COMMISSIONER OF INCOME TAX,TRIVANDRUM vs. STATE BANK OF TRAVANCORE

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ITA/1398/2009HC KeralaKLHC01026159200901 November 2018Bench: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON15 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the appeals filed by the Revenue and set aside the orders of the Income Tax Appellate Tribunal on the sole issue of granting interest on interest on the refunds. The Court followed the clarification provided by the Supreme Court in Commissioner of Income-tax v. Gujarat Fluoro Chemicals Ltd. The Court noted that the Supreme Court in Sandvik Asia Ltd. v. CIT had directed compensation for inordinate delay in refunding amounts including statutory interest, not interest on interest. The Court found that the facts in the present case did not commend such a drastic measure. Therefore, the question of law was answered in favour of the Revenue and against the assessee. The operative direction was to set aside the ITAT's order on this specific issue.

What were the facts?

The assessee, State Bank of Travancore (now amalgamated with State Bank of India), is the respondent, and the appellant is the Commissioner of Income Tax, Trivandrum. The appeals concern assessment years 1989-90, 1990-91, 1991-92, 1995-96, 1997-98, and 2001-02. Following completion of assessments and various statutory proceedings, refunds were due to the assessee, which were paid with interest. The assessee claimed interest on interest for the refund amounts. The Income Tax Appellate Tribunal (ITAT), Cochin Bench, had allowed this claim, relying on the Supreme Court decision in Sandvik Asia Ltd. v. CIT. The Revenue has appealed the ITAT's orders.

What were the issues?

1. Whether the Tribunal was correct in granting interest on interest with respect to the refund for the various periods, turning on the interpretation of Section 244A of the Income Tax Act, 1961, and the applicability of Supreme Court decisions. Assessee's contentions (as inferred from the Tribunal's allowance and the Revenue's appeal): The assessee contended that they were entitled to interest on interest on the refunds due to delays in payment by the Revenue, citing the Supreme Court decision in Sandvik Asia Ltd. v. CIT. Revenue's contentions: The Revenue contended that the Tribunal erred in granting interest on interest, arguing that the Supreme Court's decision in Gujarat Fluoro Chemicals Ltd. v. CIT clarified that the Sandvik Asia Ltd. case did not permit interest on interest but rather compensation for inordinate delay. The Revenue argued that the facts of the present case do not warrant such a measure.

Which sections of the Income-tax Act were involved?

Section 244A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 01ST DAY OF NOVEMBER 2018 / 10TH KARTHIKA, 1940 I.T.A.No.1054 of 2009 AGAINST THE ORDER IN I.T.A.NO.25/COCH/2002 DATED 21-07-2006 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN [ASSESSMENT YEAR 1995-96] APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX, TRIVANDRUM. BY SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT/RESPONDENT: STATE BANK OF TRAVANCORE, POOJAPURA, TRIVANDRUM. BY ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01.11.2018, ALONG WITH ITA.1590/2009, ITA.1427/2009, ITA.1398/2009, ITA.1574/2009, ITA.1317/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA.No.1054/2009 & - 2 - connected cases IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 01ST DAY OF NOVEMBER 2018 / 10TH KARTHIKA, 1940 I.T.A.No.1590 of 2009 AGAINST THE ORDER IN I.T.A.NO.13/COCH/2002 DATED 21-07-2006 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN [ASSESSMENT YEAR 1989-90] APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX THIRUVANANTHAPURAM. BY ADVS. SRI.P.K.R.MENON, SENIOR COUNSEL, GOI (TAXES) SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT/RESPONDENT: STATE BANK OF TRAVANCORE, POOJAPPURA, THIRUVANANTHAPURAM. BY ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01.11.2018, ALONG WITH ITA.1427/2009, ITA.1398/2009, ITA.1574/2009, ITA.1317/2009, ITA.1054/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA.No.1054/2009 & - 3 - connected cases IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 01ST DAY OF NOVEMBER 2018 / 10TH KARTHIKA, 1940 I.T.A.No.1427 of 2009 AGAINST THE ORDER IN I.T.A.NO.14/COCH/2002 DATED 21-07-2006 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN [ASSESSMENT YEAR 1990-91] APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX, TRIVANDRUM BY SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT/RESPONDENT: STATE BANK OF TRAVANCORE, POOJAPPURA, TRIVANDRUM. BY ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01.11.2018, ALONG WITH ITA.1590/2009, ITA.1398/2009, ITA.1574/2009, ITA.1317/2009, ITA.1054/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA.No.1054/2009 & - 4 - connected cases IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 01ST DAY OF NOVEMBER 2018 / 10TH KARTHIKA, 1940 I.T.A.No.1398 of 2009 AGAINST THE ORDER IN I.T.A.NO.1189/COCH/2004 DATED 21-07-2006 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN [ASSESSMENT YEAR 1997-98] APPELLANT/APPELLANT: COMMISSIONER OF INCOME TAX, TRIVANDRUM. BY ADVS. SRI.P.K.R.MENON, SENIOR COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT/RESPONDENT: STATE BANK OF TRAVANCORE, POOJAPURA, TRIAVANDRUM. BY ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01.11.2018, ALONG WITH ITA.1590/2009, ITA.1427/2009, ITA.1574/2009, ITA.1317/2009, ITA.1054/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA.No.1054/2009 & - 5 - connected cases IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 01ST DAY OF NOVEMBER 2018 / 10TH KARTHIKA, 1940 I.T.A.No.1574 of 2009 AGAINST THE ORDER IN I.T.A.NO.1187/COCH/2004 DATED 21-07-2006 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN [ASSESSMENT YEAR 1991-92] APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME TAX, TRIVANDRUM. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI(TAXES) RESPONDENT/RESPONDENT: STATE BANK OF TRAVANCORE, POOJAPPURA,TRIVANDRUM BY ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01.11.2018, ALONG WITH ITA.1590/2009, ITA.1427/2009, ITA.1398/2009, ITA.1317/2009, ITA.1054/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA.No.1054/2009 & - 6 - connected cases IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT:- THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON THURSDAY, THE 01ST DAY OF NOVEMBER 2018 / 10TH KARTHIKA, 1940 I.T.A.No.1317 of 2009 AGAINST THE ORDER IN I.T.A.NO.1191/COCH/2004 DATED 21-07-2006 OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN [ASSESSMENT YEAR 2001-02] APPELLANT/APPELLANT: THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT/RESPONDENT: STATE BANK OF TRAVANCORE, POOJAPURA, TRIVANDRUM. BY ADV. SRI.P.BALAKRISHNAN (E) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01.11.2018, ALONG WITH ITA.1590/2009, ITA.1427/2009, ITA.1398/2009, ITA.1574/2009, ITA.1054/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA.No.1054/2009 & - 7 - connected cases JUDGMENT [ ITA 1054/2009, ITA.1590/2009, ITA.1427/2009, ITA.1398/2009, ITA.1574/2009 & ITA.1317/2009 ] Vinod Chandran,J. The assessee-respondent in these cases is the State Bank of Travancore, which is now amalgamated with the State Bank of India. The question raised is as to whether the Tribunal was correct in having granted interest on interest with respect to the refund for the various periods. The Tribunal had granted the same on the basis of the decision in Sandvik Asia Ltd. v. CIT [(2006) 280 ITR 643 (SC)]. The said two-Judge decision was clarified by a later three-Judge Bench in Commissioner of Income

- tax v. Gujarat Fluoro Chemicals [(2013) 358 ITR 291 (SC)]. 2. The admitted facts, for the assessment years 1989-90, 1990-91, 1991-92, 1995-96, 1997-98 and 2001-02, which are identical sans the dates; are the following. The assessments were completed and there were various proceedings, including rectification, appeals, revision and so on and so forth. When the statutory proceedings were completed, there was a refund due to the assessee in all these years. The refund was made with interest. The assessee

ITA.No.1054/2009 & - 8 - connected cases claimed interest on interest, which the Tribunal permitted as per the afore-cited decision. 3. We need only extract the following paragraph from Gujarat Fluoro Chemicals (supra): “7. As we have already noticed, in Sandvik case (supra) this court was considering the issue whether an assessee who is made to wait for refund of interest for decades be compensated for the great prejudice caused to it due to the delay in its payment after the lapse of statutory period. In the facts of that case, this court had come to the conclusion that there was an inordinate delay on the part of the Revenue in refunding certain amount which included the statutory interest and, therefore, directed the Revenue to pay compensation for the same not an interest on interest”. The clarification has put it in the proper perspective and the facts in the present case do not commend such a drastic measure of interest on interest. We, hence, allow the appeals and set aside the order of the Tribunal on the sole issue of grant of interest on interest on the refunds and answer the question of law in favour of the Revenue and against the assessee, following the decision in Gujarat Fluoro Chemicals (supra).

ITA.No.1054/2009 & - 9 - connected cases Ordered accordingly. Parties are left to suffer their respective costs. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE Vku/-

ITA.No.1054/2009 & - 10 - connected cases APPENDIX OF ITA 1054/2009 APPELLANT'S ANNEXURES: ANNEXURE-A TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 28/11/2001. ANNEXURE-B TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 21/7/2006.

ITA.No.1054/2009 & - 11 - connected cases APPENDIX OF ITA 1590/2009 APPELLANT'S ANNEXURES: ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER DATED 14/5/97. ANNEXURE-B TRUE COPY OF THE ORDER OF THE CIT(A) DATED 28/11/2001 ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 21/7/2006.

ITA.No.1054/2009 & - 12 - connected cases APPENDIX OF ITA 1427/2009 APPELLANT'S ANNEXURES: ANNEXURE-A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER DATED 31/3/2000 ANNEXURE-B TRUE COPY OF THE ORDER OF THE CIT (A) DATED 28/11/2001 ANNEXURE-C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 21/7/2006.

ITA.No.1054/2009 & - 13 - connected cases APPENDIX OF ITA 1398/2009 APPELLANT'S ANNEXURES: ANNEXURE A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER DATED 26.3.2002. ANNEXURE B TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 10.8.2004. ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 21.7.2006

ITA.No.1054/2009 & - 14 - connected cases APPENDIX OF ITA 1574/2009 APPELLANT'S ANNEXURES: ANNEXURE A TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER DATED 26.3.2004. ANNEXURE B TRUE COPY OF THE ORDER OF THE CIT (A) DATED 10.8.2004. ANNEXURE C TRUE COPY OF THE ORDER OF THE GNOME TAX APPELLATE TRIBUNAL DATED 21.7.206.

ITA.No.1054/2009 & - 15 - connected cases APPENDIX OF ITA 1317/2009 APPELLANT'S ANNEXURES: ANNEXURE-A TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 10/8/2004. ANNEXURE-B TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 21/7/2006. [TRUE COPY]

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