COMMISSIONER OF INCOME TAX V. M/S. HYNOUP FOOD & OIL INDUSTRIES LTD.

TAXAP/1959/2006

AI Insights

The case involves the Commissioner of Income Tax as the appellant and M/S. HYNOUP Food & Oil Industries Ltd. as the respondent, concerning the assessment years 1989-90 to 1992-93 and 1994-95. The core issue revolved around the denial of interest on delayed tax refunds by the Assessing Officer, which was contested through multiple levels of appeal, ultimately reaching the High Court of Gujarat. The Tribunal had dismissed the Revenue's appeal primarily on the grounds of low tax effect and on merits, referencing the Supreme Court's decision in Sandvik Asia Ltd. vs. CIT & others, which supported the assessee's claim for interest on the withheld refund.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 729541 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 06-08-2008
• Assessment Year: misc
• Other Referred Cases: D.J.Works Vs. DCIT 195 ITR 227 (Guj.), Sandvik Asia Ltd. Vs. CIT & others (2006) 280 ITR 643 (SC)
• Laws Referred To: Income Tax Act, 1961, Section 154, Section 244A
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: RULE SERVED
• Assessee Lawyers: MANISH BHATT
• Keywords: Interest on interest; Interest on Refund; Low tax effect; Tax appeal
• Section: 154; 244A; 260A

Judgement Text

"TAXAP/195720/2006 1/7 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1957 of 2006 To TAX APPEAL No. 1961 of 2006 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ HONOURABLE MR.JUSTICE BANKIM.N.MEHTA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX - Appellant(s) Versus M/S. HYNOUP FOOD & OIL INDUSTRIES LTD. - Opponent(s) ========================================================= Appearance : MR MANISH R BHATT for Appellant(s) : 1, RULE SERVED for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE K.A.PUJ and HONOURABLE MR.JUSTICE BANKIM.N.MEHTA Date : 06/08/2008 TAXAP/195720/2006 2/7 JUDGMENT ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE K.A.PUJ) 1. The Revenue has filed these five Tax Appeals under Section 260A of the Income Tax Act, 1961 for the assessment year 1989­90 to 1992­ 93 and 1994­95 proposing to formulate the following substantial questions of law. “(A) Whether the Appellate Tribunal is right in law and on facts in dismissing the appeal filed by the Revenue without adjudicating the same on merits on the ground that since in the appeal, the effect was below Rs.1 lakh, the revenue could not have preferred the same in view of instructions of the CBDT, thereby entitling the Hon'ble Tribunal not to decide the same on merits ? (B) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) directing the Assessing Officer to grant interest on interest withheld for the period claimed by the assessee ?” 2. This Court has admitted all the five TAXAP/195720/2006 3/7 JUDGMENT Appeals on 6.8.2007 and formulated the same questions of law. 3. The brief facts of the case are that the assessee company filed an application under Section 154 of the Act wherein the Company has contended that it was granted a combined refund of Rs.2,73,23,200/­ for A.Y. 1989­90 to 1992­93 and 1994­95 after appeal effect which was stayed upto 30.9.2001 by the learned CIT and refund of Rs.2,37,23,200/­ was issued in November, 2001 wherein interest under Section 244A was calculated only upto 31.12.2000 as a result of which the assessee had not received interest upto the date of issue of refund. The assessee, therefore, requested to issue the balance interest under Section 244A for 10 months from 1.1.2001 to 31.10.2001 for A.Y. 1989­90 to 1992­93 and 1994­95. This claim was not accepted by the Assessing Officer. TAXAP/195720/2006 4/7 JUDGMENT 4. Being aggrieved by the said order the Assessee preferred an appeal before CIT(A) and the CIT vide its order dated 27.11.2002 directed the Assessing Officer to give interest on interest withheld for the period claimed. Following the decision of this Court in the case of D.J.Works Vs. DCIT 195 ITR 227 (Guj.) the learned CIT observed that the interest was payable on refund arising due to appellate order. The interest was also determined and quantified by the order giving effect to the appellate order. Thus what was withheld included both the tax and the interest payable by the government. The interest which was payable on the refund cannot be retained without payment of interest thereon and accordingly direction was given to the Assessing Officer to grant such interest. 5. Being aggrieved by the said order of the learned CIT(A) the Revenue took up the matter TAXAP/195720/2006 5/7 JUDGMENT before the Income­Tax Appellate Tribunal, Ahmedabad and the Tribunal vide its order dated 30.3.2006 confirmed the order of the learned CIT(A) and the Appeals filed by the Revenue were dismissed both on the basis of preliminary objection as well as on merits. 6. Before the Tribunal a preliminary objection was raised on behalf of the assessee that there being low tax effect the Revenue's Appeals are not maintainable. The Tribunal has, however, observed that apart from the low tax effect the issue is squarely covered by the decision of the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. Vs. CIT & others (2006) 280 ITR 643 (SC) wherein the Hon'ble Supreme Court has observed that the assessee was entitled to interest on the amount of interest paid under Section 214 and/or Section 244 of the Act and the Department was bound to grant interest which had accrued for those periods. TAXAP/195720/2006 6/7 JUDGMENT 7. We have heard Mr.Manish Bhatt, learned Senior Standing Counsel for the Revenue. Despite service of rule nobody appears on behalf of the assessee. We have also perused the order passed by the authorities below. The question regarding low tax effect was heard at great length and we have decided the said issue in favour of the assessee. The question No.(A) formulated by this Court is, therefore, answered in affirmative, in favour of the assessee and against the Revenue. We have also taken the same view in other group matters. 8. So far as question No.(B) is concerned, the Tribunal has followed the decision of the Hon'ble Supreme Court. Since the issue is concluded by the decision of the Hon'ble Supreme Court, we decide the said issue regarding grant of interest on interest in favour of the assessee and against the TAXAP/195720/2006 7/7 JUDGMENT Revenue. The question No.(B) is, therefore, answered in affirmative and the Tribunal is right in confirming the order of the learned CIT directing the Assessing Officer to give interest on interest withheld for the period claimed by the assessee. 9. In the above view of the matter, all the five Tax Appeals stand dismissed without any order as to costs. (K. A. PUJ, J.) (B. N. MEHTA, J.) kks "