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

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.

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.

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