DCIT, CENTRAL CIRCLE 2(2), AHMEDABAD vs. NIRMA LIMITED, AHMEDABAD

The issue in dispute in both the appeals relate to adjustment of Tax refund firstly against the Interest refund due and thereafter against the Tax refund due.

This issue is already decided by the ITAT in the assessee’s own case for the Asst. Year 1996-97 and from Asst. Years 2006- 07 to 2011-12. In the said case, the ITAT Bench “D” Ahmedabad vide order dated 30-06-2023 held as under: “291. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute to the fact that the assessee has been granted refund of Rs. 75,00,281/- and interest under section 244A of the Act on the same for Rs. 22,12,583/- for the period of March 2004 to January 2009. The dispute is limited to the extent of additional compensation for interest under section 244A of the Act which was granted on a later date. In this regard, we note that the refund amount was determined in the month of January 2009 on which assessee was eligible for interest under section 244A of the Act for Rs. 22,12,583/-till January 2009. Therefore, the total amount due to the assessee on account of refund and interest thereon was for Rs. 97,12,864/- (Rs. 75,00,281/- + Rs. 22,12,583/-). However, refund for Rs. 75,00,281/- was only issued in the month of February 2009 meaning thereby only principal amount of refund was issued to the assessee. Thus, the question arises whether only the refund issued for Rs. 75,00,281/- can be adjusted against the principal amount due or against the interest amount under section 244A of the Act. This question has been answered by Mumbai Tribunal in the case of Union Bank of India vs. ACIT reported in 72 taxmann.com 348 wherein it was held that the amount of refund issued to the assessee will be first adjusted against the interest then, after that against the principal amount. The relevant finding of the Mumbai Tribunal is extracted as under: "3.10 It is noted from the observations of the Hon'ble Supreme Court that it has been observed that whatever money has been received by the department, it ought to be refunded ex aequo et bono. It is a Latin phrase which means 'what is just and fair' or 'according to equity and good conscience'. Something to be decided ex aequo et bono is something that is to be decided by principles of what is fair and just. A decision- maker who is authorized to decide ex aequo et bono is not bound by legal rules but may take account of what is just and fair. Thus, if we decide the issue before us ex aequo et bono, then it would be decided by the principles of what is fair and just and not necessarily as per strict rule of law. Thus, since 2 the statute itself has already prescribed a particular method of adjustment in explanation to section 140A(1), then justice, fairness, equity and good conscience demands that same method should be followed while making adjustment for refund of taxes, especially when no contrary provision has been provided. Under these circumstances and aforesaid discussion, we find that the judicial proprietary demands that order of the Tribunal of earlier years must be followed and therefore we direct the AO to re-compute the amount of interest u/s. 244A by first adjusting the amount of refund already granted towards the interest component and balance left if any shall be adjusted towards the tax component. Thus, with these directions, the appeal of the assessee is allowed." 291.1 From the above we hold that the amount of refund granted to the assessee, first, has to be adjusted against the interest payable to the assessee in the given facts and circumstances. Considering the fact that the amount of refund issued to the assessee for Rs. Rs. 75,00,281/- was first to be adjusted against the interest of Rs. 22,12,583/- then refund of principal amount. Admittedly, the interest for Rs. 22,12,583/- was finally issued to the assessee in the month of May 2016. Thus, the assessee will be entitled to interest under section 244A of the Act for the delay in issuing of refund for Rs. 22,12,583/- which represents the principal amount. 291.2. The above principle was also followed and held in favour of assessee by this tribunal in case of Karsanbhai Kacharabhai Patel HUF vs. ITO in ITA No. 183/AHD/2022.”

The same view was again held by the ITAT “A” Bench, Ahmedabad in the assessee’s own case for the Asst. Years 1993- 94 and 1998-99 in ITA Nos. 284 and 460/Ahd/2023.

Before us, Ld. A.R. Shri Bandish Soparkar submitted that this matter is squarely covered by the earlier decisions of the Tribunal in the assessee’s own cases and also submitted that the Revenue itself has stated in its grounds of appeal, that the issue is covered by the assessee’s cases and the CIT(A) erred in following the ITAT decisions without appreciating that the issue relating to the manner of appropriation of part refund towards Interest and Tax/Principal components has not attained finality as the department has challenged the said issue before the Hon’ble High Court.

Ld. Sr. D.R. Shri Arvind Kumbhare conceded that the issue is covered by the decisions of the ITAT in the assessee’s own cases and the department is keeping the same alive in view of the appeals pending before the Hon’ble High Court. 7. Under the circumstances, we uphold the decisions of the Ld. CIT(A) respectfully following the decision of the Co-ordinate Benches in assessee’s own cases.

In the result, both the appeals of the Revenue are dismissed.