THE DY. CIT., CIRCLE-1(1), BARODA vs. GUJARAT STATE FERTILIZERS & CHEMICALS LTD., BARODA

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ITA 2459/AHD/2014Status: DisposedITAT Ahmedabad13 December 2017AY 1997-983 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the Supreme Court's decision relied upon by the revenue was not applicable as it dealt with interest on delayed payment of interest, not interest on a refund of wrongly levied interest. Therefore, the assessee is entitled to interest under section 244A on the refunded interest.

What were the facts?

The Assessing Officer refunded interest paid by the assessee under section 234B but did not pay interest under section 244A on this refund. The CIT(A) directed the AO to allow interest under section 244A on the refunded interest.

What were the issues?

Whether interest under Section 244A is payable on the refund of interest paid under Section 234B. Whether the Supreme Court's decision in CIT vs. Gujarat Fluoro Chemicals is applicable to this case.

Which sections of the Income-tax Act were involved?

Section 244A,Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD ‘A’ BENCH, AHMEDABAD

Per Pramod Kumar, AM:

1.

By way of this appeal, the appellant Assessing Officer has challenged correctness of the order dated 4th June 2014, passed by the CIT(A)-I, Baroda, in the matter of appeal effect order passed by the Assessing Officer, for the assessment year 1997-98. 2. Grievance of the appellant is as follows:

“On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred in directing the AO to allow the interest u/s 244A of the Act on refund of interest u/s 234B of the Act without appreciating the fact that as per the provisions of Section 244A of the Act, the assessee is not entitled for interest on refund of any interest as also held by the Hon’ble (SC) [2013].”

3.

The relevant material facts, as discernable from material on record, are as follows. While giving effect to the CIT(A)’s order, the Assessing Officer refunded interest, paid by the assessee under section 234B, of Rs.8,62,74,168/-. However, he DCIT vs. Gujarat State fertilizers & Chemicals Ltd A.Y. 1997-98 did not pay interest under section 244A in respect of the same, nor did he provide any reasons for declining interest under section 244A. When assessee carried this issue in appeal before the CIT(A), he upheld the grievance of the assessee and observed as follows:-

“7.1 Above submission of AR of the appellant is found to be tenable. The Hon'ble ITAT Ahmedabad in the case of AC-IT Vs Alembic Glass Industries Ltd., 111 ITD 320 has mainly held that section 244A grants interest only on that amount of refund, i.e. out of the payments of tax or penalty, made by the assessee or collected from him. As per the Hon'ble ITAT in the instant case, the assessee had made payment of interest u/s 234B which was to be refunded as the same was found to be not chargeable. As per the Hon'ble ITAT therefore, the condition, that refund was out of amount paid or collected from the assessee was satisfied for granting the interest. As per the Hon'ble ITAT, Ahmedabad a literal meaning given to the expression "tax or penalty' found in clause (b) of the later part of section 244A(1) would create an anomalous situation resulting in exclusion of the concept of the interest. Therefore, in the context of section 244A(1)(b), the expression ‘tax' would include interest also and the definition of tax in section 2(43) meaning 'income- tax' may not be applicable in the context of section 244A(1). As per the Hon'ble ITAT consequently, the interest paid in pursuance of an order under section 234B has to be regarded as forming part of tax or an adjunct to income-tax. As per the Hon'ble ITAT, the result was that the assessee would be entitled to interest on the refund of interest paid lender section 234B also. Again, the Hon'ble High Court of Gujarat in the case of CIT Vs Gujarat State Warehousing Corporation (supra) has held that the assessee is entitled to interest u/s 244(1A) in respect of interest payments u/s 215, 217 and 220(2) of the IT Act. The Hon'ble High Court of Delhi in the case of Modipon Ltd. Vs CIT 142 taxman, 92 has also held that the assessee is entitled to interest u/s 244(1A) in respect of interest payments u/s 220(2) of the IT Act.

7.

2 In view of above decision and also(in view of above decisions of Hon'ble Courts, it is held that the appellant is entitled to interest u/s 244A of the IT Act on the amount of interest of Rs. 8,62,74,168/- as paid by it u/s 234B of the IT Act. In view of this the AO is directed to grant interest to the appellant on amount of Rs.8,62,74,168/- u/s 244A of the IT Act from the date of payment till the date of issue of refund.”

4.

The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us.

5.

We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

6.

We find that short grievance of the revenue, as evident from the ground of appeal reproduced by us earlier, is that in the light of Hon’ble Supreme Court’s judgment in the case of CIT vs. Gujarat Fluoro Chemicals [(2013) 358 ITR 291 (SC)], interest under section 244A cannot be granted in respect of interest refunded which was wrongly charged under section 234B earlier. However, on a perusal of the said order, we find DCIT vs. Gujarat State fertilizers & Chemicals Ltd A.Y. 1997-98 that Hon’ble Supreme Court was dealing with interest on delayed payment of interest by the Assessing Officer. Such an interest on interest was held to compensation for great prejudice caused to the assessee, when payment was inordinately delayed by decades, and not a matter of course in computation of statutory interest payable by the Assessing Officer. Interest refunded by the Assessing Officer, on account of incorrect levy earlier, is certainly not the same thing as a statutory interest on refund by the Assessing Officer. The reliance placed on this decision is thus wholly misplaced and is rejected. No other issue was raised in appeal, or even otherwise, before us. We, therefore, decline to interfere in the matter.

7.

In the result, the appeal is dismissed. Order pronounced in the open Court on this 13th day of December, 2017. Mahavir Prasad Pramod Kumar (Judicial Member) (Accountant Member) Ahmedabad, the 13th day of December, 2017 **bt* Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order

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