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Facts
Piem Hotels Limited claimed a refund of Dividend Distribution Tax (DDT) of Rs. 2,70,86,631/- for A.Y. 2014-15. The Assessing Officer granted the refund but denied interest under Section 244A of the Income Tax Act. The assessee's rectification application under Section 154 and subsequent appeal to the CIT(A) were dismissed, citing that the denial of interest was not an apparent mistake rectifiable under Section 154 and that DDT was an additional tax, not covered by specific interest provisions of Section 244A.
Held
The Tribunal found that the lower authorities erred in denying interest on the DDT refund, as Section 244A applies to all refunds under the Income Tax Act, and interest on excess DDT paid is a statutory and non-discretionary obligation. It held that the assessee is entitled to interest on the refunded amount from the date of payment of the excess tax/additional tax.
Key Issues
Whether the assessee is entitled to interest under Section 244A of the Income Tax Act, 1961, on the refund of excess Dividend Distribution Tax (DDT), and if the denial of such interest by the lower authorities constitutes a mistake apparent from the record rectifiable under Section 154.
Sections Cited
Income Tax Act, 1961, Section 250, Section 244A, Section 154, Section 116, Section 143(3), Section 115O, Section 156, Section 115WJ, Section 206C, Section 199, Section 115WE, Section 140A, Section 115WF, Section 115WG, Section 144, Section 147, Section 155, Section 254, Section 260, Section 262, Section 263, Section 264, Section 245D, Section 201(1A), Section 195(2)
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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI. PRASHANT MAHARSHI & SHRI. RAJ KUMAR CHAUHAN
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI BEFORE SHRI. PRASHANT MAHARSHI, ACCOUNTANT MEMBER AND SHRI. RAJ KUMAR CHAUHAN, JUDICIAL MEMBER ITA NO. 4407/MUM/2023 (A.Y: 2014-15) Piem Hotels Limited Vs. Assistant Commissioner of 90, Vivanta President, Cuffe Income Tax Circle 3(2)(2) Parade, Mumbai – 400 005. Aayakar Bhavan, Maharshi PAN: AAACP8376M Carve Road, New Marine Lines, Churchgate, Mumbai – 400 020. (Appellant) (Respondent)
Assessee Represented by : Shri. Ketan Ved Department Represented by : Shri. H. M. Bhatt (Sr. D.R.) Date of conclusion of Hearing : 25.04.2024 Date of Pronouncement : 27.05.2024
O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order dated 13.09.2023 of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) [hereinafter referred to as the
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“CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the A.Y. 2014-15. 2. Assessee has raised following grounds in its appeal: -
“Non grant of Interest u/s. 244A of the Income Tax Act, 1961 ('the Act') a. On the facts and in the circumstances of the case, the learned Assessing Officer ('AO') has erred in not granting interest under section 244A of the Act while granting refund of Dividend Distribution Tax ('DDT") in accordance with the provisions of the Act. It is prayed that the learned AO be directed to compute the interest in accordance with the provisions of section 244A of the Act and issue refund accordingly. Grant of interest on the principle of fairness and natural justice b. Without prejudice to Ground No 1, if the provision of section 244A is at all held to be not applicable in case of DDT refund, then the learned AO be directed to grant interest on principle fairness and natural justice and denial of unjust enrichment. It is prayed that the learned AO be directed to compute the interest on principle of fairness and natural justice.” 3. The brief facts giving rise to the present appeal are as under: -
The appellant is engaged in the business of running hotels. The appellant owns and manages various five-star hotels in India. The appellant filed its Return of income (ROI) electronically on 30.11.2019 for the A.Y. 2014-15, wherein the appellant claimed refund of Dividend Distribution Tax (DDT) amounting to Rs. 2,70,86,631/- in schedule DDT of Income Tax Return Form.
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The Ld. Assessing Officer i.e., Assistant Commissioner of Income Tax, Circle 3(2)(2), Mumbai (hereinafter referred to as the “AO”) vide his order dated 30.10.2019 issued under section 154 of the Income Tax Act, 1961, granted refund of Dividend Distribution Tax of Rs. 2,70,86,631/- . However, the Ld. AO erred in not granting interest either under section 244(A) of the Act or under any other provisions of law.
Aggrieved by the said order, a rectification application was moved under section 154 of the Act before the Ld. AO and the assessee vide letter dated 30.10.2019 has submitted that while passing the order under section 143(3) Dividend Distribution Tax was determined at Rs. 20,51,297/- and additional income tax already paid on DDT was Rs. 2,91,37,928/- and as such requested to issue balance refund of Rs. 2,70,86,631/-. The Ld. AO has disposed off the said application vide order dated 30.10.2019 and has computed the liability of Dividend Distribution Tax as under: Particulars Amount (Rs.) Dividend declared by Piem 17,14,50,000 Hotels Less: Dividend received from 15,93,80,000 foreign subsidiary company as per section 115O(1A) of the Act. Amount for the purpose of 1,20,70,000 computing DDT liability. Tax Payable @ 16.995% 20,51,297
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Tax Paid 2,91,37,928 DDT Refund 2,70,86,631 7. The said order was challenged in appeal before the Ld. CIT(A) on the ground that the Ld. AO erred in not granting interest either under section 244(A) of the Act or under any other provision of law while granting refund of DDT of Rs. 2,70,86,631/-.
It was prayed before the Ld. CIT(A) that the Ld. AO be directed to compute the interest in accordance with the provision of law and issue further refund accordingly. The appellant/assessee further alleged that where the DDT refund is granted, interest under section 244(A) of the Act should also be granted; that the interest under section 244(A)of the Act is a compensatory in nature as there is no fault of the appellant. The action of the Ld. AO for rejecting the interest claim of the appellant without giving an opportunity of hearing is invalid. It is further stated that the interest on DDT refund is covered within provisions of section 244(A) of the Act. It was therefore prayed before the Ld.CIT(A) that the Ld.AO be directed to grant compensatory interest under section 244(A) of the Act from the date of payment of the DDT till the date of issue of refund. It was further prayed that if the provision of section 244(A) was
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not applicable in case of interest on DDT refund, then the Ld. AO be directed to grant interest on the principle of natural justice.
The Ld. CIT(A) has passed the order under section 250 of the Act dated 13.09.2023. The appeal of the appellant/assessee was dismissed holding that the case was not fit for rectification order under section 154 of the Act and as such there was no illegality in the Ld. AO’s order wherein, he has declined to rectify the mistake if any under section 154 of the Act.
In order to proceed further, it is necessary to find out the detailed reasons given by the Ld. CIT(A) for dismissing the appeal. Therefore, para 3 onwards of the judgment of Ld. CIT(A) is relevant and reproduced as under: -
“As mentioned in Para-2 above, the sole issue in this appeal is whether there was any infirmity in AO's order u/s 154 declining to grant interest u/s 244A of the Act was right or wrong. Section 154 of the Act reads, "Rectification of mistake. 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"
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3.1. So, the conditions precedent for passing rectification order are, namely, (i) any mistake should exist; and (ii) such mistake should be apparent from records. In T. S. Balaram, ITO v. Volkart Brothers, 1971 AIR 2204, 1972 SCR (1) 30, it was held, "A mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long-drawn process of reasoning on points on which there may conceivably be two opinions. In Satyanarayan Laxminarayan Hegde and Ors. v. Millikarjun Bhavanappa Tirumale this Court, while spelling out the scope of the power of a High Court under Act 226 of the Constitution, ruled that an error which has to be established by a long-drawn process of reasoning on points where there may conceivably be two opinions cannot be said to be an error apparent on the face of the record. A decision on a debatable point of law is not a mistake apparent from the record (see Sidhamappa v. Commissioner of Income Tax, Bombay). The power of the officers mentioned in S. 154 of the Income-tax Act, 1961 to correct 'any mistake apparent from the record. The above principle of law, laid down by the Supreme Court, is binding on all including me under Article 141 of Constitution of India. Therefore, I now turn to see whether there "may conceivably be two opinions " in the matter and whether the issue is "something which can be established by a long-drawn process of reasoning on points on which there may conceivably be two opinions as pronounced in the above judgments by the Supreme Court. 4. Relevant Section 244A of the Act provides, "Interest on refunds. 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: ---
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(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 percent 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 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
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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 dermand 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." 4. Clause (a) is obviously not applicable in the present case. Words of sub-section (1) are clearly for both clause (a) and (b) below it. These read, "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:" The words, "Where refund of any amount becomes due to the assessee under this Act are sweeping enough to take into their fold all refunds arising under the Act. No distinction or exclusion is made or provided. As far as
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this part is concerned, the only question to be asked is whether the refund is arising under the Act. Here, the answer is yes However, as the words "subject to the provisions of this section indicate, such omnibus provision is qualified by the provisions of Section 244A. If any exclusion is provided in the section, interest will be subject to that. Now, from the words of clause (b) and Explanation it appears that by the words "in any other case", all types of refunds under the Act are covered. Thereafter, the calculation procedure is provided in which the period will be from date of payment of tax to date of granting refund. So far, there is no complexity particularly when payment of DDT is termed as payment of 'additional income tax in Section 1150 of the Act. But in the Explanation, the date of payment of tax has been given a special definition which is somewhat restrictive and different from normal meaning of the term. By this Explanation, 'date of payment' is defined as the date on which tax mentioned in demand notice u/s 156 is paid in excess of demand mentioned in that notice. In case of Dividend Distribution Tax (DDT), no such demand notice was issued and, so, the beginning date for this calculation is not available. This creates a problem how to calculate the interest, or, for that matter, whether interest can be granted at all, or, even larger question as to whether the legislation intended to grant interest in cases where some tax is paid without any demand notice. That two opinions on the issue can be conceived, or in other words, there can be conceivably two opinions, is evident from the fact that the issue has been subject matter of several case laws, some of which have been cited by the appellant and mentioned at Para 2 hereinabove. Significantly, even the Supreme Court said in UOI v. Tata Chemicals Ltd (2014) 363 ITR 658 (SC)that in such other cases, neither clause (a) nor clause (b) is applicable. The relevant portion is reproduced below: "39. In the present case, it is not in doubt that the payment of tax made by resident / depositor
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is in excess and the department chooses to refund the excess payment of tax to the depositor. We have held the interest requires to be paid on such refunds. The catechize is from what date interest is payable, since the present case does not fall either under clause (a) or (b) of Section 244A of the Act. In the absence of an express provision as contained in clause (a), it cannot be said that the interest is payable from the 1st of April of the assessment year. Simultaneously, since the said payment is not made pursuant to a notice issued under Section 156 of the Act, Explanation to clause (b) has no application. In such cases, as the opening words of clause (b) specifically referred to "as in any other case", the interest is payable from the date of payment of tax. The sequel of our discussion is the resident/deductor is entitled not only the refund of tax deposited under Section 195(2) of the Act, but has to be refunded with interest from the date of payment of such tax." 5.1. The above judgment is in the subject of interest on refund arising out of TDS unlike this case where refund is out of DDT. Thus, the facts are different. In UOI &Ors. v. Dhanwanti Devi & Ors. (1996) 6 SCC 44the Supreme Court held. "9 ...... Every judgment must be read as applicable to the particular facts proved. since the generality of the expressions which may be found there is not intended to be exposition of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found.
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Therefore, in order to understand and appreciate the binding force of a decision is always necessary to see what were the facts in the case in which the decision was given and what was the point which had to be decided." 5.2. In Gangadhar Behera and Ors. v. State of Orissa (2002) 8 SCC 381, the apex court held, "So far as the observations made in Kamaksha Rai case are concerned, it is to be noted that the decision in the said case was rendered in a different factual scenario altogether. There is always peril in treating the words of a judgement as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases (see Padma Sundara Rao v. State of Τ.Ν. - [(2002) 3 SCC 533]). 5.3. Appellant has cited the order of ITC Ltd v. CIT (cited at Para - 2 supra). But the present appeal before me is of Mumbai and the jurisdictional Bombay High Court held in CIT v. Thane Electricity Supply Ltd. [1994] 206 ITR 727(Bom) overruled the judgment in the case of CIT v. Smt. Godavari Saraf [1978] 113 ITR 589 (Bom) holding that the decision of one High Court was not a binding precedent for another High Court or Lower Courts outside the jurisdiction. 5.4. The fact emanating from the above discussion is that the issue is not clear cut it. is not an issue where there cannot conceivably be two opinions. Therefore, it cannot be said that the mistake is apparent from records. Consequently, respectfully, following the decision of hon'ble Supreme Court in T. S. Balaram, ITO vs. Volkart Brothers (supra), I am of the opinion that the case is not fit for rectification order u/s. 154 of the Act and, hence, there is no infirmity
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in AO's order declining to rectify by passing order u/s 154 of the Act. 6. In the result, the appeal is dismissed.”
It is thus evident from the impugned order of the Ld. CIT(A) under section 250 of the Act that the present appeal was directed against the order of the Ld. AO under section 154 dated 30.10.2019, wherein the Ld. AO had ordered DDT refund of Rs. 2,70,86,631/- but no interest was paid for the delayed refund of DDT tax. The rectification application was filed by the appellant/assessee on 20th December, 2019 under section 154 of the Act in which it was claimed that rectification of the mistake apparent from record is necessary wherein interest has not been refunded in violation of section 244A of the Act. Since in para 2 of the impugned order, the Ld. CIT(A) has discussed and observed that “it is seen that after filing of this appeal on 06.12.2019, the appellant filed another rectification petition on 12.12.2019 specifically seeking interest under section 244A on the refund of Rs. 2,70,86,631/- which was dismissed on 30.09.2020”, hence, the order dated 30.09.2020 of the Ld. AO on the said rectification application become relevant and reproduced as under because the said rectification petition was dismissed by this order.
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“In this case, order u/s.154 was passed on 30.10.2019 determining Dividend Distribution Refund of Rs.2,70,86,631/-. Assessee vide letter dated 12.12.2019 stated that while passing order u/s.154, eligible interest u/s 244A was not granted. It is further submitted by the assessee that the delay in issue of refund is not due to any fault on the part of the Company. but because of the department's system which was not designed to grant refund which is legally due to the Company and the Company is entitled to statutory and compensatory interest in accordance with the provisions of section 244A of the Act as also other applicable laws. The application filed by the assessee has been perused but found not to be acceptable. It is contended by the assessee that it is eligible for interest u/s.244A as per clause (b) of section 244A. On verification of clause (b) of section 244A, it is seen that assessee's claim is not genuine. For better clarity, the relevant portion of section 244A(b) is reproduced below: "244A(1) ……… (a) where the refund is out of any tax collected at source under section 260C or paid by way of advance tax or treated as paid under section 199….. (aa) where the refund is out of any tax paid under section 140A………. (b) in any other case, such interest shall be calculated at the rate of [one-half percent forevery 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 purpose of this clause, 'date of payment of tax or penalty' means the date on and from which the amount of tax or penalty specified
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in the notice of demand issued under section 156 is paid in excess of such demand." Thus, assessee's case is not falls under section 244A(1)(a) or 244A(1)(aa). Further in the explanation to section 244A(1)(b), it is amply clear that intention of the legislature is to grant refund of excess payment made for regular payment or penalty, where the notice of demand is issued u/s 156 of the Income Tax Act. In assessee's case there is no such demand notice u/s 156 was served. Also, here it is pertinent to mention that distribution of profits as "dividend" being appropriation of profits, the company distributing profits as dividend is liable to pay tax on the total income inclusive of the amount of profits distributed as dividend. By inserting section 1150, the legislature has imposed additional income tax on the amount of "profits distributed" as "dividend". Hence it is here amply clear that Dividend Distribution Tax is not a tax but an additional tax and under section 244A of the Act, it is nowhere mentioned that the interest on account of this section should be paid on excess of additional taxes paid by the company. Accordingly, rectification petition filed by the assessee u/s154 of the Act for granting interest u/s 244 of the Act onto excess of DDT paid is not a mistake apparent from record and hence the said petition is hereby rejected.”
Thus, the reasons for dismissal of the rectification petition by the Ld. AO can be briefly summarized as under:
i. The assessee’s case does not falls under section 244(A) or 244A(1)(a) or 244A(1)(aa).
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ii. Further, in the explanation to section 244A(1)(b), it is amply clear that intention of the legislature is to grant refund of excess payment made for regular payment of penalty, where the notice of demand is issued under section 156 of the Act but in assessee’s case there is no such demand notice served under section 156 of the Act.
iii. The Dividend Distribution Tax is not a tax but an additional tax payable by the assessee under section 115-O, therefore, under section 244A of the Act, it is nowhere mentioned that the interest on account of this section should be paid on excess of additional taxes paid by the appellant/assessee.
The dismissal of the appeal by the Ld. CIT(A) can be summarized as under:-
i. The legislation never intended to grant interest in cases where some tax is paid without any demand notice and in any case of DDT, no such demand notice was issued.
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ii. Since two opinions are possible in this case and hence there is no mistake apparent from the law which can be rectified under section 154 of the Act.
We have heard the Ld. AR of the appellant/assessee who has argued that both the lower authorities i.e., the Ld. AO and Ld. CIT(A) has committed illegality in their orders as they have not followed the law referred and already decided by the coordinate bench in ITA No. 301/Kol/2015, ITC Ltd. Vs. Commissioner of Income Tax, Kolkata dated 03.02.2016 wherein similar matter was decided in favour of the appellant/assessee. The Ld. AR further referred and relied the case of Hon’ble High Court of Bombay in Stock Holding Corporation of India Ltd. Vs. N. C. Tewari, Commissioner of Income Tax, Mumbai City-III reported as [2015] 53 taxmann.com 106 (Bombay). It is further argued that the ratio of these two judgments perfectly covers the facts and circumstances of the case of the assessee and the assessee was within his legal and statutory right to seek interest under section 244A of the Act which has been wrongly denied by both the Ld. Lower Authorities.
The Ld. DR on behalf of the revenue has argued that the orders of lower authorities are perfectly and legally valid and there is no illegality
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and perversity and has defended the impugned order as well as the order of the Ld. AO saying that since two opinions were possible in this case hence, the rectification was not legally possible as has been rightly held by the Ld. CIT(A). Regarding the denial of interest on the excess DDT which has been ordered to be refunded by the Ld. AO on the application of the assessee it is argued that there was no question of payment interest in the absence of any provisions in that regard and the finding recorded by both the lower authorities was therefore legally sustainable in the eyes of law.
We have considered the rival submissions and precedents referred by Ld. AR on behalf of assessee. In ITC Ltd. case of the coordinate bench referred (supra) the Ld. CIT(A) has held that regarding the interest on excess DDT, there is no provision under the Act to allow the interest on the refund of the excess DDT paid. In that regard, the finding recorded by the Ld. Coordinate Bench in ITA No. 301/Kol/2015, ITC Ltd. Vs. Commissioner of Income Tax, Kolkata dated 03.02.2016 from para no. 6.5 is relevant and reproduced as under:
“Regarding the interest on the refund granted by the AO under section 244A of the Act, let us understand the provisions of section 244A which is reproduced below:
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"(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 percent for every month or part of a month comprised in the period from the 1std day of April of the assessment year to the date and 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 (T) 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 one halt 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... From the aforesaid provisions of Section 244A we find that it applies to all refunds that arise under the Income Tax Act. The Section begins with where refund of any amount becomes due to the assessee under this Act..... DDT is nothing but an "additional income tax" for which the charging section is section 115-0 of the Income tax Act, Section 115-0 lays down that-
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Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1 day of April, 2003, whether out of current or accumulated profits shall be charged to additional income-tax (hereinafter referred to as tax on distributed profits)...."
Thus, where any refund arises on account of excess payment of DDT, it is a refund becoming due to the assessee under the Act and interest under Section 244A is applicable on the same. Clause (a) of Section 244A(1) deals with refunds that arise on account of excess payment of advance tax, TDS/TCS.
Clause (b) of section 244A(1) applies to refunds that arise "in any other case". As such, Clause (b) is of wide import and any payment which does not fall in clause (a), are covered under clause (b) like refund of excess tax payment made against demand raised, refund of excess self-assessment tax paid, refund of excess DDT paid, refund of TDS deposited, refund of interest levied u/s. 201(1A), refund of penalty, etc. Refund of excess DDT paid falls clearly under clause (b) i.e. "in any other case and there is no reasons to think otherwise.
We also find the support from CBDT circular clarifying its intent to grant interest on all refunds due to an assessee under the Income Tax Act, as evident from its circular no. 549 dated 31.10.1989. While insertion of a new interest section u/s 244 for interest on refunds, the CBDT had clarified in the said circular that apart from being complicated, the earlier sections for refund/interest had left certain gaps for which interest was not paid by the department to the assessee for money remaining with the Government. To remove this inequity, as also to simplify the provisions in this regard, the Act, 1987 has
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inserted a new section 244A in the Income-tax Act. applicable from the assessment year 1989-90 and onwards, which contains ap the provisions for payment of interest by the department on delay in the grant of refunds.
We also find that support for our conclusion in the Judicial precedents on the issue of interest on refund due u/s. 244A(1)(b) of the Act. IT is not out of place to point out the Income Tax department has in a similar way contended ar various judicial forums across the country that there are no provisions for payment of interest on refund due to self- assessment tax and all in the cases the appellant and judicial authorities have held that interest has to be granted u/s. 244A(1)(b) on sell assessment tax. Reference can be made to the following case laws which have upheld the grant of interest on refund of self-assessment tax:
(1) Asst Comm. of Income tax vs. M/s Kerala Transport Co. -2013 (10) TMI 1232 9 Kerala High Court)
(2) Comm, of Income tax, Coimbatore vs ABT Industries Ltd. 2013-TIOL- 332-High Court- MAD-IT (Madras High Court)
(3) Addl. CIT vs Royal Bank of Scotland N.V. [2011] 15 taxmann. Com 333 (Kolkata Tribunal) (4) CIT vs Vijaya bank [TS-481-High Court-2011 (KAR)] (Karnataka High Court)
(5) CIT Vs SIV Industries Ltd. (2007-2 TMI 30 (HC)9Madras High Court)
In fact, recently the Supreme Court in the case of Union of India v. Tata Chemicals Ltd. (2014) 43 taxmann.com 240 (SC) has upheld the right of a deductor to claim interest on
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excess TDS deposited to and refunded by revenue subsequently. The Supreme Court has clearly held that:
....Interest payment is a statutory obligation and non-discretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244A is drafted and enacted. The language employed in Section 244A of the Act is clear and plain. It grants substantive right of interest and is not procedural. The principles for grant of interest are the same as under the provisions of Section 244 applicable to assessments before 01.04.1989, albeit with clearly of application as contained in Section 244A;
In view of above provisions, we find that the assessee is very much entitled to have the refund along with the interest. Therefore, we deem it that the AO's order is not erroneous in so far as it is prejudicial to the revenue. Hence provisions of section 263 are not applicable and should be dropped we allow this ground of appeal of the assessee accordingly.” 17. In Stock Holding Corporation of India Ltd. referred (supra) the matter pertains to refund of amount alongwith interest payable under section 244A(1)(b) on refund of excess amount paid on self-assessment tax. Para 5 to 7 are relevant and reproduced as under: -
“5. Mr. Jitendra Jain, learned counsel appearing for the petitioner in support submits as under: - (a) The issue of grant of interest is no longer res- integra in view of the decision of the Supreme Court in Union of India v. Tata Chemicals Ltd. [2014] 363 ITR 658/222 Taxman 225/43 taxmann.com. (Mag.) 240. Thus, the revenue should be directed to grant interest on the excess amount paid as tax on self-assessment under Section 140A of the Act;
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(b) Section 244A (1) of the Act provides that refund of any amount due under the Act to the assessee would entitle the assessee to receive the same along with interest. This would govern refund granted both under clauses (a) & (b) of sub- section (1) of Section 244A of the Act. Section 244A(1)(a) would govern refunds out of Advance tax and tax deducted at source while Section 244A(1)(b) of the Act would govern all other refunds including tax paid on self-assessment. This view is also supported by CBDT Circular No.549 dated 30 October 1989; and (c) The explanation to Section 244A(1)(b) would have no application to the present facts. This is particularly so as no amount has been paid in excess of the demand specified under Section 156 of the Act. For all the above reasons, it is submitted that the petition be allowed. 6. As against the above, Mr. Arvind Pinto, appearing for the revenue in support of the impugned order, submits as under:- (a) The amount paid by the petitioner on self- assessment was even according to the petitioner not tax payable. This, he submits, is evident from the computation of income filed by the petitioner where they claim a refund of Rs.47.15 lacs. Consequently, the amount paid in excess, not being tax, would entitle the petitioner only to the refund of the principal amount paid and not any interest thereon; (b) The Apex Court decision in Tata Chemicals Ltd. (supra), would have no application to the present facts as the petitioners therein had deducted a larger quantum of tax then liable to be deducted in view of an order passed by the authorities under the Act. In this case, the petitioner has made the
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payment voluntarily and not consequent to any order passed under the Act and (c) In the alternative and without prejudice to any interest is at all to be allowed to the petitioner, the same can only be from the aforesaid, it is submitted that, if the date on which the notice under Section 156 of the Act is issued to the petitioner. In this case, according to him, it was issued on the date of the assessment order. 7. We have considered the rival submissions. On a bare analysis of Section 244A(1) of the Act it is clear that amount paid by the petitioner as tax on self-assessment would not stand covered by Section 244A(1)(a) of the Act. This is so as it is neither the payment of tax by way of advance tax or by way of tax deducted at source. Thus tax paid on self-assessment would fall under Section 2444(1)(b) of the Act, i.e. a residuary clause covering refunds of amount not falling under Section 244A(1) of the Act. The revenue contends that in the absence of tax on self-assessment finding mention in Section 244A(1)(a) of the Act, no interest is payable under Section 244A(1) of the Act and Section 244A(1)(b) of the Act would have no application. This contention is opposed to the meaning of the provision disclosed even on a bare reading. If the tax paid is not covered by clause (a) of Section 244A(1), it falls within clause (b), which is a residuary clause. Besides, this contention stands negatived by the CBDT Circular bearing No.549 dated 31 October 1989 wherein reference is made to Section 244A and para 11.4 thereof reads as under: 11.4 The provisions of the new section 244A are as under- i. Sub-section (1) provides that where in pursuance of any order passed under this Act, refund of any amount becomes due to the assessee then-
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a. if the refund is out of any advance tax paid or tax deducted at source during the financial year immediately preceding the assessment year, interest shall be payable for the period starting from the 1st April of the assessment year and on the date of grant of the refund. No interest shall, however, be payable, if the amount of refund is less than 10 per cent of the tax determined on regular assessment; (b) if the refund is out of any tax, other than advance tax or tax deducted at source or penalty, interest shall be payable for the period starting from the date of payment of such tax or penalty and ending on the date of the grant of the refund. (Refer to example III in para 11.8)." (Emphasis supplied) The inferences to be drawn from the Board's circular is clear that if refund is out of any tax other than out of advance-tax or tax deducted at source, interest shall be payable from the date of payment of tax and ending on the date of the grant of refund. It is to be noted that nowhere does the CBDT even remotely suggest that interest is not payable by the Department on self- assessment tax. Moreover, the amount paid under Section 140A of the Act on self-assessment is an amount payable as and by way of the tax after noticing that there is likely to be shortfall in the taxes already paid. Thus, this payment is considered to be a tax under the aforesaid provision.” 18. In the light of the settled law referred above and also relied by the Ld. AR on behalf of the assessee, we have examined the order of the Ld. CIT(A) to find out if the same is legally sustainable in view of the settled
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law as discussed above. Para 5 and 5.4 of the impugned order the Ld. CIT(A) are relevant and reproduced as under: -
“5. Clause (a) is obviously not applicable in the present case. Words of sub-section (1) are clearly for both clause (a) and (b) below it. These read, "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:" The words, "Where refund of any amount becomes due to the assessee under this Act are sweeping enough to take into their fold all refunds arising under the Act. No distinction or exclusion is made or provided. As far as this part is concerned, the only question to be asked is whether the refund is arising under the Act. Here, the answer is yes However, as the words "subject to the provisions of this section indicate, such omnibus provision is qualified by the provisions of Section 244A. If any exclusion is provided in the section, interest will be subject to that. Now, from the words of clause (b) and Explanation it appears that by the words "in any other case", all types of refunds under the Act are covered. Thereafter, the calculation procedure is provided in which the period will be from date of payment of tax to date of granting refund. So far, there is no complexity particularly when payment of DDT is termed as payment of 'additional income tax in Section 1150 of the Act. But in the Explanation, the date of payment of tax has been given a special definition which is somewhat restrictive and different from normal meaning of the term. By this Explanation, 'date of payment' is defined as the date on which tax mentioned in demand notice u/s 156 is paid in excess of demand mentioned in that notice. In case of Dividend Distribution Tax (DDT), no such demand notice was issued and, so, the beginning date for this calculation is not available. This creates a problem how to calculate the interest, or, for that matter, whether interest can be granted at all, or, even larger question as to whether the legislation intended to grant interest in cases where some tax is paid without any demand notice. That two opinions on the issue can be
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conceived, or in other words, there can be conceivably two opinions, is evident from the fact that the issue has been subject matter of several case laws, some of which have been cited by the appellant and mentioned at Para 2 hereinabove. Significantly, even the Supreme Court said in UOI v. Tata Chemicals Ltd (2014) 363 ITR 658 (SC)that in such other cases, neither clause (a) nor clause (b) is applicable. The relevant portion is reproduced below: "39. In the present case, it is not in doubt that the payment of tax made by resident/ depositor is in excess and the department chooses to refund the excess payment of tax to the depositor. We have held the interest requires to be paid on such refunds. The catechize is from what date interest is payable, since the present case does not fall either under clause (a) or (b) of Section 244A of the Act. In the absence of an express provision as contained in clause (a), it cannot be said that the interest is payable from the 1st of April of the assessment year. Simultaneously, since the said payment is not made pursuant to a notice issued under Section 156 of the Act, Explanation to clause (b) has no application. In such cases, as the opening words of clause (b) specifically referred to "as in any other case", the interest is payable from the date of payment of tax. The sequel of our discussion is the resident/deductor is entitled not only the refund of tax deposited under Section 195(2) of the Act, but has to be refunded with interest from the date of payment of such tax. 5.4. The fact emanating from the above discussion is that the issue is not clear cut it. is not an issue where there cannot conceivably be two opinions. Therefore, it cannot be said that the mistake is apparent from records. Consequently, respectfully, following the decision of hon'ble Supreme Court in T. S. Balaram, ITO vs. Volkart Brothers (supra), I am of the opinion that the case is not fit for rectification order u/s. 154 of the Act and, hence, there is no infirmity
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in AO's order declining to rectify by passing order u/s 154 of the Act.” 19. It is evident from the observations of the Ld. CIT(A) that in the beginning para 5 of his order, he has proceeded in right direction holding that the words “where refund of any amount becomes due to the assessee under this Act” are sweeping enough to take into their fold all refunds arising under the act but the Ld. CIT(A) seems to be distracted in his subsequent observation of para 5 and specifically para 5.4 where he conclude that in this case it cannot be said that mistakes were apparent from records because two opinions were possible in this case and accordingly held that it was no fit case for rectification of order under section 154 of “the Act” and for that reason, he has observed that there was no illegality in the Ld. AO’s order declining to rectify under section 154 of the Act.
On perusal of the order under section 154 of the Act dated 30.10.2019, it is noticed that the Ld.AO has stated nothing regarding entitlement and refund of interest when the DDT refund to the tune of Rs. 2,70,86,631/- was ordered by him. While deciding the rectification application of the appellant/assessee in order dated 30.09.2020, the Ld. AO has committed apparent mistake and illegality while holding that
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the “assessee’s case does not falls under section 244(A) or 244A(1)(a) or 244A(1)(aa) because the explanation under section 244A(1)(b), it is amply clear that intention of the legislature is to grant refund of excess payment made for regular payment or penalty, where the notice is issued under section 156 of the Act. In assessee’s case there is no such demand notice under section 156 was served.”
It is evident from the order of the lower authorities that they seem to be more concerned about the rectification of the order and has spoken less about the entitlement of assessee to the interest on refund. Both Ld. AO and Ld. CIT(A) seems to have misinterpreted the provision of section 244A(1) which is the only provision applicable in case of the assessee and there is no requirement of applicability of subsequent part of section 244A. The subsequent part of the section has been wrongly applied by the Ld. lower authority on the wrong presumption that in the case of assessee no notice under section 156 was issued. Moreover, the finding recorded by the Ld. Coordinate Bench i.e., ITA No. 301/Kol/2015, ITC Ltd. Vs. Commissioner of Income Tax, Kolkata dated 03.02.2016 perfectly covers the facts and circumstances of this case where the Ld. Coordinate bench has relied the case of Supreme Court of India in Union of India Vs. Tata Chemicals Ltd. referred (supra) stating that the
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“Interest payment is a statutory obligation and non-discretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244A is drafted and enacted. The language employed in Section 244A of the Act is clear and plain. It grants substantive right of interest and is not procedural.”
For the above reasons, we are of the considered opinions that the Ld. Lower authority has committed illegality and perversity while denying the interest on the DDT refund amount and the impugned order is not legally sustainable in the eyes of law and accordingly set aside. We therefore accordingly hold that the appellant/assessee is very much entitled to payment of interest on the already ordered DDT refund of Rs. 2,70,86,631/- from the date of payment of excess tax/additional tax till the payment of interest in pursuance of this order.
Both the ground nos. 1 and 2 are decided in favour of the appellant/assessee. In view of the decision in favour of appellant/assessee on ground no. 1 and 2, the decision on ground no. 3 pales into insignificance and stands disposed off accordingly and having become infructuous.
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In the result, appeal filed by the assessee is allowed in the above terms. Order pronounced in the open court on 27.05.2024
Sd/-/- Sd/-/- (PRASHANT MAHARISHI) (RAJ KUMAR CHAUHAN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Mumbai / Dated 27.05.2024 Karishma J. Pawar, (Stenographer)
Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.
//True Copy//
BY ORDER
(Asstt. Registrar) ITAT, Mumbai