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Facts
The assessee company claimed a refund of excess Dividend Distribution Tax (DDT) paid. The Assessing Officer (AO) initially granted the refund but later withdrew part of it along with interest, considering it an excess refund. The CIT(A) allowed the assessee's appeal, holding that interest on the excess DDT refund was eligible.
Held
The Tribunal held that Dividend Distribution Tax (DDT) does not fall under categories like advance tax or self-assessment tax. Therefore, interest on refunds related to excess DDT paid is eligible under the residual clause of Section 244A(1)(b) of the Act, not the proviso which limits interest eligibility.
Key Issues
Whether interest under Section 244A is eligible on the refund of excess Dividend Distribution Tax (DDT) paid, considering it does not fall under specific categories like advance tax or self-assessment tax.
Sections Cited
244A, 154, 115O, 143(1), 143(3), 144C(13), 250, 115JB, 234A, 234B, 234C, 234D, 115WE, 115WF, 115WG, 144, 147, 155, 254, 260, 262, 263, 264, 245D, 206C, 199, 140A, 115WJ, 207
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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: DR. BRR KUMAR & SHRI SIDDHATHA NAUTIYAL
आदेश/ORDER PER : DR. BRR KUMAR, VICE PRESIDENT:
1. This appeal is filed by the Revenue as against the appellate order dated 10.04.2023 passed by the Commissioner of Income Tax (Appeals)- 12, Ahmedabad, relating to the Assessment Year 2010-11.
2. The Revenue has raised the following grounds of appeals:
1. In the facts and on the circumstance of the case, the Ld.CIT(A) has erred in giving direction to the AO for granting interest u/s.244A(1)(b) of the Act on the amount of excess DDT refunded from 01.10.2010 to the date the refund was granted.
2. On the facts and circumstances of the case, the CIT(A) ought to have upheld the order u/s.154 of the act passed on 15.03.2021.
3. In the order u/s. 154, the Assessing Officer has levied the tax by discussing as under: "In this connection, the assessee company filed its return of income for A.Y. 2010-11 on 28/09/2010 declaring total income of Rs. (-) 12,59,65,634/- under normal provisions and book profit of Rs. 160,04,09,477 u/s. 115JB. The return of income was duly processed by CPC u/s. 143(1) of the Act on 03/05/2011 and demand of Rs. 10,69,99,920/- was raised. The credit of DDT of Rs. 9,53,58,500/- paid by the assessee company was not granted. Thereafter assessment order u/s. 143(3) r.w.s. 144C(13) of the IT Act was passed in the case of assessee on 06/02/2015 determining total income of Rs. 106,21,34,600/- u/s 115JB. Further, income of the assessee company for A.Y. 2010-11 was revised vide rectification order u/s 154 dated 03/07/2020 determining total income of Rs.3,68,15,907/- under normal provisions and determining book profit of Rs 160,04,09,477/- u/s. 115JB. 2. On perusal of records, it is noticed that rectification order passed in the case of assessee company on 05/07/2017 wherein credit of DDT of Rs.9,53,58,500/- paid by the assessee was allowed against DDT demand payable of Rs. 10,43,91,098/- and balance tax payable of Rs. 75,04,960/- was determined as mentioned as hereunder: Particulars Dividend (Rs.) DDT paid (Rs.) DDT payable as per intimation u/s 61,42,45,559/- 10,43,91,098/- 143(1) dated 03/05/2011 Less: credits claimed w/s. 1154- 14 for DDT paid by the subsidiaries companies German Remedies Limited, 1,20,00,000/- 20,39,400/- Mumbai (wholly owned subsidiary) paid on 03.08.2009 Zydus Wellness Ltd (70% holding) 4,11,48,207/- 63.93.138/- paid on 03.06.2009 Zydus Animal Health Ltd. (wholly 4,41,59,816/- 75,04,960/- owned subsidiary) paid on 27.09.2010 Net 51,69,37,536/- 8,78,53,540/- Less: tax paid by assessee 9,53,58,500/- company on 11/08/2009 Excess tax paid claimed against 75,04,960/- the income tax payable as per the return of income filed
2.1 The assessee preferred appeal before CIT(A) against rectification order u/s. 154 of the Act dated 05/07/2017 requesting credit of Rs. 75,04,960/- paid by ZAHL (subsidiary) company of assessee. The Ld. CIT(A) allowed the appeal of the assessee for eligibility of assessee for refund on excess tax paid on dividend computed as per section 1150(1A) of the Act. 2.2 In view of above, as per appeal effect to the order of Ld. CIT(A), a refund of Rs. 75,04,960/- was required to be issued to the assessee. As vide order u/s. 154 dated 05/07/2017 it is perused that the gross DDT payable was Rs. 10,43,91,098/- and net DDT payable was 8,78,53,540/- against which the assessee company had paid Rs. 9,53.58,500/- tax as DDT and balance of Rs. 75,04,960/- required to be refunded to the assessee. However, it was noticed that vide order u/s. 250 of the Act dated 20/01/2020, ITD software had allowed refund of Rs.1,14,28,230/-, including interest of Rs. 2,06,168/- u/s.244A of the Act. This resulted into excess allowance of refund of Rs. 39,23,270/-. Further, no interest u/s 244A was required to be issued to assessee as base determined refund of Rs. 75,04,960/- was less than 10% of the net tax amount. The mistake being apparent from record needs to be rectified and excess refund issued to the assessee of Rs 39,23,270/- required to be withdrawn including interest u/s. 244A of the Act for A.Y. 2010-11.
In this regard, notice u/s. 154 was issued and duly served upon assessee on 24/02/2021 as tax liability of the assessee is to be increased thereby giving an opportunity of being heard is given to assessee to rectify the above mistake apparent from record and submit its reply by 02/03/2021. However, assessee failed to comply in response to the aforementioned notice issued. Thus, it is presumed that assessee has no objection in response to notice issued vide dated 24/02/2021 and has nothing to offer for enhancing the tax and interest liability by withdrawing excess refund issued.
4. In this case, vide order giving appeal effect to the order of CIT(A) dated 23/01/2020, a refund of Rs. 75,04,960/- was required to be issued to the assessee. Vide order u/s. 154 dated 05/07/2017 it is perused that the gross DDT payable was Rs. 10,43,91,098/- and net DDT payable was Rs.8,78,53,540/- against which the assessee company had paid Rs.9,53,58,500/- tax as DDT and balance of Rs. 75,04,960/- required to be refunded to assessee. However, it was noticed that vide order u/s 250 of the Act dated 20/01/2020 ITD software had allowed refund of Rs.1,14,28,230/-including interest of Rs.2,06,168/- u/s 244A of the Act
which resulted into excess allowance of refund of Rs. 39,23,270/-. Further no interest w/s.244A was required to be issued to assessee as base determined refund of Rs. 75,04,960/- was less than 10% of the net tax amount. The mistake being apparent from record is being rectified and excess refund issued to the assessee of Rs.39,23,270/- is being withdrawn including interest w/s. 244A of by passing order u/s. 154 of the Act.
The assessed income of the assessee remains unchanged as per order us. 250 of the Income tax Act, 1961 dated 23/01/2020 as mentioned under: 1 Assessed Income under normal Rs. (-)4,88,25,097/- provisions 2 Book profit u/s.115JB Rs. 160,04,09,477/-
6. Tax charged accordingly. Calculate interest w/s. 234A, 234B, 234C & 234D as applicable as per law is worked out. Revised demand notice & challan/refund order as the case is issued herewith. Give credit of pre- paid taxes, if paid any"
4. Aggrieved by the order of the Assessing Officer, the Assessee filed appeal before the Ld. CIT(A) who allowed the appeal of the assessee.
5. Aggrieved by the order of the Ld. CIT(A), the Revenue filed appeal before the Tribunal.
Before us, the Ld. DR relied on the above order of the Assessing Officer passed under Section 154 of the Act.
The Ld. AR relied on the submissions made before the Ld. CIT(A) which are as under:-
"Kindly refer to your above Notice wherein you have stated that an excess refund of Rs. 39,23,270 in respect of interest paid u/s. 244A has been issued to us and you have proposed to withdraw the same.
You have contended that no interest us. 244A is payable as the refund of Rs. 75,04,960/- is less than 10% of the tax amount.
3. You contention applicable only with reference to clause (a) or clause (aa) of Sec. 244A, which specifically deals with TDS, TCS. Advance Tax or Self- Assessment Tax paid u/s 140A.
Proviso to Sec. 244A(1) as relied upon is not applicable to the facts of the case, which is in fact governed by the provisions of Sec. 244A(1)(h), being in any other case. The amount of Rs. 75,04,960/-as determined to be refundable to us has been so determined by the Hon'ble CIT(A) u/s. 115-0 r.w.s. 237 of the I.T. Act. Accordingly, the interest paid to us vide your appeal effect order dated 23/01/2020 was correctly granted and the same does not require any modification.
5. The Assessing Officer erred in withdrawing interest of Rs. 39,23,261/-, correctly granted to the appellant us. 244A of the I.T. Act in respect of the refund of excess Dividend Distribution Tax (DDT) paid us 115-O of Rs.75,04,960/-, pursuant to the order of the then A.O., while giving effect to the Order passed by the Hon'ble CIT(A) in favour of the appellant, granting refund on excess DDT paid us. 115-0.
6. The A.O. had erred in law and on facts in holding that no interest u/s. 244A as referred to in point no. I was payable, since the base refund of Rs.75,04,960/- was less than 10% of the tax amount
Heard both the parties and perused the material available on record.
We find that the Ld. CIT(A) held that the provision of section 244A(1)(a) is applicable where refund is out of any TCS u/s 206C or paid as an advance tax or treated as paid u/s 199 of the Act. Similarly, provision of section 244A(1)(aa) is applicable where refund is out of tax paid u/s 140A. In such circumstances, proviso is applicable wherein interest is not eligible u/s 143(1) or regular assessment if the amount of refund is less than the 10% of the tax determined. The appellant's contention is that its case is covered u/s 244A(1)(b) which is for 'in any other case' which is a residual clause which includes refund of all other taxes paid other than TDS/TCS/Advance Tax/Self-assessment Tax. The appellants plea that DDT lies in this category and therefore covered u/s 244A(1)(b) and consequentially eligible for interest u/s 244A on such refund. It emphasizes that the basic refund given to it is out of the excess DDT it had paid, as was held by the CIT(A) and later confirmed by the ITAT, and hence it is eligible for interest u/s 244A(1)(b) of the Act. In addition, it submitted that the claim of the refund including excess DDT paid was made at the time of filing of return of income 28.09.2010 so it is eligible for refund from 01.10.2010. There is no doubt that the refund of Rs. 75,04,960/- was part of the excess DDT that was paid by the appellant without giving cognizance to the fact that dividend it had paid included a deemed dividend from a wholly owned subsidiaries namely Zydus Animal Health Ltd on 27.09.2010, which was part of the profits from which its own dividend was issued and in accordance with provision of sec. 1150(1A) of the Act was liable to be reduced therein. It had paid the DDT without giving cognizance to the provision of such section on 11.08.2009 itself and when it realized the mistake at the time of filing of return it claimed the benefit as eligible u/s 1150(1A) and accordingly refund of the excess amount of DDT it had paid.
The provision of Section 244A reads as under:- 244A. (1) [Where refund of any amount becomes due to the assessee under this Act], he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely :— (a ) where the refund is out of any tax [paid under section 115WJ or] [collected at source under section 206C or] paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of [one-half per cent] for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted: Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined [under [sub-section (1) of section 115WE or] sub-section (1) of section 143 or] on regular assessment; (b ) in any other case, such interest shall be calculated at the rate of 43[one-half per cent] for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.
Explanation.—For the purposes of this clause, "date of payment of tax or penalty" means 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.
(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final.
(3) Where, as a result of an order under [sub-section (3) of section 115WE or section 115WF or section 115WG or] [sub-section (3) of section 143 or section 144 or] section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub- section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly.
(4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years :] [ Provided that in respect of assessment of fringe benefits, the provisions of this sub- section shall have effect as if for the figures "1989", the figures "2006" had been substituted.]
We find that the factum of refund of excess DDT of Rs 75,04,960/- is not in dispute. However, the Assessing Officer has treated DDT as being covered under the provision of sec.244A(1)(a)/(aa) and hence applied the proviso to these clauses. It is known that the accounting of DDT is done separately from advance tax or self-assessment tax. DDT is payable at the time of declaration/distribution or payment of any dividend whichever date is earlier. It cannot be termed as an advance tax as envisaged u/s 207 or a self-assessment tax as per Section 140A of the Act. Hence, the interest on refund related to DDT paid in excess is covered under the residual clause as envisaged u/s 244A(1)(b) of the Act and is therefore eligible for interest u/s 244A(1)(b) of the Act on the amount of excess DDT refunded from 01.10.2020 to the date the refund was granted. Ergo, the decision of the Ld. CIT(A) is affirmed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 07.03.2025