M/S.CHENNAI PETROLEUM CORPOR vs. THE DY COMMISSIONETR OF INCO

T.C.A.No.107 of 2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 14.10.2020 CORAM THE HON'BLE MR.JUSTICE T.S.SIVAGNANAM AND THE HON'BLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.No.107 of 2020 and C.M.P.No.3833 of 2020 M/s.Chennai Petroleum Corporation Limited, 536, Anna Salai, Teynampet, Chennai-600 018. PAN : AAACM4392C ... Appellant -vs- The Deputy Commissioner of Income-tax, Larger Tax Payer Unit - Appeals, Chennai-600 101.

... Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order dated 20.03.2019 made in I.T.A.No.2193/Chny/2016 on the file of the Income Tax Appellate Tribunal 'B' Bench, Chennai for the assessment year 2007-08. For Appellant : Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyar Padmanabhan For Respondent : Mr.T.Ravikumar Senior Standing counsel 1/9 http://www.judis.nic.in T.C.A.No.107 of 2020 JUDGMENT (Judgment of the Court was delivered by T.S.Sivagnanam, J.) This appeal has been filed by the assessee under Section 260 A of the Income Tax Act, 1961 ('the Act' for brevity), is directed against the order dated 20.03.2019 made in I.T.A.No.2193/Chny/2016 on the file of the Income Tax Appellate Tribunal 'B' Bench, Chennai ('the Tribunal' for brevity) for the assessment year 2007-08. 2.This appeal has been filed by raising the following substantial questions of law:- "1.Whether the Tribunal was right in law in holding that the interest under Section 244A of the Act is not payable on the amount determined as refundable (inclusive of interest up to that date) for the period for which there was a delay in payment of the amount to be refunded? and 2.Whether the Tribunal was right in law in holding that there is no inordinate delay in the grant of refunds?" 3.We have heard Mr.R.Vijayaraghavan, learned counsel appearing for the appellant and Mr.T.Ravikumar, learned Senior Standing Counsel appearing for the respondent. 2/9 http://www.judis.nic.in T.C.A.No.107 of 2020 4.The facts that are necessary for the disposal of the appeal are hereunder: The assessee is engaged in the business of Crude oil refining and manufacture of petroleum products. For the assessment year 2007-0, they have filed a return of income on 27.10.2007 which was completed under Section 143(3) of the Act by order dated 16.12.2009 determining the total income at Rs.4,38,99,85,730/- after making certain disallowances. Subsequently, the assessment was reopened by issuance of notice dated 28.03.2012 under Section 148 of the Act and the re-assessment was completed by order dated 06.11.2012. This order was put to challenge by the assessee before the Commissioner of Income Tax (Appeals) [CIT(A)] who by order dated 25.12.2013 directed the Assessing Officer to work out the interest under Section 244A of the Act till the date of refund including the self assessment tax paid under Section 140A of the Act. The Assessing Officer passed a giving effect to order dated 31.01.2014. This order according to the assessee is incorrect because the adjustment of interest was not done in a proper manner. Therefore, appeal was filed before the CIT(A), who dismissed the appeal by order dated 30.03.2016. The assessee's case 3/9 http://www.judis.nic.in T.C.A.No.107 of 2020 before the CIT(A) was that in the case of refund made by the Department, the interest payable under Section 244A has to be first adjusted and the balance, if any, should be adjusted against the refund of principal, on which the assessee is eligible for interest under Section 244A of the Act. 5.According to the assessee, this issue was not decided by the CIT(A) who proceeded only to consider the interest computed by the Assessing Officer. It appears that the assessee did not contest the quantum of interest which was computed but their plea was with regard to the adjustment of such interest. The assessee carried the matter by way of appeal to the Tribunal referring to Section 140A(1) and submitted that where the amount paid by an assessee under self assessment fall short of aggregate amount of tax and interest aforesaid, the amount paid shall first be adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax payable. The assessee would contend that the Tribunal also proceeded on the basis as if the assessee was contesting the quantum of interest which was calculated and made payable. Therefore, the assessee is before us by way of this appeal raising the above referred substantial questions of law with regard to the manner of adjustment of the interest. 4/9 http://www.judis.nic.in T.C.A.No.107 of 2020 6.Mr.T.Ravikumar, learned Senior Standing Counsel appearing for the respondent placed reliance on the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax, Gujarat vs. Gujarat Fluoro Chemicals [(2013) 58 ITR 291(SC)], wherein it was held that for delay in refund to assessee, it is only interest provided for under statute which may be claimed by an assessee; only for inordinate delay of decades compensation is to be paid. Thus, it is the submission of Mr.T.Ravikumar, learned Senior Standing Counsel that other than interest payable under Section 244A of the Act no other interest on such statutory interest is payable by the revenue. Reliance was also placed on the decision of this Court in the case of Commissioner of Income Tax vs. Brakes India Limited [(2014) 361 ITR 0424 (Mad)][to which one of us, T.S.S.J. is a party], wherein the Court followed the decision in Gujarat Fluoro Chemicals and held as follows: “7.The aforesaid decision of the Hon'ble Supreme Court arose out of the reference made by a bench of two Hon'ble Judges referring the matter doubting the correctness or otherwise of the decision of the Hon'ble Supreme Court in the case of Sandvik Asia Limited vs. 5/9 http://www.judis.nic.in T.C.A.No.107 of 2020 Commissioner of Income Tax and others reported in (2006)2 SCC 508 on which reliance was placed by the Tribunal in the instant case and the Hon'ble Supreme Court clarified that in the case of Sandvik Asia Limited (cited supra), the Hon'ble Supreme Court was considering the issue as to 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 delay in its payment after the lapse of statutory period and on the facts of the said case, the Hon'ble Supreme Court came 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 and not an interest on interest. 8.In the light of the recent decision of the Hon'ble Supreme Court in the case of Gujarat Fluoro Chemicals (cited supra), question No.2 is answered as against the assessee.” 7.Reliance was also placed on the decision of the High Court of Delhi in the case of Commissioner of Income Tax vs. Indian Farmer Fertilizer Co-operative [(2015) 375 ITR 0056(Delhi)], wherein the Court followed 6/9 http://www.judis.nic.in T.C.A.No.107 of 2020 the decision in Sandvik Asia Ltd. vs. Commissioner of Income Tax and others [(2006) 280 ITR 643] as well as the decision of the Hon'ble Supreme Court in the case of Gujarat Fluoro Chemicals and held that the payment of any sum over and above the interest payable under Section 244A(1) of the Act to the assessee cannot be upheld. 8.Mr.R.Vijayaraghavan, learned counsel appearing for the appellant/assessee submitted that the assessee is not claiming any interest on interest and the assessee accepts the legal position as mentioned by Mr.T.Ravikumar and laid down in the aforementioned three decisions, however, their plea before the CIT(A) and before the Tribunal was with regard to how the interest is to be adjusted which issue more raised specifically before the CIT(A) and the Tribunal has not been considered. 9.Upon going through the orders of the CIT(A) and the Tribunal, we find that this issue regarding the adjustment of interest was not specifically considered by the CIT(A) and the Tribunal. Therefore, we are of the considered view that the matter should be remanded. 7/9 http://www.judis.nic.in T.C.A.No.107 of 2020 10.Accordingly, the appeal is allowed, the orders passed by the CITA() and the Tribunal are set aside only on the aspect indicated above and the matter is remanded to the CIT(A) to consider whether under explanation to Section 140A(1), it is stipulated where the amount paid by an assessee under self-assessment falls short of the aggregate amount of tax and interest aforesaid, the amount paid shall first be adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax payable. The remand to the CIT(A) is only on the aforementioned issue. Consequently, the substantial questions of law are left open. No costs. Consequently, connected miscellaneous petition is closed. (T.S.S., J.) (V.B.S., J.) 14.10.2020 [1/5] Index : Yes/No Speaking Order/Non-speaking Order cse 8/9 http://www.judis.nic.in T.C.A.No.107 of 2020 T.S.Sivagnanam, J. and V.Bhavani Subbaroyan, J. cse T.C.A.No.107of 2020 and C.M.P.No.3833 of 2020 14.10.2020 [1/5] 9/9 http://www.judis.nic.in