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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI G.S.PANNU & SHRI SANDEEP GOSAIN
ORDER PER G.S.PANNU,A.M:
The captioned appeal filed by the assessee pertaining to assessment year 2006-07 is directed against an order passed by CIT(A)-4, Mumbai dated 12/10/2015, which in turn arises out of an order passed by the Assessing Officer under section 143(3) r.w.s. 147 r.w.s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) dated 12/03/2014.
The short point involved in this appeal is with regard to determination of interest payable to the assessee on refunds in terms of (A.Y. 2006-07) section 244A of the Act. Briefly put, the relevant facts are that the appellant is a Public Sector Bank, which also has foreign branches and whose income is also taken into consideration while computing assessee’s total tax liability. In determining such tax liability, credit for the advance tax and TDS paid with respect to foreign branches was allowed, which is termed as DIT relief, amounting to Rs.31,74,14,174/-. After allowing such credit, the tax liability was determined at Rs.53,55,92,368/- and after reducing therefrom, the TDS of Rs.77,58,71,279/- and advance tax of Rs.330.00 crores, a refund of Rs.354,02,78,911/- arose. As per the Assessing Officer interest under section 244A of the Act was not allowable with respect to the refund corresponding to the DIT relief. This aspect of the controversy has also been upheld by CIT(A) against which the assessee is further in appeal before us.
Before us, the Ld. Representative for the assessee vehemently pointed out that the interest under section 244A of the Act has been unjustly reduced by the income-tax authorities in the impugned assessment and pointed out that the refund has arisen only on account of TDS and advance tax being in excess of the tax liability (net of DIT relief) and, therefore, there is no situation to say that there is refund out of DIT relief. The Ld. Representative for the assessee pointed out that this controversy is directly covered by the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Tech. Mahindra Ltd. [2016] 69 taxmann.com 402(Bombay).
On the other hand, the Ld. Departmental Representative defended the stand of the lower authorities by pointing out that denial of interest in relation to the credit of DIT relief is justified because the Government of India is not the beneficiary of such taxes; and, that assessee would be eligible for interest under section 244A of the Act only on excess taxes paid in India.
We have carefully considered the rival submissions. Factually speaking, in the instant case, the assessment has resulted into a refund and, therefore, in principle, assessee is entitled to interest in terms of section 244A of the Act. The only controversy is as to whether for the purposes of computing interest under section 244A of the Act, the excess taxes will be computed after considering the credit paid for DIT relief or not. The contention of the Revenue is that the DIT relief does not represent taxes paid/collected in India; and, therefore, the same would not be a part of the refund for the purposes of calculating interest under section 244A of the Act. We find that this controversy has been directly answered by the Hon'ble Bombay High Court in the case of Tech. Mahindra Ltd.(supra), wherein following discussion is relevant:-
We find that the Commissioner of Income Tax (Appeals) and the Tribunal have while examining the claim for interest on refund granted considered the fact that the relief under Section 90 of the Act is available in respect of the income tax which is payable both in India as well as in the other Countries with which India has DTAA. Therefore, relief under Section 90 of the Act is to be allowed while computing the tax liability in India by virtue of credit being given to the extent that tax has been paid abroad. Therefore, the tax payable is to be computed on the income to be assessed. Thereafter the credit which is available to the assessee in view of DTAA is to be taken into account and if there is any excess which the assessee has paid into the Indian Treasury, then, he is entitled to the refund of the same which would also carry interest in terms of Section 244A of the Act.
In so far as the argument of the Ld. Departmental Representative is concerned, the same has also been noted and, thereafter repudiated by the Hon'ble Bombay High Court in the aforesaid decision. Therefore, it has to be concluded that once credit for the DIT relief is available to the assessee in terms of a statutory provision, the same is liable to be taken into consideration for determining the amount of refund, for the purposes of computing interest under section 244A of the Act also. Thus, on this aspect assessee has to succeed. We hold so.
The other plea raised before us at the time of hearing was against the validity of the proceedings initiated by the Assessing Officer under section 147/148 of the Act. Since assessee succeeds on merits of the dispute, the said aspect is rendered academic and is not being adjudicated for the present.
In the result, appeal of the assessee is allowed as above.
Order pronounced in the open court on 23/03/2018.