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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI D.S. SUNDER SINGH
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
All these appeals of the Revenue are directed against the common order passed by the Commissioner of Income Tax (Appeals) -17, Chennai, dated 30.03.2016 for the assessment years 2006-07, 2007-08 and 2009-10.
There was a delay of 2 days in filing these appeals by the Revenue. The Revenue has filed a petition for condonation of delay. We have heard the Ld. Departmental Representative and the Ld. counsel for the assessee. We find that there was sufficient cause for not filing these appeals before the stipulated time. Therefore, we condone the delay and admit the appeals.
Shri Shiva Srinivas, the Ld. Departmental Representative, submitted that the CIT(Appeals) has directed the Assessing Officer to grant interest on interest for the delay in refund of the tax paid by the assessee. Referring to the judgment of Apex Court in CIT v.
Gujarat Fluoro Chemicals (2013) 358 ITR 291, the Ld. D.R. submitted that the Apex Court found that interest on interest cannot be allowed. The Ld. D.R. further submitted that the earlier judgment of Apex Court in Sandvik Asia Ltd. v. CIT and Others (2006) 280 ITR 643 was reversed by the Apex Court in Gujarat Fluoro Chemicals (supra). Therefore, levy of interest on the interest for delayed refund of tax paid is not justified.
On the contrary, Sh. R. Vijayaraghavan, the Ld.counsel for the assessee, submitted that it is not a payment of interest on interest. According to the Ld. counsel, it is an adjustment of refund made by the Assessing Officer towards interest, initially. Referring to the order passed by the Assessing Officer for the assessment year 2009-10 dated 21.04.2014, the Ld.counsel submitted that interest under Section 244A of the Income-tax Act, 1961 (in short 'the Act') for the period from April, 2009 to March, 2011 was `31,55,243/-. This computation of interest is not in dispute. The tax refundable is admittedly `2,62,93,692/-. According to the Ld. counsel, the Assessing Officer refunded a sum of `73,89,520/- on 29.03.2011 instead of total refundable amount of `2,94,48,035/-. Out of refund of `73,89,520/-, the interest payable by the Department to the extent of `31,55,243/- has to be first adjusted.
The balance amount has to be adjusted towards the refund of excess tax paid by the assessee. Since there was further delay in refund of amount, the Assessing Officer has to pay interest on the refund of excess tax which was delayed further. Therefore, according to the Ld. counsel, it is not a case of payment of interest on interest. It is a case of adjustment of amount repaid towards the interest payable by the Revenue. Therefore, according to the Ld. counsel, the Department is not correct in claiming that the CIT(Appeals) has directed the Department to pay interest on interest.
We have considered the rival submissions on either side and perused the relevant material available on record. From the order of the CIT(Appeals), it is obvious that the CIT(Appeals) directed the Assessing Officer to pay interest on the total amount payable by the Department including the interest. Therefore, partly the direction of the CIT(Appeals) is covering the interest on the interest. Moreover, the Apex Court in Gujat Fluoro Chemicals (supra) examined this issue elaborately and held that the Department is not liable to pay interest on interest and it was further pointed out that the judgment of Apex Court in Sandvik Asia Ltd. (supra) is not a good law.
Now the Ld.counsel for the assessee claims before this Tribunal that interest on interest is not payable but the refund actually given by the Department has to be adjusted towards the payment of interest initially. This claim of the assessee is correct. Wherever there was refund or repayment of money, the amount has to be first adjusted towards payment of interest. In the case before us, the Assessing Officer quantified the amount refundable which was considered to be paid by the assessee excessively and also computed interest thereon. Even after computation of the excess tax paid by the assessee and payment of interest thereon, the Assessing Officer has repaid only a part of the amount. Therefore, the assessee now claims that the part of the amount repaid by the Assessing Officer has to be first adjusted towards interest. We find merit in the claim of the assessee. When the Assessing Officer repaid part of the amount to be refunded to the assessee, first it has to be adjusted towards the interest and if anything remains, it has to be adjusted towards refund of excess tax paid by the assessee. Therefore, the excess tax remains to be refunded by the Department is again subject to payment of interest under Section 244A of the Act. It is not known why the Department has not refunded the entire amount after quantification of the excess tax refundable by the Department together with interest thereon. Whatever the case may be, after the adjustment of interest from the refund made by the Department, if excess tax remains to be refunded, the Department has to pay interest under Section 244A of the Act. However, the matter needs to be re-examined by the Assessing Officer. Accordingly, the orders of the authorities below are set aside and the issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall adjust the amount refunded towards the interest first and anything remains further, it has to be adjusted towards refund of excess tax. Thereafter, the Department is liable to pay interest on the tax refundable till the actual repayment was made by the Department.
With the above observation, all the appeals of the Revenue are allowed for statistical purposes.
Order pronounced on 25th November, 2016 at Chennai.