JAGDISH CHANDRA MALHOTRA,NEW DELHI vs. DCIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘D’ NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA No.5651/Del/2013 Asstt.Year: 2008-09

Shri Jagdish Chandra Malhotra, vs DCIT, C/o Nagesh Bahl & Co., CA Circle-6(1), 21/25, Moti Nagar, New Delhi. New Delhi. (PAN: AAIPM9318D) (Appellant) (Respondent) Appellant by: Shri Nagesh Kumar Bahl, CA Respondent by : Shri K.K. Jaiswal, Sr. DR Date of Hearing: 19.11.015 Date of pronouncement: 14.01.2016 O R D E R PER L.P. SAHU, A.M. This appeal by the assessee has been filed against the order of the CIT(A)-IX, New Delhi dated 26.8.2013 on the following grounds of appeal:-

“1 That Commissioner (Appeals) erred in not granting interest u/s 244A on the income tax refund of Rs. 8,63,139 paid to the assessee for the period from 17-12-2008, being the date of filing of rectification application, till 04-12-2012 being the date of grant of refund. 2 That Commissioner (Appeals) erred in holding that delay in issue of refund was attributable to the assessee without considering the fact that application for rectification of mistake was filed on 17-12-2008. 3 That without prejudice to above grounds, whether for the purpose of passing of rectification order u/s 154, law as on the date of passing of order u/s 154 is relevant and not as on the date of passing of appellate order and since law on 04-12-2012 was that assessee is entitled to interest on

I.T.A. No. 5651/D/2013 Assessment year 2008-09 refund arising on account of self assessment tax, CIT(A) erred in not giving interest u/s 244A. 4. Whether for the purpose of deciding whether self assessment tax is a tax covered in Sec. 244A(l)(b) or not, direct judgement of Supreme Court in the case of Cholamandalam Investment & Finance Co. Ltd. [which lay down specific rule that self assessment tax is a tax covered under sec 244A(l)(b)] be followed and judgment of SC in the case of Commissioner of Income-tax, Gujarat v. Gujarat Fluoro Chemicals [2014] 42 taxmann.com 1 (SC) dated September 18, 2013 (which lay down general rule that “it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest”) should not be followed.

I.T.A. No. 5651/D/2013 Assessment year 2008-09 2. Brief facts of the case are that the assessee filed its return of income for assessment year 2008-09 on 30.07.2008 vide acknowledgement no. 0110 claiming nil refund. He determined total tax and interest of Rs.45,81,673 and tax paid accordingly. As per return, the advance tax paid was Rs. 50,000, TDS – Rs. 39,50,807 and self-assessment tax paid – Rs. 5,80,870. The appellant has calculated his returned income under the following heads:-

Income from Salaries 11,90,400 Income from house properties 1,08,75,047 Long term capital gain 17,02,103 Income from other sources 3,83,397 Deduction claimed under Chapter VIA 51,760

He had paid Rs.8,00,000/- as advance tax on 15.03.2008 by CSN 44 BSR 220094. In the application, the appellant admitted that ‘by mistake the assessee has not claimed the same in the income tax return’ and the advance tax of Rs.8,00,000/- was paid on 15.3.2008 but again deposited tax by way of self assessment tax of Rs. 5,80,870/-

I.T.A. No. 5651/D/2013 Assessment year 2008-09 which he claimed advance tax for Rs. 8 lakh which was not claimed in the original return filed. There was a demand u/s 143(1) and he was entitled for refund of Rs.2,34,153/- for assessment year 2011-12 which was also adjusted. Accordingly, he was entitled for net refund of Rs.10,34,153. Ld. Assessing Officer has denied interest on excess tax paid and passed the order u/s 154 showing net tax refundable of Rs.8,76,210. He did not give interest on excess tax paid of Rs. 8,00,000/. Against this order, he preferred an appeal before the first appellate authority and the first appellate authority has confirmed the order of the Assessing Officer, therefore, the assessee is in appeal before us.

I.T.A. No. 5651/D/2013 Assessment year 2008-09 “On an analysis of section 244A, it is seen that where ‘refund of any amount’ becomes due to the assessee, the assessee is entitled to simple interest thereon. The mode and manner of calculating such interest is laid down in clauses (a) and (b) of sub-section (1) of the said section. Where the refund is out of pre-paid taxes, interest is calculated in terms of section 244A(1)(a). Where the refund is of taxes paid other than pre-paid taxes covered in clause (a), the computation of interest is for the period prescribed in clause (b), sub-section (1) of the said section. The tax due on the returned income has to be paid by way of tax deducted at source (section 199), advance tax (section 209) or by way of self-assessment tax (section 140A). In addition, where the assessment is completed at an income higher than the returned income, the tax payable by the assessee is specified in the notice of demand issued under section 156. Where there is a shortfall in payment of tax vis-a-vis the tax finally due on the assessed income, the assessee is liable to pay interest under section 234B. Conversely, where the revenue makes a high-pitched assessment which is subsequently reduced/modified in an appeal, any payment of taxes made, which are subsequently refunded as a consequence of relief obtained in appeals, etc., are monies legitimately belonging to the taxpayers and wrongly withheld by the Government. This is based on the principle that if the revenue had, in the first instance, made correct assessment of the tax liability of the assessee, the assessee would not have been deprived of the use of money. In such a situation, where pre-paid taxes are in excess of the assessed tax, the assessee is entitled to refund of such tax along with interest thereon. Where an assessee out of abundant caution pays self-assessment tax whilst staking a claim in the return, which claim is accepted, resulting in refund of self-assessment tax, the assessee would be equally entitled to interest thereon.

Section 244A was inserted in the statute as a measure of rationalization to ensure that the assessee is duly compensated by the Government by way of payment of interest for monies legitimately belonging to the assessee and wrongfully retained by the Government without any gaps. Therefore, where the self-assessment tax paid by the assessee

I.T.A. No. 5651/D/2013 Assessment year 2008-09 under section 140A is refunded, the assessee would be entitled to interest thereon since the self-assessment tax falls within the expression ‘refund of any amount’. The computation of interest on self-assessment tax has to be in terms of section 244A(1)(b), i.e., from the date of payment of such amount up to the date on which refund is actually granted.” He placed reliance also on the following judgements in support of his claim : 1). CIT vs. Engineers India Ltd. ( Del. H.C. ) ITA No. 300/2012 2). ACIT vs. M/s. Syndicate Bank Ltd. (ITA No. 1700 to 1704/ Bang/2013) 3). CIT Vs. Engineers India Ltd. (2015) 55 Taxman .com ( Delhi) 4. Union of India & Ors vs. S.K. Kapoor(Civil appeal No. 5341 of 2006) dated 16 March, 2015 5. Central Board of Dawoodi Bohra vs. State of Maharashtra & Anr. Dated 17 December, 2004 6. Safiya Bee vs. Mohd. Vajahath Hussain @ Fasi dated 16 December, 2010. 7. Union of India & ors. Vs. R.P. Singh dated 22 May, 2014 8. Order of Supreme Court of India in the case of CIT, Bhopal vs. HEG Ltd. (2010) 189 Taxman 335 (SC) 9. CIT vs. Gujrat Fluoro Chemicals (2014) 42 Taxmann.com 1(SC) 10. Amt. Manura & Ors (MAC App. 471/2014) dated 20 Feb. 2015 11. CIT vs. Gujrat Fluoro Chemicals (2014) 43 Taxmann.com 350(SC) 12. Sandvik Asia Ltd vs. CIT(Civil appeal No.1337-1340 of 2005) dated 27 Jan. 2006 13. CIT vs. A.B.T. Industries Ltd. (2013) 36 Taxmann.com 22 (Madras) 14. CIT vs. Arvind Mills Ltd. (2011) (9) TMI 244) dt. 13 Sept., 2011.

He further submitted that Long term capital gain is taxable as per section 112 of the Act @20%. The ld. AR contended that long term capital gain tax has been

I.T.A. No. 5651/D/2013 Assessment year 2008-09 calculated at the rate of 30% whereas it should be at 20% as per section 112 of the Act

“Interest on refund where no claim is needed. “244. (1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the [Assessing] Officer does not grant the refund within a period of [three months from the end of the month in which such order is passed], the Central Government shall pay to the assessee simple interest at [fifteen] per cent per annum on the amount of refund due from the date immediately following the expiry of the period of [three] months aforesaid to the date on which the refund is granted. [(1A) Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the

I.T.A. No. 5651/D/2013 Assessment year 2008-09 amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted : Provided that where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted : Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding : Provided also that where any interest is payable to an assessee under this sub-section, no interest under sub-section (1) shall be payable to him in respect of the amount so found to be in excess.] (2) Where a refund is withheld under the provisions of section 241, the Central Government shall pay interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceeding for the period commencing after the expiry of [three months from the end of the month in which the order referred to in section 241 is passed] to the date the refund is granted. [(3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment years.]” The provisions of section 244A read as under : 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 :— (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 per cent 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:

I.T.A. No. 5651/D/2013 Assessment year 2008-09 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 excluded, it shall be decided by the [Principal Chief Commissioner or] Chief Commissioner or [Principal 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 demand 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.”

I.T.A. No. 5651/D/2013 Assessment year 2008-09 9. After going through the provisions of section 244 and 244A and plethora of judgments cited by the appellant, we are of the considered opinion that the appellant is entitled for simple interest on the excess tax paid, by whatever name called, such as TDS or Advance Tax or self assessment tax. Such interest is payable to the assessee after adjustment of taxes due, from the date from which the assessee claims it. Accordingly, the appeal of the assessee is allowed.

Order pronounced in the open court on 14.01.2016.

Sd/- Sd/- (I.C. SUDHIR) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER

DT. 14th January, 2016