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Facts
The appeal by the assessee, Tata Sons Private Limited, is against the order dated 05/08/2024 & 26/08/2024 passed by NFAC, Delhi concerning AY 2008-09 & 2009-10. The core issue revolves around the calculation of interest on refunds and the appropriation of refunds.
Held
The Tribunal held that the Assessing Officer erred in how refunds were adjusted. Interest should be calculated first on the interest component, then the balance towards the tax component. The AO was directed to re-compute the interest, considering the period up to the actual receipt of refund and also re-examine the issue of additional interest under section 244A(1A) from 01.06.2016.
Key Issues
Whether the Assessing Officer correctly calculated interest on refunds by not prioritizing the interest component and whether additional interest under Section 244A(1A) was correctly denied.
Sections Cited
244A, 244A(1A), 251
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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI SANDEEP SINGH KARHAIL, HON’BLE
| आयकर अपीलीय अिधकरण "ायपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI SANDEEP SINGH KARHAIL, HON’BLE JUDICIAL MEMBER I.T.A. No. 5109/Mum/2024 Assessment Year: 2008-09 & I.T.A. No. 5102/Mum/2024 Assessment Year: 2009-10 Tata Sons Private Limited Deputy Commissioner of Income Bombay House Vs Tax – 2(3)(1), Mumbai 24, Homi Mody Street Fort, Mumbai Maharashtra – 400001 [PAN: AAACT4060A] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee by : Shri Sukhsagar Syal, A/R Revenue by : Shri Hemanshu Joshi, Sr. D/R सुनवाई की तारीख/Date of Hearing : 16/12/2024 घोषणा की तारीख /Date of Pronouncement: 16/12/2024 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order dated 05/08/2024 & 26/08/2024 passed by NFAC, Delhi pertaining to AY 2008-09 & 2009-10, respectively. 2. Since common grounds are involved, except for variance in quantum, both the appeals were heard together and are disposed off by this common order for the sake of convenience and brevity. 3. The grievance of the assessee reads as under:- “Based on the facts and circumstances of the case and in law, Tata Sons Private Limited (the appellant), respectfully craves leave to prefer an appeal against the order dated 05 August 2024 passed by the learned Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre [NFAC], on following grounds each of which is independent, separate and without prejudice to one another:
I.T.A. No. 5109/Mum/2024 & I.T.A. No. 5102/Mum/2024 2 1) On the facts and circumstances of the case and in law, the NFAC ought to have held that the Id. Assessing Officer erred in not granting interest on refund from the date on which the order giving effect to the ITAT order was passed determining the refund to the date on which the actual refund was credited to the Appellant's bank account.
2) On the facts and circumstances of the case and in law, the NFAC ought to have held that the ld. Assessing Officer erred in not adjusting the total refund, first towards the interest component under section 244A(i) and the balance towards the principal tax component.
3) On the facts and circumstances of the case and in law, the NFAC ought to have held that the ld. Assessing Officer erred in calculating the refund by appropriating the earlier refunds granted towards the interest as calculated then (i.e., at the time of earlier refunds issued) as against the revised interests computed at the time of granting the latest refund.
4) On the facts and circumstances of the case and in law, the NFAC ought to have held that the ld. Assessing Officer erred in not granting interest under section 244A(1A) of the Act.
5) Without prejudice to the above, the NAC erred in remanding the matter to the Assessing Officer which is violative of section 251 of the Act.
The Appellant craves leave to add, alter, vary, omit, substitute, or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal.” 4. Representatives of both the sides were heard at length. Case records carefully perused. 5. The sum and substance of the quarrel is that the ld. AO erred in not granting interest on refund from the date on which the actual refund was credited to the assessee’s bank account and further erred in not adjusting the total refund, first towards the interest component and thereafter the balance towards the principal tax component. The assessee also contends that the AO has not granted interest u/s 244A(1A) of the Act. 6. We find that the quarrel was also there in AY 1993-94, 2001-02, 2010-11 & 2011-12. The Co-ordinate Bench in ITA No. 2363/Mum/2023
I.T.A. No. 5109/Mum/2024 & I.T.A. No. 5102/Mum/2024 3
for AY 1993-94, has considered the impugned quarrel and held as under:- “7. We heard the parties and perused the material on record. The first grievance of the assessee with regard to calculation of interest under section 244A is the way in which the AO has adjusted the refunds issued. In this regard we notice that the coordinate bench has been consistently holding the AO is required first adjust the interest component and then the taxes for the purpose of calculating interest under section 244A of the Act. The relevant extract from the decision of the coordinate bench in the case of Grasim Industries Ltd vs DCIT (123 taxmann.com 312) is as given below - 6. We find that assessee has raised ground before us stating that refund granted to the assessee is to be first adjusted against the correct amount of interest due on that date and thereafter, the left over portion should be adjusted with the balance tax. We find that in the instant case refund was granted to the assessee vide refund order in October 2013 and it was pleaded by the assessee that the said refund is to be adjusted against the correct amount of interest payable thereof to be computed as per the directions of the Ld. CIT(A) and only the balance amount is to be adjusted against tax paid. Accordingly, unpaid amount is the tax component and therefore, the assessee would be entitled for claiming interest on the tax component remaining unpaid. In our considered opinion, the same would not tantamount to interest on interest as alleged by the Ld. CIT(A) in para 4.2 on his order. Similarly, the refund granted to the assessee in July 2016 is to be adjusted against the correct interest payable on the tax amount remaining unpaid and balance towards tax component. We find that this issue is already settled in favour of the assessee by the following decisions of this Tribunal:-
a. Decision in the case of Union Bank of India v. Asstt. CIT (2016) 72 taxmann.com 348/162 ITD 142 (Mum.). b. Decision in the case of Bank of Baroda v. Dy. CIT [IT Appeal No. 646 (Mum) of 2017, dated 20-12-2018)
In view of our aforesaid decision in the facts and circumstances of the instant case and respectfully following the judicial precedents relied upon hereinabove, the alternative argument made by the id AR on without prejudice basis, need not be gone into and no opinion is given herein and they are left open.
Accordingly, we direct the Id. AO to compute the correct amount of interest allowable to the assessee as directed by the id. CIT(A) as on the date of giving effect to the Tribunal's order i.e. 6-9-2013 We further hold that the refund granted on 6-9-2013 be first appropriated or adjusted against such correct amount of interest and consequently, the short fall of refund is to be regarded as shortfall of tax and that shortfall should then be considered for the purpose of computing further interest payable to the assessee u/s.244A of I.T.A. No. 5109/Mum/2024 & I.T.A. No. 5102/Mum/2024 4
the Act till the date of grant of such refund. Accordingly, the grounds raised by the assessee in this regard are allowed for both the years." (Emphasis supplied)
The ratio laid down is that the amount of interest u/s. 244A is to be calculated 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. Therefore we hold that the manner in which the assessing officer has adjusted the refund is not correct and that the assessee would be entitled for interest on the unpaid refunds in accordance with the principle laid out in the aforesaid decision of Tribunal. The ld AR during the course of hearing submitted a detailed working of the manner in which the AO has calculated the interest and also the correct way in which the same is to be calculated (page 23 and 24 of paper book) Accordingly the assessing officer is directed to compute interest under section 244A as per the claim of the assessee after giving a proper opportunity of being heard.
On the issue of grant of refund till the date of issue of refund, the ld AR submitted that the issue is squarely covered in favour of the assessee vide the decisions of Hon'ble Bombay High Court in case of CIT vs. Pfizer Limited [1991] 191 ITR 626 (Bom) and also of City bank NA Mumbai Vs. CIT in ITA No. 6 of 2001 as well as the decision of CIT vs. K.E.C International in ITA No. 1038 of 2000. Respectfully following the aforesaid precedents, in our considered view, the assessee is justified in seeking interest u/s 244A of the Act upto the date of receipt of the refund order, i.e. 18.08.2022. Accordingly the AO is directed to re-calculate the interest up to the date of actual receipt of refund by the assessee. It is ordered accordingly.
The next issue contended pertaining to the interest calculation is that additional interest u/s. 244A(1A) to be calculated on the total amount of refund including Interest. In this regard the ld AR drew our attention to the provisions of sub-section (1A) of section 244A of the Act, in terms of which, when there is a delay in granting refund due to the assessee as a result of delay in passing an order giving effect to the appellate order or revisional order, the assessee is entitled to the additional interest on such amount of refund at 3% p.a. for the period as mentioned therein. The ld AR submitted that the ITAT order, was passed on 04.02.2015 & 01.01.2016 and the present OGE has been passed on 08.03.2016 and refund was received on 18.08.2022. The provision of Section 244A(1A) came into effect from 01.06.2016 and hence from 01.06.2016 to 31.08.2022 there is a delay of 75 months for which the assessee is entitled for additional 3% interest under section 244A(1A). The ld AR in this regard relied on the decision of the coordinate bench in case of ACIT v/s Bharat Petroleum Corporation Ltd. (Mumbai ITAT "B" Bench) (30.06.2021) (ITA No. 5231 to 5233 of 2019). The ld AR further submitted that interest u/s 244A(1A) of the Act cannot be held as interest-on-interest as held by the Hon. Supreme Court and followed by High Court(s). In this regard our attention was drawn to the decision of the Hon. Delhi High Court in the case of India Trade Promotion Organization v/s CIT (06.09.2013) 38 taxmann.com 233 wherein by placing reliance on the decision of the Hon. Supreme Court of India in the case of CIT v/s. H.E.G. Ltd. (2010) 324 ITR 331,
I.T.A. No. 5109/Mum/2024 & I.T.A. No. 5102/Mum/2024 5
it is held that the words " refund of any amount becomes due to the assessee" would include in its scope tax as well as interest which has accrued and is payable upto the date of refund. Accordingly, it is further held that when the revenue does not pay full amount of refund but part amount is paid, it will be liable to pay interest on the balance outstanding amount. This does not amount to payment of interest on interest".
We heard the parties and perused the material on record. We notice that the coordinate bench in the case of Bharat Petroleum Corporation Ltd (supra) has considered the applicability of section 244A(1A) for assessment years prior to 01.06.2016 and held that –
From the reading of the above decision, we are of the considered opinion that provisions of section 244A (1A) would apply only prospectively w.e.f 01.06.2016 and hence additional interest would be eligible only from that date and not from 01.04.2016. As the Hon'ble High Court has imposed caveat explaining the circumstances under which the additional interest can be granted u/s. 244A[14] of the Act, we are of the view that this matter should go back to the file of the Assessing Officer for examining the facts of the assessee in the present appeals and for application of the ratio of decision in view of the observations of their lordships on applicability of the additional interest to the present appeals. Thus, we restore this issue to the file Assessing Officer who shall examine the issue afresh in the light of the decision of the Hon'ble Gujarat High Court (supra). 12. The provisions of sub-section (1A) to section 244A are inserted by the Finance Act, 2016 as a remedial measure to compensate the assessee in cases where there are delays in granting refunds due on account of delay in passing order giving effect to appellate or revisional orders. Applying the ratio laid down by the coordinate bench in the case of Bharat Petroleum Corporation Ltd (supra), we are of the considered view that the provisions of section 244A(1A) would be applicable in assessee's case from 01.06.2016 till the date of actual receipt of refund and accordingly we remit the issue back to the AO to examine the issue afresh and calculate the additional interest under section 244A(1A) in accordance with law.”
The Co-ordinate Bench in AY 2001-02, 2010-11 & 2011-12 has followed the aforementioned decision. 8. Considering the facts of the case, being pari materia the same, as considered by the Co-ordinate Bench in the earlier years (supra), we direct the AO to re-compute the interest and decide the issue as directed by the Co-ordinate Bench in the earlier years to which we have been I.T.A. No. 5109/Mum/2024 & I.T.A. No. 5102/Mum/2024 6
told that the AO has already given suitable appeal effect. With the above directions, both the appeals are allowed for statistical purposes. 9. In the result, both the appeals are allowed for statistical purposes. Order pronounced in the Court on 16th December, 2024 at Mumbai. (SANDEEP SINGH KARHAIL) ACCOUNTANT MEMBER Mumbai, Dated 16/12/2024 *SC SrPs *SC SrPs *SC SrPs *SC SrPs
आदेश की "ितिलिप अ"ेिषत /Copy of the Order forwarded to : अपीलाथ" / The Appellant 1. ""थ" / The Respondent 2. संबंिधत आयकर आयु" / Concerned Pr. CIT 3. आयकर आयु" अपील 4. ( ) / The CIT(A)- िवभागीय "ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 5. 6. गाड" फाई/ Guard file.
आदेशानुसार/ BY ORDER,