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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: Sh. Amit ShuklaDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of the ld. CIT(A), Dehradun dated 30.12.2016.
Following grounds have been raised by the assessee: “1. That the Ld. CIT(A) erred on facts and in law, in upholding the action of the assessing officer in not allowing interest under section 244A on refund of self-assessment tax of Rs.20,73,65,410/- in the order dated 11.06.2014 passed under section 154 of the Income-tax Act, 1961 (‘the Act’).
1.1 That the Ld. CIT(A) erred on facts and in law in holding that since the said issue was capable of two views, the same did not constitute ‘mistake apparent
ITA No. 1434/Del/2017 2 Oil and Natural Gas Corporation Ltd. from record’ within the scope of rectification under section 154 of the Act.
That the Ld. CIT(A) erred on facts and in law in upholding the action of assessing officer in not allowing interest of Rs. 16,27,93,369/- under section 244A of the Act on short refund of interest of Rs. 29,68,87,603/- granted on 30.09.2002 (date of order giving effect to ITAT’s order) for the period 01.10.2002 to 19.07.2011 (being the date of actual grant of refund).
2.1 That the Ld. CIT(A) erred on facts and in law in holding that since the appellant was allowed interest on delayed payment of principal amount of tax from the due date of payment till the actual date of payment, no further interest was liable to be granted on the aforesaid short payment of interest under section 244A of the Act.
That the Ld. CIT(A) erred on facts and in law, in upholding the action of the assessing officer in not allowing interest of Rs. 22,70,00,248/- on the aggregate amount of unpaid interest as on 19.07.2011, due to the appellant under section 244A of the Act, upto the actual date of payment (30.06.2014), on the ground that there is no provision for allowing interest on unpaid interest under section 244A of the Act.”
The company was assessed on a total income of Rs.394,43,32,079/- and a refund of Rs. 350,55,48,716/- was issued to it on 15.07.2011. Against the said order, the assessee filed an application before the AO under section 154, contending therein that interest under section 244A(1)(b) amounting to Rs.156,25,56,450/- had been granted to it whereas interest on tax till 27.09.2002 comes to Rs. 185,94,44,075. It was also contended by the assessee that interest u/s 244A(1)(b) on amount of refund of Rs.16,27,64,646 (from 16.02.2010 to 19.07.2011), Rs.255,85,61,853/- (from 29.10.2007 to
ITA No. 1434/Del/2017 3 Oil and Natural Gas Corporation Ltd. 15.02.2010), Rs.78,42,86,455/- (from 31.11.2007 to 19.07.2011) and Rs.64,338/- (from 16.02.2010 to 19.07.2011), which worked out to Rs. 83,74,63,304/- in total has not been allowed. In addition to the above, the assessee contended before the AO that interest u/s 244A(1)(b) for the period from 01.10.2002 to 19.07.2011 on the short amount of interest had not been allowed and on amount of interest of Rs.29,68,87,603/- interest amounting to Rs. 16,27,93,369/- had also not been allowed. The assessee further contended that on amount of interest of Rs. 83,74,63,304/-, Rs. 29,68,87,603/- & Rs. 16,27,93,369/-, interest u/s 244A(1)(b) which worked out to Rs.22,70,00,248/- for the period from 19.07.2011 to 30.06.2014 was also allowable to it and short interest to the extent of Rs. 22,70,00,248/- was allowable to it. The assessee thus requested that interest of Rs.29,68,87,603/-, Rs.82,74,63,304/-, Rs.16,27,93,369/- and Rs.22,70,00,248/- totaling to Rs. 152,41,44,524/- may be allowed to it.
The AO considered the application of the assessee and found the same to be partly acceptable. He held that the interest was allowable from the date of actual payment of demand to the date of grant of refund resulting into additional interest u/s 244A(1)(b) amounting to Rs. 112,05,65,168/-. However, he held that while calculating interest allowable to the assessee, interest was not allowable on Rs. 27,89,38,093/- (the correct amount is Rs.20,73,65,410) as this refund was granted out of the self assessment tax paid u/s 140A. With regard to the request of the assessee for interest on the interest portion, the AO pointed out that section 244A(1)(b) read as under:
ITA No. 1434/Del/2017 4 Oil and Natural Gas Corporation Ltd. "In any other case, such interest shall be calculated at the rate of [one-half per cent] for every month or part of month comprised in the period or periods from date, or as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.”
The AO held that this contention of the assessee was not acceptable as the claim of the assessee did not fall within the scope of section 244A(1)(b).
Aggrieved the assessee filed appeal before the ld. CIT (A) who held that the interest on excess self-assessment tax is debatable referring to the judgment in the case of CIT Vs Engineers India Ltd. and hence it is outside the scope of rectification u/s 154.
Regarding the short refund of Rs.29,68,87,603/-, the ld. CIT (A) held that the claim of interest was hypothetical and hence dismissed the grounds. The relevant portion of the order of the ld. CIT (A) on this issue is as under:
“12. The second issue that has been agitated in the appeal is the failure of the Assessing Officer to refund an amount of Rs 29,68,87,603/- on account of interest due in 2002. The argument taken is that, while giving appeal effect to the order of the ITAT in the year 2002, the AO wrongly computed refundable tax at Rs 178,19,49,025 /- as against actually refundable tax of Rs 194,47,13,771/-. This resulted in short computation of refund of Rs 16,27,64,746/- and consequential short computation of interest of Rs 29,68,87,603/-. The appellant filed an appeal against this, which was dismissed, as was the petition under section 154, because in the meanwhile it had lost the appeal in the High Court, but now that it had won in the Supreme Court, this interest which it was entitled to
ITA No. 1434/Del/2017 5 Oil and Natural Gas Corporation Ltd. in 2002, should be paid to it (the short computation of tax having already been allowed to it). To understand the claim, the representatives of the appellant were asked to take me through the computation. From the same, it emerged that on 30.09.2002, the appellant was entitled to a tax refund of Rs 194,47,13,771/- on which it claims that it was entitled to interest of Rs.185,94,44,053/-, but the AO computed the tax refundable at Rs.178,19,49,025/- and the interest refundable on such tax at Rs 156,25,56,450/-.Thus, there was a short fall of Rs.16,27,64,746/- on tax refunded and Rs.29,68,87,603/- on interest refunded. Subsequently, when the appellant lost the case in the High Court, this amount of Rs.334,45,05,475/- that was paid to its credit was recovered from it by adjustment against other years refund. However, when the Hon Supreme Court ruled in favour of the appellant, the AO on 19.07.2011, granted refund of Rs 350,55,48,716/- on account of the tax paid by the assessee and the interest recovered from it. This meant that this time around, the AO granted the refund of the Rs.16,27,64,746/- of tax paid, for which he had not granted credit earlier. However, the AO did not pay any interest on any amount refunded to the appellant, other than Rs. 156,25,56,450/- which had been computed in 2002, paid to the appellant then and subsequently recovered from it in 2007. Therefore, the appellant petitioned the AO under section 154. Subsequently, the AO acknowledged the mistake and granted the refund of interest due to the appellant on 19.07.2011. For the tax and interest refund of Rs 334,45,05,475/-, the further interest was computed from the date of adjustment of demand in 2007, up till date of refund i.e. 19.07.2011, while for the refund of Rs 16,27,64,746/- the refund was computed right from the date of payment of demand after assessment up till date of refund of tax. Thus, from these facts it becomes crystal clear that vide his order dated 11.06.2014, the AO has refunded to the appellant, the entire amount of excess tax paid by it and also computed interest on such tax right from the date of payment of
ITA No. 1434/Del/2017 6 Oil and Natural Gas Corporation Ltd. taxes till the date of issue of refund i.e. 19.07.2011. The refund of extra interest of Rs 112,05,65,168/- so computed, was received by the appellant on 30.06.014. Thus, it could no longer be argued that any part of the interest due on 30.09.2002, had remained unpaid (excluding interest on self assessment tax). Once the AO had computed the refund payable on the amount of Rs 16,27,64,746/- right from the date of payment of taxes till the date of refund, the interest due on this amount in 2002, would automatically stand subsumed in the figure of interest computed on this amount till the date of issue of refund. There is therefore, no prima facie mistake in the order of the AO dated 11.06.2014, which needs rectification at any stage. The appellant is aggrieved with the appeal effect order passed on 27.09.2002 and the rejection of rectification petition by the AO on 19.11.2007/ 28.01.2008. However, these orders are not the subject matter of appeal before the undersigned. The only order under appeal is the order under section 154 dated 11.06.2014, and since it is obvious that ho-part of the interest that was due to the assessee on 19.07.2011 was omitted from the computation of interest due on that date, the appellant’s claim for payment of interest hypothetically due to it on 30.09.2002, is unwarranted. This ground of appeal is therefore also dismissed.”
Regarding the payment of interest on unpaid interest of Rs.27,70,00,248/-, the ld. CIT (A) dismissed the ground of the assessee holding that only the interest provided under the statute which may be claimed by the assessee from the revenue but no other interest on any statutory interest is allowable. The relevant portion of the order of the ld. CIT (A) on this issue is as under: “13. The third ground that has been raised by the appellant is that it should be paid interest on the delay in payment of interest that
ITA No. 1434/Del/2017 7 Oil and Natural Gas Corporation Ltd. was due to it along with the refund on 19.07.2011. It has claimed this extra interest from 19.07.2011 to 30.06.2014 i.e. the date on which it was actually paid the interest that was due to it. When the appellant was asked to explain as to which provision of the Act this claim was being made, it was submitted that the claim was being made under section 244A, which started with the statement that ‘‘Where refund of any amount is due". It was submitted that this any amount included interest that was legally due, but not paid to the appellant and therefore since the AO had not paid the interest at the opportune time, the appellant was legally entitled by virtue of the provisions of section 244A to receive interest on this unpaid refund from the period 19.07.2011 to 30.06.2.014 i.e. on the date this refund was actually granted to the appellant. The Judgments of the Hon Supreme Court in the cases of Sandvik Asia: 280 ITR 643 (SC), and H.E.G Ltd: 324 ITR 331 and the judgment of the Hon Delhi High Court in the case of ITPO: 361 ITR 646 have been cited in support of the claim. However, it is observed that a larger bench of the Hon Supreme Court considered the issue at a later date (18.09.2013) in the matter of CIT vs Gujarat Fluoro Chemicals (2013) 358 ITR 291 (SC) and held, “6. In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the revenue. They are of the view that in Sandvik case (supra) this Court have directed the revenue to pay interest on the statutory interest in case of delay in the payment, in other words, the interpretations placed is that the revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period.
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 the statutory period. In the facts of that case, this Court has come to the conclusion that there was an inordinate delay on the part of the revenue in refunding certain amount which included statutory interest
ITA No. 1434/Del/2017 8 Oil and Natural Gas Corporation Ltd. and, therefore, directed the revenue to pay compensation for the same, not an interest on interest.
Further, it is brought to our notice that the legislature by the Act No. 4 of 1988 (with effect from April 1, 1989) has inserted section 244A to the Act which provides for interest on refunds under various contingencies. We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the revenue and no other interest on such statutory interest”
Thus, the appeal before us deals with the following issues: a. Whether non-granting of interest on self-assessment is a matter of rectification u/s 154 and if so, whether the assessee is eligible for statutory interest on the refund arising out of self-assessment tax ? b. Whether the assessee is eligible to interest till the date of issue of refund out of the taxes paid and recovered from the assessee later on ? c. Whether the assessee is eligible for interest on the delay in payment of interest ?
These issues are being dealt as under: Whether non-granting of interest on self-assessment is a matter of rectification u/s 154 and if so, whether the assessee is eligible for statutory interest on the refund arising out of self- assessment tax ?
In the context of mistake apparent from record with relevance to the provisions of Section 154 are being examined in the instant case. The provisions of Section 154 read as under:
ITA No. 1434/Del/2017 9 Oil and Natural Gas Corporation Ltd. “Section 154. [(1) With a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may,—
(a) amend any order passed by it under the provisions of this Act ; [(b) amend any intimation or deemed intimation under sub- section (1) of section 143;]] [(c) amend any intimation under sub-section (1) of section 200A;]
[(d) amend any intimation under sub-section (1) of section 206CB.]
[(1A) Where any matter61 has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub- section in relation to any matter other than the matter which has been so considered and decided.]
(2) Subject to the other provisions of this section, the authority concerned—
(a) may make an amendment under sub-section (1) of its own motion, and
(b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee [or by the deductor] [or by the collector], and where the authority concerned is the [***] [Commissioner (Appeals)], by the [Assessing] Officer also. [* * *]
(3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee [or the deductor] [or the collector], shall not be made under this section unless the authority concerned has given notice to the assessee [or the deductor] [or the collector] of its intention so to do and has allowed the assessee [or the deductor] [or the collector] a reasonable opportunity of being heard.
ITA No. 1434/Del/2017 10 Oil and Natural Gas Corporation Ltd. (4) Where an amendment is made under this section, an order shall be passed in writing by the income-tax authority concerned.
71[(5) Where any such amendment has the effect of reducing the assessment or otherwise reducing the liability of the assessee or the deductor 72[or the collector], the Assessing Officer shall make any refund which may be due to such assessee or the deductor 72[or the collector].]
(6) Where any such amendment has the effect of enhancing the assessment73 or reducing a refund 74[already made or otherwise increasing the liability of the assessee or the deductor 75[or the collector], the Assessing Officer shall serve on the assessee or the deductor 75[or the collector], as the case may be] a notice of demand in the prescribed form specifying the sum payable76, and such notice of demand shall be deemed to be issued under section 156 and the provisions of this Act shall apply accordingly.
(7) Save as otherwise provided in section 155 or sub-section (4) of section 18677 no amendment under this section shall be made after the expiry of four years 78[from the end of the financial year in which the order79 sought to be amended was passed.]
[(8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee [or by the deductor] [or by the collector] on or after the 1st day of June, 2001 to an income- tax authority referred to in sub-section (1), the authority shall pass an order, within a period of six months from the end of the month in which the application is received by it,—
(a) making the amendment; or (b) refusing to allow the claim.]”
Section 154 (1) of the Income Tax Act, 1961 provides that with a view to rectifying any mistake apparent from the record an income-tax authority referred to in section 116 may (a) amend any order passed by it under the provisions of this Act; (b) amend any intimation or deemed
ITA No. 1434/Del/2017 11 Oil and Natural Gas Corporation Ltd. intimation under sub-section (1) of section 143. Thus, the essential ingredients of section 154 (1) are as follows: (i) The mistake must emanate from record in the context of Income tax proceedings; and (ii) The mistake should be apparent from record.
What is a mistake? Mistake connotes incorrect idea or opinion, thing incorrectly done or thought, error of judgment, misunderstand the meaning of. It doesn’t mean only the computational mistake but also mistakes of understanding and interpretation of an established, undisputed judgment. It could be an error of law or an error of fact with the exclusion of any debatable issue of law. Overlooking of ignoring of a mandatory provision of the Income Tax Act can also be considered as a mistake. Thus, the following can be considered as a mistake for the purpose of Section 154 of income tax Act. • Misreading a clear provision • Application of wrong provision • Erroneous application of the provision • Applying an inapplicable provision • Overlooking mandatory provision • Contravening the ratio decidendi or stare decisis
Record denotes information or evidence collected, available, preserved before captivating a decision. It is the sum of the whole evidence that has gone into the mind of the Assessing Officer to take a decision. The record for income tax purpose is the record of the assessee only but not the record of any other entity unless it is made a part of the record of the assessee in the proceedings relevant to which such record of the other persons has been obtained. The record for the income tax proceedings and for the purpose of Section 154 is the entire proceedings,
ITA No. 1434/Del/2017 12 Oil and Natural Gas Corporation Ltd. order sheets, notices, documents, materials collected by the revenue, replies produced by the parties, result of the direct and collateral enquiries conducted by the authorities which are available at the time of passing of the order which is the subject matter proceeding for rectification.
Apparent from record signifies, a mistake which is obvious, patent and discernable from the record available which is a subject matter of rectification. The word “apparent mistake” denotes an obvious, plain, evident, noticeable or visible error. An apparent mistake is glaring, obvious, self-evident and should be free from debate.
From the above facts and provisions of the Act, we find that the ld. CIT (A) erred in holding that the issue cannot be held to be a prima facie mistake. We find that the AO having completed the calculation of interest incorrectly ought to have rectified the mistake u/s 154. A computational mistake/mistake of calculation of computation is a prima facie mistake amenable to Section 154.
Having held that the issue before the Assessing Officer is a matter squarely falls under the purview of the Section 154, we proceed to adjudicate the issue of allowability of interest on the self-assessment tax paid.
This issue has been dealt in ITA No. 2553/Del/2013 by the ITAT Delhi Bench, Delhi for the Assessment Year 1999-00. The relevant portion is as under:
“48. The next question before us is whether interest is payable on the self-assessment tax paid by the assessee or not.
ITA No. 1434/Del/2017 13 Oil and Natural Gas Corporation Ltd. 49. We have gone through the judgment of Hon’ble Jurisdictional High Court in the case of CIT Vs Sutlej Industries Ltd. in ITA No. 1204/2005 order dated 15.03.2010 wherein the Hon’ble High Court held that where self-assessment tax paid by the assessee u/s 140A is refunded, the assessee should be entitled to interest thereon. The Hon’ble High Court held that the self-assessment tax falls within the expression “refund of any amount”. The computation of simple interest on self-assessment tax has to be in terms of Section 244A(1)(b), i.e., from the date of payment of such amount up to the date on which refund is actually granted. The judgment of the Hon’ble jurisdictional High Court was shored up by the judgment of Hon’ble Madras High Court in Cholamandalam Investment and Finance Co. Ltd., the SLP against which order was dismissed by the Supreme Court.
Even otherwise, it is trite law that wherever the assessee is entitled to refund, there is statutory liability on the Revenue is to pay the interest on such refund on general principles to pay the interest on sums wrongfully retained.
The Hon’ble Jurisdictional High Court in the case of Engineers India Ltd. 373 ITR 377, based on the judgment of the Hon’ble Apex Court in the case of Gujarat Flora Chemicals 358 ITR 291 held that the assessee is not entitled to get interest u/s 244A on the refund of self-assessment tax which was voluntarily paid u/s 140A and did not agree with the decision of the Co-ordinate Bench of High Court in the case of Sutlej Industries Ltd. 325 ITR 337.
The Hon’ble Apex Court, having gone through the different views expressed by the Hon’ble Jurisdictional High Court, referred back the matter for adjudication by larger bench.
The Hon’ble High Court of Kolkata in the case of Birla Corporation Ltd. held that clause (1)(b) of Section 244A is
ITA No. 1434/Del/2017 14 Oil and Natural Gas Corporation Ltd. residual in nature which prescribes interest on refund from the date of payment of tax in cases which are not covered by Section 244A(1)(a). Necessarily, it will cover interest on refund of excess self-assessment tax paid by the assessee. The proviso to section 244A (1)(a) would have no application as the tax paid was self- assessment tax u/s 140A. Hence according to mandate of section 244A(1)(b), interest is payable on refund of excess self assessment tax, from the date of payment of such tax to the date when the refund is granted. The Hon’ble Court of Kolkata has duly considered the judgment of Hon’ble High Court of Delhi in the case of CIT Vs Engineers India Ltd.
Similarly, the Hon’ble High Court of Bombay in the case of Stockholding Corporation of India Vs. CIT 373 ITR 282 has elaborately dealt with the question of interest on refund of excess self assessment tax and held that where the self-assessment tax paid by the assessee u/s. 140A is refunded, the assessee should be, in principle entitled to interest thereon since the self assessment tax falls within the expression “refund of any amount”. The computation of interest on self-assessment tax has to be in terms of Section 244A(1)(b), i.e., from the date of payment of such amount up to the date on which refund is actually granted.
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Further, in this aspect, we are guided by the judgment of Tata Chemicals Ltd. 6 SCC 335 as to what the tax refund is. It was held that the tax refund is a refund of taxes when the tax liability is less than the taxes paid. The Hon’ble Apex Court has held that the assessee was entitled for payment of interest on the amount of taxes refunded pursuant to an order passed under the Act including the order passed in an appeal. In the case of Tata Chemicals Ltd., the assessee has paid taxes pursuant to the order
ITA No. 1434/Del/2017 15 Oil and Natural Gas Corporation Ltd. passed by the AO. In the appeal filed against the said order the assessee has succeeded and a direction is issued by the appellate authority to refund the tax paid. The amount paid by the resident/ deductor was retained by the Government till a direction was issued by the appellate authority to refund the same. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded.
The question before the Hon’ble Apex Court is whether the resident/deductor is also entitled to interest on refund of excess deduction or erroneous deduction of tax at source under Section 195 of the Act. The Hon’ble Apex Court has ruled that the assessee is eligible to refund of excess tax deducted and also interest on such excess tax refunded.
The Hon’ble Apex Court held that the language of the Section is precise, clear and unambiguous. Sub-Section (1) of Section 244A speaks of interest on refund of the amounts due to an assessee under the Act. The assessee is entitled for the said amount of refund with interest thereon as calculated in accordance with clause (a) & (b) of sub-Section (1) of Section 244A. In calculating the interest payable, the section provides for different dates from which the interest is to be calculated.
The Hon’ble Apex Court held that Clause(a) of sub- Section(1) of Section 244A talks of payment of interest on the
ITA No. 1434/Del/2017 16 Oil and Natural Gas Corporation Ltd. amount of tax paid under Section 155WJ, tax collected at source under section 206C, taxes paid by way of advance tax, taxes treated as paid under Section 199 during the financial year immediately preceding the assessment year.
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Clause(b) of Sub-Section(1) of Section 244A opens with the words "in any other case" that means in any case other than the amounts paid under Clause(a) of Sub-section(1) of Section 244A. Under this clause, the rate of interest is to be calculated at the rate of one and a half per cent per month or a part of a month comprised in the period or the periods from the date or, as the case may be, either the dates of payment of the tax or the penalty to the date on which the refund is granted. An explanation is appended to clause(b) of the aforesaid sub-Section to explain the meaning of the expression "date of payment of tax or penalty". It clarifies that the “date of payment of tax or penalty” would mean the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.
Thus, the Hon’ble Apex Court brought the self-assessment tax under the ambit of tax u/s 244A(1)(b). The assessee is eligible for interest on the complete amount of the refund arising out of self-assessment tax. Whatever the money received by the department in excess is ought to be refunded ex-aequo et bono.
Hence, keeping in view the entire facts and circumstances of the case, the provisions of the Act as at 1989, 2016, judgments of the various Hon’ble High Courts and Hon’ble Apex Court, we hold as under: Where refund of any amount becomes due denotes refund arising out of advance tax u/s 207
ITA No. 1434/Del/2017 17 Oil and Natural Gas Corporation Ltd. TCS u/s 206 TDS u/s 195 All credits u/s 199 Taxes paid as specified u/s 156 and Self-assessment tax
Before 01.06.2016, no interest would be paid if the amount of refund is less than 10% of the taxes determined in case the refund is out of the taxes paid other than self-assessment tax. Before 01.06.2016, in the case of refund arising out of self- assessment tax, interest would be calculated on the entire self- assessment tax refunded from the date of payment of S.A. tax. After 01.06.2016, no interest would be paid if the amount of refund is less than 10% of the taxes determined whether it is u/s 140, u/s 156, u/s 195, u/s 199, u/s 206 and u/s 207. Where refund of “any amount” [244A(1)] due connotes the refund of taxes paid by the assessee. Where refund of “any amount” [244A(1)] is due, the assessee is entitled to simple interest. The simple interest would be calculated at the prescribed percentage after determining the refund due and paid along with the principle. Even, “a single day” should be considered as a part of the month for the purpose of computation of interest.
Ergo, the AO is hereby directed to pay interest on the refund eligible in accordance with the proviso to Section 244A(1)(a) with regard to the advance tax paid. With regard to the self- assessment tax paid, we hereby hold that the assessee is eligible for interest on the total amount of refund in accordance with provision of Section 244A(1)(b) as the bar contend in proviso to Clause (a) to Section 244A(1) is not applicable to the cases (A.Ys. 1999-2000 and 1994-95) before us. The ground no.3 of the assessee is treated as allowed.”
ITA No. 1434/Del/2017 18 Oil and Natural Gas Corporation Ltd. 19. Following the principle laid down as above, we hereby direct that the assessee is eligible for interest on the refund arising out of payment of self-assessment tax in accordance with provision of Section 244A(1)(b).
Whether the assessee is eligible to interest till the date of issue of refund out of the taxes paid and recovered from the assessee later on ?
Post, order of the ITAT, as on 30.09.2002, the assessee was entitled to a tax refund of Rs 194,47,13,771/- on which it claims that it was entitled to interest of Rs.185,94,44,053/-.
However, the AO computed the tax refundable at Rs.178,19,49,025/- and the interest refundable on such tax at Rs 156,25,56,450/-.
Thus, there was a short fall of Rs.16,27,64,746/- on tax refundable and Rs.29,68,87,603/- on interest payable.
Subsequently, when the assessee lost the case in the High Court, this amount of Rs.334,45,05,475/- that was paid to its credit was recovered from it by adjustment against other year’s refund.
However, when the Hon’ble Supreme Court ruled in favour of the assessee, the AO on 19.07.2011, granted refund of Rs 350,55,48,716/- on account of the tax paid by the assessee and the interest recovered from it.
This time, the AO granted the refund of the Rs.16,27,64,746/- of tax paid, for which he had not granted
ITA No. 1434/Del/2017 19 Oil and Natural Gas Corporation Ltd. credit earlier. However, the AO did not pay any interest on any amount refunded to the assessee, other than Rs. 156,25,56,450/- which had been computed in 2002, paid to the assessee then and subsequently recovered from it in 2007.
Therefore, the assessee petitioned the AO under section 154. Subsequently, the AO acknowledged the mistake and granted the refund of interest due to the assessee on 19.07.2011.
For the tax and interest refund of Rs 334,45,05,475/-, the further interest was computed from the date of adjustment of demand in 2007, up till date of refund i.e. 19.07.2011, while for the refund of Rs 16,27,64,746/- the refund was computed right from the date of payment of demand after assessment up till date of refund of tax.
Thus, from these facts it becomes clear that vide his order dated 11.06.2014, the AO has refunded to the assessee, the entire amount of excess tax paid by it and also computed interest on such tax right from the date of payment of taxes till the date of issue of refund i.e. 19.07.2011.
The refund of extra interest of Rs 112,05,65,168/- so computed, was received by the assessee on 30.06.014. Thus, it could no longer be argued that any part of the interest due on 30.09.2002, had remained unpaid.
Once the AO had computed the refund payable on the amount of Rs 16,27,64,746/- right from the date of payment of taxes till the date of refund, the interest due on this amount in
ITA No. 1434/Del/2017 20 Oil and Natural Gas Corporation Ltd. 2002, would automatically stand subsumed in the figure of interest computed on this amount till the date of issue of refund.
The ld. AR relied on the order of Hon’ble Supreme Court in the case of Gujarat Flluro Chemicals 358 ITR 291.
We have perused the same, the relevant portion of the said judgment is as under:
“Doubting the correctness or otherwise of the decision of this Court in the case of Sandvik Asia Limited vs. Commissioner of Income Tax & Ors., (2006) 2 SCC 508, a bench of two learned Judges has referred the following question of law for our consideration and authoritative pronouncement by order dated 28.08.2012:
"The question which arises in this case is, whether interest is payable by the Revenue to the assessee if the aggregate of installments of Advance Tax OF TDS paid exceeds the assessed tax?"
In the aforesaid order of reference, this Court has briefly noticed the facts and the discussion in Sandvik case (supra) wherein, the main issue for consideration and determination by this Court was, whether the assessee is entitled to be compensated by the Revenue for delay in payment of the amount admittedly due to the assessee. This Court has noticed inter alia the provisions of Section 214 of the Income Tax Act, 1961 (for short ‘the Act’) and in light of the same has doubted the correctness of the decision in Sandvik case (supra).
In order to answer the aforesaid issue before us, we have carefully gone through the judgment of this Court in Sandvik case
ITA No. 1434/Del/2017 21 Oil and Natural Gas Corporation Ltd. (supra) and the order of reference. We have also considered the submissions made by the parties to the lis.
We would first throw light on the reasoning and the decision of this Court on the core issue in Sandvik case (supra). The only issue formulated by this Court for its consideration and decision was whether an assessee is entitled to be compensated by the Income Tax Department for the delay in paying interest on the refunded amount admittedly due to the assessee. This Court in the facts of the said case had noticed that there was delay of various periods, ranging from 12 to 17 years, in such payment by the Revenue. This Court had further referred to the several decisions which were brought to its notice and also referred to the relevant provisions of the Act which provide for refunds to be made by the Revenue when a superior forum directs refund of certain amounts to an assessee while disposing of an appeal, revision etc.
Since, there was an inordinate delay on the part of the Revenue in refunding the amount due to the assessee this Court had thought it fit that the assessee should be properly and adequately compensated and therefore in paragraph 51 of the judgment, the Court while compensating the assessee had directed the Revenue to pay a compensation by way of interest for two periods, namely; for the Assessment Years 1977-78, 1978-79, 1981-82, 1982- 83 in a sum of Rs.40,84,906/- and interest @ 9% from 31.03.1986 to 27.03.1998 and in default, to pay the penal interest @ 15% per annum for the aforesaid period.
In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assessees and also by the Revenue. They are of the view that in Sandvik case (supra) this Court had directed the Revenue to pay interest on the statutory interest in case of delay in the payment. In other words, the
ITA No. 1434/Del/2017 22 Oil and Natural Gas Corporation Ltd. interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period.
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.
Further it is brought to our notice that the Legislature by the Act No. 4 of 1988 (w.e.f. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest.
With the aforesaid clarification we now refer back all the matters before a Two Judge Bench of this Court to consider each case independently and take an appropriate decision one way or the other.”
Thus, we find that there is no provision of any interest other than the statutory interest provided u/s 244A. As the facts undisputed, the assessee has already been paid interest on the short computation of refund of tax of Rs.16,27,64,746/- and interest of Rs.29,68,87,603/- after the outcome of the order of the Hon’ble Supreme Court on 19.07.2011 by the AO.
ITA No. 1434/Del/2017 23 Oil and Natural Gas Corporation Ltd. 35. While reiterating that the assessee is eligible for interest from the date of payment of tax to the date of issue of refund (not date of determination of refund) on the taxes paid, we also hold that the assessee is not eligible for any other interest other than interest u/s 244A on the taxes paid. We further clarify that in case the taxes payable of Rs.100/- have been collected along with interest of Rs.10/- totaling to Rs.110/-, then in the eventuality of the refund interest u/s 244A would be calculated on the amount of Rs.110/- based on the dates of payment of these amounts.
Whether the assessee is eligible for interest on the delay in payment of interest ?
The main argument of the assessee was that the claim was being made u/s 244A which started with the statement that “where refund of any amount is due” meant that “any amount” included interest that was legally due but not paid to the assessee and therefore, since the revenue has not paid the interest at the opportune time, the assessee was entitled to receive interest on the unpaid refund from the period 19.07.2011 to 30.06.2014 on the date the refund was actually granted to the assessee.
In the case of H.E.G, the revenue has not provided interest on the TDS i.e. the tax paid u/s 206 which the Court has ordered to pay interest on the TDS of Rs.XXXX/- on the original assessment till the date of payment. To reiterate the Hon’ble Supreme Court directed that interest be paid as per the Act on the amount of TDS of Rs.XXXX/-. It never directed for
ITA No. 1434/Del/2017 24 Oil and Natural Gas Corporation Ltd. compounding of the interest or held that refund becomes part of the principle and to pay further interest on that amount.
Based on the order of the Hon’ble Supreme Court in the case of Gujarat Flluro Chemicals (supra), we hereby hold that the assessee is eligible for interest on the refund of taxes till the date of issue of refund. In case, the interest u/s 244A has not been calculated till 30.06.2014 i.e. the date of issue of refund order, on the taxes paid then the assessee would be eligible for interest.
To conclude, Ground No. 1 of the assessee is allowed. Ground No. 2 of the assessee is dismissed. Ground No. 3 of the assessee is sent to AO for verification whether interest on the taxes has been computed till 30.06.2014.
Order Pronounced in the Open Court on 28/09/2020.
Sd/- Sd/- (Amit Shukla) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 28/09/2020 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR