BRAKES INDIA LIMITED,,CHENNAI vs. DCIT (LTU), CHENNAI

PER G. MANJUNATHA, AM:

This appeal filed by the assessee is directed against order

passed by the learned Commissioner of Income Tax (Appeals)

Large Taxpayer Unit (LTU), Chennai, dated 21.02.2012 and

pertains to assessment year 2002-03.

“1. The order of the Commissioner of Income tax (Appeals) is contrary to law, facts and circumstances of the case.

2 ITA No. 758/Chny/2012

2.1 The Commissioner of Income tax (Appeals) ought to have appreciated that according to provisions of section 244A where refund of “any amount” arises to the appellant out of advance/TDS/tax paid, the appellant is entitled to interest from the 1st day of April of the Assessment Year/Date of payment to the date on which the refund is actually granted. The actual interest due to the appellant calculated strictly on the above basis amounting to Rs.16,84,867/-. Hence this sum should have been granted as interest under section 244A. 2.2 The Appellant relies on the decision of the Honb’le Apex court in the case of Sandwik Asia Limited reported in 280 ITR 643. 2.3 The Commissioner of Incometax (Appeals) ought to have appreciated that in assessee’s own case the Chennai Tribunal has allowed the issue in favour of assessee in ITA Nos. 1558 to 1564 in the for ÀY 1986-87, 89-90 to 94-95 by an order dated 06.02.2009.”

“a) In computing the interest payable under Section 244A, the refunds paid by the department should be first adjusted against the interest in the amount refundable by the department and only the balance

3 ITA No. 758/Chny/2012

amount should be adjusted against the tax to be refunded.

b) Interest uls.244A should be computed on the outstanding tax as adjusted in the manner specified in the grounds above.

c) Under Section 140A, the amount paid as self assessment tax is first adjusted against the interest payable by the Assessee and only the balance is adjusted against the tax payable.

d) This is the manner of adjustment prescribed by the Incometax Act under Section 140A and the same manner of adjustment should also be applied for calculating interest u/s.244A.”

4 ITA No. 758/Chny/2012

assessee carried the matter in appeal before the first appellate

authority and challenged computation of interest payable

u/s.244A of the Income Tax Act, 1961, in light of decision of

the Hon'ble Supreme Court in the case of M/s.Sandwik Asia

Ltd. vs. CIT (280 ITR 643) (SC). The learned CIT(A), after

considering relevant facts and by following decision of the

Hon'ble High Court of Madras in the case of M/s. Wheels India

Ltd. in T.C.A. No.76 & 77 of 2008 dated 27.04.2011 decided the

issue against assessee by holding that interest on interest is to

be granted only if there is inordinate delay in granting refund.

Since, there is no inordinate delay in granting such refund, the

assessee is not entitled for interest on interest. The assessee

challenged order of the learned CIT(A) before the Tribunal. The

Tribunal vide its order dated 29.06.2012 in ITA No.

758/Mds/2012 dismissed appeal filed by the assessee. The

assessee carried the matter in further appeal before Hon’ble

High Court of Madras in T.C.A No.53 of 2013 and raised two

substantial questions of law. The relevant questions of law

raised before the Hon'ble High Court of Madras are as under:-

5 ITA No. 758/Chny/2012

1) Whether on the facts and circumstances of the case, the Tribunal was right in holding that the appellant is not entitled to the differential claim of interest u/s 244A on refund as claimed by it?

2) Whether the Tribunal was right in law in not following the judgment of the Hon’ble Supreme Court in the case of CIT Vs. H.E.G. Ltd. (324 ITR 331) holding that interest component will partake of the character of the amount due u/s 244A of the Act which becomes an integral part of the principal amount and assessee would be entitled to interest after the said amount becomes due and payable.”

6 ITA No. 758/Chny/2012

Hon'ble Supreme Court in the case of CIT Vs. Gujarat Flouro

Chemicals (2013) 358 ITR 291 (SC), but manner in which

such interest can be computed has been explained by the

ITAT., Chennai bench in assessee’s own case for the

assessment year 1989-90 in ITA No.1559/Chny/2008 vide

order dated 25.02.2020, where the Tribunal has held that

although, the assessee is not entitled for interest on interest,

but the manner in which any refund which has been granted

partly to the assessee is to be adjusted first towards interest

due to the assessee and remaining portion should be adjusted

towards tax due to the assessee. The learned AR further

referring to provisions of section 140A of the Act, submitted

that u/s.140A amount of self-assessment tax paid by the

assessee is first adjusted against interest payable by the

assessee and balance, if any, is adjusted against tax payable.

If you follow same analogy for computing interest payable to the

assessee u/s.244A of the Act, then refund should be first

adjusted against interest payable to the assessee and balance

if any, should be adjusted for refund of tax for the purpose of

computing interest u/s.244A of the Act. Therefore, he submitted

that additional grounds filed by the assessee should be

7 ITA No. 758/Chny/2012

admitted and suitable direction may be given to the Assessing

Officer to recompute interest payable in accordance with

directions given by the Tribunal for earlier assessment year.

Income Tax Appellate Tribunal Rules, 1963 in support of

certain judicial precedents and argued that petitioner can raise

issue which was decided against the assessee, even if the

assessee has not filed any appeal or cross objection and thus,

requested to consider petition filed under Rule 27 of ITAT

Rules and decide issue in accordance with law.

the learned CIT(A) submitted that as per provisions of section

244A of the Act, the assessee is entitled for interest on refund

from a particular day and except this, the assessee is not

entitled for any interest, including interest on interest. The

learned DR further submitted that this issue is also covered by

the decision of the Hon'ble Supreme Court in the case of CIT

Vs. Gujarat Flouro Chemicals (supra), where the Hon'ble

Supreme Court, after considering its earlier decision in the case

8 ITA No. 758/Chny/2012

of M/s.Sandwik Asia Ltd. Vs. ACIT (supra), held that the

assessee is entitled only interest on refund, but not entitled for interest on interest. Therefore, the learned DR submitted that there is no merit in the arguments of the assessee that while

computing interest u/s.244A of the Act, refund given to the assessee should be first adjusted against interest payable and balance if any, payable should be adjusted against tax.

Therefore, the learned DR submitted that additional grounds of appeal filed by the assessee and petition filed under Rule 27 of ITAT Rules cannot be entertained.

cited by the assessee in light of petition filed by the assessee for admission of additional grounds of appeal along with petition filed under Rule 27 of ITAT Rules, 1963. As regards petition

filed by the assessee for admission of additional grounds dated 25th August, 2021, we find that the assessee has filed additional grounds taking certain grounds in light of provisions of section

140A of the Income Tax Act, 1961, and requested to give

9 ITA No. 758/Chny/2012

direction to the Assessing Officer as to how to compute interest

u/s.244A of the Income Tax Act, 1961. As per petition filed by

the assessee, it was contended that while computing interest

u/s.244A of the Act, refund given to the assessee shall be first

adjusted towards interest payable to the assessee u/s.244A

and balance, if any, should be adjusted against tax due to the

assessee. The assessee has taken this plea on the basis of

provision of section 140A, which provides for how to adjust

amount of tax paid by the assessee to tax and interest payable

under the Act.

filed by the assessee for admission of additional grounds in light

of decision of the Hon'ble Jurisdictional High Court of Madras in

T.C.A No.53 of 2013, and we ourselves do not subscribe to the

arguments advanced by the learned counsel for the assessee

in the petition filed for admission of additional grounds for

simple reason that question of law raised before the Hon’ble

High Court was that whether the appellant is entitled for interest

on interest u/s.244A of the Act, and further, whether the

Tribunal was right in not following judgement of the Hon'ble

10 ITA No. 758/Chny/2012

Supreme Court in the case of CIT Vs. H.E.G. Ltd. (324 ITR

331).

High Court of Madras, we find that the Hon'ble Supreme Court

in the case of CIT Vs. Gujarat Flouro Chemicals (supra) had

considered an identical issue and after considering its earlier

decision in the case of M/s.Sandwik Asia Ltd. vs. CIT (supra),

held that the assessee is not entitled for interest on interest

while granting refund of tax. The second question of law raised

before the Hon’ble High Court in light of decision of the Hon'ble

Supreme Court in the case of CIT Vs. H.E.G. Ltd.(supra) was

whether that interest payable to the assessee u/s.244A of the

Act, will become an integral part of TDS amount which was not

refunded after it became due and payable and therefore, the

assessee was entitled to interest u/s.244A of the Act, on

delayed refund of TDS. We find that the Hon'ble Supreme

Court in the case of CIT Vs. Gujarat Flouro Chemicals (supra)

had very categorically held that it was only that interest

provided for under statute which may be claimed by the

assessee from the revenue and no other interest on such

11 ITA No. 758/Chny/2012

statutory interest. Therefore, we are of the considered view that

although, there is no reference of earlier judgement in the case

of CIT Vs. H.E.G. Ltd.(supra), while deciding the issue in the

case of CIT Vs. Gujarat Flouro Chemicals (supra), but

because judgement of Gujarat Flouro Chemicals is subsequent

to the decision of CIT Vs. H.E.G. Ltd.(supra) and thus, we

presume that the Hon'ble Supreme Court was aware of its

earlier judgement of CIT Vs. H.E.G. Ltd.(supra), while deciding

the issue and thus, we are of the considered view that

subsequent judgement of the Hon'ble Supreme Court prevails

on this issue. Further, in the case of CIT Vs. Gujarat Flouro

Chemicals (supra), it was very categorically held that

assessee is not entitled for interest on interest. Further, the law

is very clear that as per section 244A of the Act, the assessee

is entitled for interest on refund due from the date immediately

following expiry of period of three months of aforesaid to the

date on which refund is granted. We further noted that there is

no substance in additional grounds taken by the assessee in

light of provision of provisions of section 140A of the Act,

because manner in which amount paid by the assessee to be

adjusted has been specifically provided u/s.140A of the Act,

12 ITA No. 758/Chny/2012

and thus, there is no scope for the assessee as well as the

department to go beyond what was specified and thus, as per

said section, when tax paid by the assessee, it shall be first

adjusted against interest payable under the Act, and only

balance if any, should be adjusted against the tax payable by

the assessee. But, u/s.244A of the Act, except payment of

interest for specified period on refund due to the assessee,

nothing has been specified on how to compute interest.

Therefore, when the law is very specific and does not provide

for manner in which such interest is to be computed, the

analogy provided under the provisions of section 140A of the

Act, cannot be imported to the provisions of section 244A to

compute interest payable to the assessee. Therefore, for all

these reasons, we are of the considered view that there is no

merit in petition filed by the assessee seeking admission of

additional grounds. Hence, we are of the considered view that

petition filed by the assessee for admission of additional

grounds is devoid of merits and thus, same is not admitted.

of Income Tax Appellate Tribunal Rules, 1963, we find that as

13 ITA No. 758/Chny/2012

per Rule 27, the respondent, though he may not have

appealed, may support order appealed against on any of the

grounds decided against him. From Rule 27 of ITAT Rules,

1963, it is only a respondent in appeal, may support order

appealed against on any of the grounds decided against him. In

this case, the assessee is a petitioner in appeal filed against

order of the learned CIT(A). Therefore, the assessee cannot file

petition under Rule 27 of ITAT Rules, 1963 to support order

appealed against on any of the grounds decided against him,

because substantive grounds taken by the assessee in appeal

filed against order of the learned CIT(A) is also on the issue of

interest payable to the assessee u/s.244A of the Income Tax

Act, 1961. Therefore, we are of the considered view that

petition filed by the assessee under Rule 27 of ITAT Rules, is

devoid of merit and thus, same is not admitted.

has challenged order of the learned CIT(A) in not granting

interest on interest u/s.244A of the Act, while granting refund

to the assessee. As we have noted in earlier part of this order

that as per section 244A of the Act, the assessee is entitled for

14 ITA No. 758/Chny/2012

interest on refund due from a particular period and except this,

the assessee is not entitled for interest on interest, in case there

is delay in refund payable to the assessee. This provision has

been explained by the Hon'ble Supreme Court in the case of

CIT Vs. Gujarat Flouro Chemicals (supra), where the Hon'ble

Supreme Court, after considering its earlier judgement in the

case of M/s.Sandwik Asia Ltd. vs. CIT (supra), has very

categorically held that the assessee is entitled only for interest

provided under the Act for specified period, but not interest on

interest while granting refund to the assessee u/s.244A of the

Income Tax Act, 1961. Therefore, we are of the considered

view that there is no merit in arguments taken by the counsel

for the assessee that assessee is entitled for interest on interest

while granting refund due to the assessee. This position has

been reiterated by the ITAT., Chennai in assessee’s own case

for earlier year in ITA No.1559/Chny/2008 vide order dated

25.02.2020 and held that the assessee is not entitled for

interest on interest. But, the Tribunal has admitted additional

grounds filed by the assessee and directed the Assessing

Officer as to how to compute interest payable u/s.244A of the

Act. In our considered view, the Tribunal has exceeded its

15 ITA No. 758/Chny/2012

authority in admitting additional grounds filed by the assessee

subsequent to the judgement of the Hon'ble Jurisdictional High

Court of Madras, because substantial question of law raised by

the assessee before the Hon’ble High Court was limited to the

extent of examining claim of the assessee whether the

assessee is entitled for interest on interest while granting refund

u/s.244A of the Act or not. Since, question of computation and

how to compute such interest was not before the Hon’ble High

Court of Madras, in our considered view, additional grounds

filed by the assessee seeking to give direction to the Assessing

Officer and manner in which such interest should be computed

is beyond scope of the Tribunal and thus, we are of the

considered view that although, Tribunal had given direction to

the Assessing Officer as to how to compute interest u/s.244A

of the Act for earlier years, we prefer not to follow said decision

of the Tribunal for earlier assessment year in assessee’s own

case, because it is not in accordance with the provisions of

section 244A of the Act and also exceeds scope of issue

before the Hon’ble High Court in Tax Case Appeal No.53 of

2013.

16 ITA No. 758/Chny/2012

circumstances of the case, we are of the considered view that

the assessee is not entitled for interest on interest u/s.244A of

the Act, while granting refund due. The learned CIT(A), after

considering relevant facts has rightly held that the assessee is

not entitled for interest on interest u/s.244A of the Act. Hence,

we are inclined to uphold findings of the learned CIT(A) and

dismiss appeal filed by the assessee.

Order pronounced in the open court on 23rd February, 2022

Sd/- Sd/- (वी. दुगा� राव) (जी. मंजुनाथ) (V.Durga Rao) (G. Manjunatha) $या�यक सद'य /Judicial Member लेखा सद'य / Accountant Member चे$नई/Chennai, *दनांक/Dated 23rd February, 2022 DS

आदेश क� ��त,ल-प अ.े-षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु/त (अपील)/CIT(A) 4. आयकर आयु/त/CIT 5. -वभागीय ��त�न3ध/DR 6. गाड� फाईल/GF.