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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present two appeals have been filed by the same assessee against separate orders passed by the ld. Commissioner of Income-Tax (Appeals)-12, Ahmedabad [hereinafter referred to as "CIT(A)" for short] dated 02.03.2023 and 07.03.2023, pertaining to the Assessment Years (AY) 1993-94 & 1998-99 respectively, under Section 250(6) of the Income-tax Act, 1961 [hereinafter referred to as the "Act” for short].
It was stated that the issue arising in both the appeals was identical; and therefore, both the appeals were taken up together for adjudication.
The ld. Counsel for the assessee stated that the solitary issue/ dispute in both the appeals relates to the adjustment of part income-tax refund
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received by the assessee against the total outstanding refund, comprising of principal/ tax and interest - with the assessee contending that the refund be adjusted first against the interest component outstanding and then against the principal/tax, while the Department’s contention was to the contrary. The result of the entire exercise would be the effect on the quantum of interest to which the assessee would be entitled u/s 244A of the Act on the outstanding principal so remaining after adjustment of the part refund received. That if, as pleaded by the ld. Counsel for the assessee, the part refund received is first adjusted against the interest component of refund, the principal component remaining would be larger in quantum as opposed to the situation in which, apropos the contention of the Revenue, the part refund is adjusted first against principal and then against interest outstanding. As a consequence of which, if the assessee’s contention is accepted, its entitlement to interest on the principal outstanding in terms of Section 244A of the Act would be more.
There are two years before us in the case of the same assessee, i.e. AYs 1993-94 and 1998-99. The facts with respect to both the assessment years are as under:-
AY 1993-94
On 01.05.2019, the Assessing Officer passed order assessing the income at Rs.2,93,61,076/-, giving effect to the ITAT’s order. The demand notice issued as a consequence stated a refund of Rs.6,28,89,345/- to be given to the assessee. The calculation of the same reveals that the refund calculated on account of the relief granted by the ITAT was Rs.6,63,36,222/- comprising of tax refund of Rs.4,60,52,921/- and interest thereon Rs.2,02,83,300/-. That thereafter adjustment against the said refund was made of outstanding
ITA Nos.284 & 460/Ahd/2023 AY : 1993-94 & 1998-99 3
demand of various assessment years ,which was adjusted both against tax and interest outstanding , and after adjustment of tax refund so, on the remaining tax refund further interest u/s 244A of the Act was granted , thus resulting in total refund of Rs.6,28,89,345/- comprising of tax refund of Rs.2,07 57,601/- and interest of Rs.4,21, 31,744/-.On 25.07.2019, the Revenue issued full and final refund of Rs.6,28,89,345/-.
The assessee does not dispute the factum of refund of Rs.6,63,36,222/- computed on the relief granted to the assessee by the ITAT in quantum proceedings comprising of tax refund of Rs.4,60,52,921/- and interest thereon Rs.2,02,83,300/-. What the assessee is aggrieved with is the adjustment of demands of various assessment years, which as per the assessee ought to be adjusted against the interest refund entirely. And as per the assessee therefore he is entitled to a total refund of Rs.8,96,87,702/- on the date refund of Rs.6,28,89,345/- was issued to the assessee, i.e 25/07/2019, and further interest on the shortfall of refund therefore of Rs.68,33,581/-. As per the assessee therefore the total refund works out to Rs.9,65,21,283/- comprising of tax refund Rs.3,97,33,225/- and balance interest of Rs.5,67,88,058/-.
In sum and substance, therefore, the dispute is regarding the adjustment of part refund granted by way of adjustment of refund against outstanding demand for various A.Y’s, which while the Department has adjusted by reducing both the interest and the tax component of outstanding refund in a particular proportion, the case of the assessee is that the adjustment ought to be made entirely against outstanding refund of interest. As a consequence while the refund computed by the department and granted to the assessee of Rs.6.28 Crs comprises of tax Rs.2.07 Crs and interest of ITA Nos.284 & 460/Ahd/2023 AY : 1993-94 & 1998-99 4
Rs.4.21 Crs, as per the assessee, the refund works out to Rs.9.65 Crs comprising of tax Rs.3.97 Crs and interest Rs.5.67 Crs.
AY 1998-99
The facts pertaining to AY 1998-99 are that, in pursuance to order passed u/s 154 of the Act on 30.05.2016, the income of the assessee was assessed at Rs.72,22,89,780/- . Subsequently, on 11.10.2017, the Hon’ble High court granted relief to the assessee to the extent of Rs.25,90,06,699/-. On 04.04.2018, the order giving effect to the High Court order was passed assessing the income of the assessee at Rs.46,41,25,441/-. Refund was not issued for a long time upto 01.12.2003 when the assessee ultimately filed a writ petition in the High Court which was allowed by the High Court vide order passed on 20.02.2023, directing the Revenue to issue refund of Rs.17,15,34,707/- + interest in two weeks. On 07.03.2023, the ld. CIT(A) passed order directing the Assessing Officer to issue refund as per the Hon’ble High Court’s order. However, on the ground raised by the assessee seeking adjustment of the refund first against the interest component and thereafter against the tax component, the ld. CIT(A) dismissed the same. The Assessing Officer issued refund of Rs.21,80,45,001/- on 10.03.2023 which, the assessee contests, is correct amount and it is not aggrieved by the same, however, he has stated that on account of the order of the ld. CIT(A) ,dismissing the assessee’s plea of adjustment of refund first against interest and thereafter against principal, the Assessing Officer may reduce the refund already granted.
Having stated so, the plea of the ld. Counsel for the assessee before us was this that the issue has been settled repeatedly in favour of the assessee by various decisions of the ITAT, beginning from the decision of the ITAT
ITA Nos.284 & 460/Ahd/2023 AY : 1993-94 & 1998-99 5
Mumbai Bench in the case of Union Bank of India Vs. ACIT, reported in [2016] 72 taxmann.com 348 (Mumbai), followed consistently by the other benches of the ITAT in the cases of… • Grasim Industries Ltd. Vs. DCIT, in ITA Nos. 473, 474 & 1120, 1121/Mum/2016, order dated 11.11.200, reported in [2021] 123 taxmann.com 312 (Mumbai-Trib); • Tata Sons Private Limited Vs. DCIT, in ITA No.2362/Mum/2023, order dated 06.12.2023, reported in [2023] 157 taxmann.com 329 (Mumbai - Trib.) • Karsanbhai No.183/Ahd/2022, order dated 21.12.2022; and • Nirma Limited Vs. DCIT, in ITA No.2049/Ahd/2017, order dated 30.06.2023. Copies of all the orders were placed before us.
The ld. DR, however, relied on the order of the ld. CIT(A) in assessee’s appeal pertaining to AY 1998-99, and submitted that if the contention of the assessee is agreed to, it would result in :-
(i) the assessee being granted interest on the same principal for a particular period twice or interest on interest which is not allowable as per the provisions of Section 244A(1) of the Act;
(ii) that the provisions of Section 244A nowhere provide that a refund issued earlier shall be first adjusted against the entire interest and then the balance be adjusted against the principal amount;
(iii) the decision of the Hon’ble Apex Court in the case of CIT Vs. Gujarat Fluro Chemicals, SLP (C) No.11406 of 2008, order dated 18.09.2018, categorically held that interest can be claimed only as per law laid down in this regard, and if the assessee’s plea is accepted, it would tantamount to interest on interest; it would be in violation of the order of the Hon’ble Apex Court.
ITA Nos.284 & 460/Ahd/2023 AY : 1993-94 & 1998-99 6
The ld. DR has also filed submissions in writing before us, contending that interest being in the nature of compensation for use of money borrowed, or retained, or not paid to the person to whom it is due; therefore, once the money is paid back to the assessee, no question of further payment of any compensation for deprivation of income-tax refund payable will arise. She has also referred to the provisions of the Indian Contract Act, Section 59 to 61 dealing with the appropriation of payments, and summarized the same stating that, as per the said provisions, it is the debtor who has first right to intimation of debt at the time of payment; if the debtor fails to intimate the same, then the right goes to the creditor and if the creditor fails to intimate, then it goes to the law itself, according to which, the refund should be appropriated proportionately. Her submissions in this regard are reproduced hereunder:- “No. Sr.DR/(ITAT)-1/'A' Bench/Nirma Ltd./2023-24 Dated :04/01/2024 To The Deputy/