law.

Which sections of the Income-tax Act were involved?

Section 260A,Section 154,Section 244A

AI-generated summary — verify with the full judgment below

TAXAP/195720/2006 1/7 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1957 of 2006 To TAX APPEAL No. 1961 of 2006 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ HONOURABLE MR.JUSTICE BANKIM.N.MEHTA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX - Appellant(s) Versus M/S. HYNOUP FOOD & OIL INDUSTRIES LTD. - Opponent(s) ========================================================= Appearance : MR MANISH R BHATT for Appellant(s) : 1, RULE SERVED for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE K.A.PUJ and HONOURABLE MR.JUSTICE BANKIM.N.MEHTA Date : 06/08/2008

TAXAP/195720/2006 2/7 JUDGMENT ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE K.A.PUJ) 1. The Revenue has filed these five Tax Appeals under   Section   260A   of   the   Income   Tax   Act, 1961 for the assessment year 1989­90 to 1992­ 93   and   1994­95   proposing   to   formulate   the following substantial questions of law. “(A) Whether the Appellate Tribunal is right in law and on facts in dismissing the appeal filed by the Revenue without adjudicating the same on merits on the ground that since in the appeal, the   effect   was   below   Rs.1   lakh,   the   revenue could  not  have   preferred  the  same  in  view  of instructions of the CBDT, thereby entitling the Hon'ble   Tribunal   not   to   decide   the   same   on merits ? (B) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) directing the Assessing Officer to grant   interest   on   interest   withheld   for   the period claimed by the assessee ?” 2. This   Court   has   admitted   all   the   five

TAXAP/195720/2006 3/7 JUDGMENT Appeals on 6.8.2007 and formulated the same questions of law. 3.   The brief facts of the case are that the assessee company filed an application under Section 154 of the Act wherein the Company has contended that it was granted a combined refund of Rs.2,73,23,200/­ for A.Y. 1989­90 to   1992­93   and   1994­95   after   appeal   effect which   was   stayed   upto   30.9.2001   by   the learned   CIT   and   refund   of   Rs.2,37,23,200/­ was issued in November, 2001 wherein interest under Section 244A was calculated only upto 31.12.2000 as a result of which the assessee had not received interest upto the date of issue   of   refund.     The   assessee,   therefore, requested to issue the balance interest under Section 244A for 10 months from 1.1.2001 to 31.10.2001   for   A.Y.   1989­90   to   1992­93   and 1994­95.  This claim was not accepted by the Assessing Officer.

TAXAP/195720/2006 4/7 JUDGMENT 4.  Being   aggrieved   by   the   said   order   the Assessee   preferred   an   appeal   before   CIT(A) and the CIT vide its order dated 27.11.2002 directed   the   Assessing   Officer   to   give interest on interest withheld for the period claimed.     Following   the   decision   of   this Court in the case of D.J.Works Vs. DCIT 195 ITR 227 (Guj.) the learned CIT observed that the   interest   was   payable   on   refund   arising due   to   appellate   order.     The   interest   was also determined and quantified by the order giving   effect   to   the   appellate   order.   Thus what was withheld included both the tax and the interest payable by the government.  The interest   which   was   payable   on   the   refund cannot   be   retained   without   payment   of interest   thereon   and   accordingly   direction was given to the Assessing Officer to grant such interest. 5.  Being   aggrieved   by   the   said   order   of   the learned CIT(A) the Revenue took up the matter

TAXAP/195720/2006 5/7 JUDGMENT before   the   Income­Tax   Appellate   Tribunal, Ahmedabad   and   the   Tribunal   vide   its   order dated   30.3.2006   confirmed   the   order   of   the learned CIT(A) and the Appeals filed by the Revenue were dismissed both on the basis of preliminary objection as well as on merits.

6.

Before the Tribunal a preliminary objection was   raised   on   behalf   of   the   assessee   that there   being   low   tax   effect   the   Revenue's Appeals are not maintainable.   The Tribunal has,   however,   observed   that   apart   from   the low tax effect the issue is squarely covered by the decision of the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. Vs. CIT & others (2006) 280 ITR 643 (SC) wherein the Hon'ble Supreme Court has observed that the assessee   was   entitled   to   interest   on   the amount   of   interest   paid   under   Section   214 and/or   Section   244   of   the   Act   and   the Department was bound to grant interest which had accrued for those periods.

TAXAP/195720/2006 6/7 JUDGMENT 7.  We   have   heard   Mr.Manish   Bhatt,   learned Senior   Standing   Counsel   for   the   Revenue. Despite   service   of   rule   nobody   appears   on behalf of the assessee.  We have also perused the   order   passed   by   the   authorities   below. The   question   regarding   low   tax   effect   was heard at great length and we have decided the said issue in favour of the assessee.   The question No.(A) formulated by this Court is, therefore, answered in affirmative, in favour of the assessee and against the Revenue.  We have also taken the same view in other group matters.

8.

So far as question No.(B) is concerned, the Tribunal   has   followed   the   decision   of   the Hon'ble Supreme Court.   Since the issue is concluded   by   the   decision   of   the   Hon'ble Supreme   Court,   we   decide   the   said   issue regarding   grant   of   interest   on   interest   in favour   of   the   assessee   and   against   the

TAXAP/195720/2006 7/7 JUDGMENT Revenue.  The question No.(B) is, therefore, answered in affirmative and the Tribunal is right in confirming the order of the learned CIT directing the Assessing Officer to give interest on interest withheld for the period claimed by the assessee. 9.   In the above view of the matter, all the five Tax Appeals stand dismissed without any order as to costs.

(K. A. PUJ, J.)  (B. N. MEHTA, J.) kks

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