The Peerless General Finance & Investment Co. Ltd., Kolkata V. DCIT, Circle - 3(1), Kolkata, Kolkata

ITA 1427/KOL/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7222 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 1990-1991
• Appeal Filed On: 13-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 244A

Judgement Text

2 I.T.A. NO. 1427/KOL/2017 ASSESSMENT YEAR: 1990-91 THE PEERLESS GEN. FIN. & INV. CO. LTD HE PROVIDED A REVISED COMPUTATION OF INTEREST U/S 244A OF THE ACT AND REFUND PAYABLE TO THE ASSESSEE AS PER THE LD. ASSESSING OFFICERS ORDER. 2.1. THE LD. D/R, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT THE LD. CIT(A) HAS RELIED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. GUJARAT FLUORO CHEMICALS [2013] 358 ITR 291 AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. INDIAN FARMER FERTILIZER CO-OPERATIVE, [2015] 56 TAXMANN.COM 453 (DELHI) AND SUBMITTED THAT INTEREST ON UNPAID INTEREST CANNOT BE GRANTED U/S 244A OF THE ACT. IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE, POINTED OUT THAT THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. GUJARAT FLUORO CHEMICALS (SUPRA), WAS CONSIDERED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03, CITED ABOVE. HE FURTHER SUBMITTED THAT THE HONBLE JURISDICTIONAL HIGH COURT HAS IN THE ASSESSEES OWN CASE IN THE COMMISSIONER OF INCOME- TAX, KOLKATA-I V. PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD [2015] 59 TAXMANN.COM 37 (CALCUTTA) , ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE. 3. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS:- THE HONBLE SUPREME COURT IN THE CASE OF K. LAKSHMANYA & CO. V. COMMISSIONER OF INCOME TAX (SUPRA) HAS ANALYZED SECTION 244A OF THE ACT AND HELD AS FOLLOWS:- 10. THE PRESENT CASE WOULD FALL OUTSIDE SUB-CLAUSES A AND AA OF THIS PROVISION AND, THEREFORE, FALL WITHIN THE RESIDUARY CLAUSE, NAMELY SUB-CLAUSE (B) OF SECTION 244(A). THE MADRAS HIGH COURT IN NEEDLE INDUSTRIES PVT. LTD. CASE (SUPRA) CONCERNED ITSELF WITH THE POSITION PRIOR TO THE ADVENT OF SECTION 244A. IT FOUND THAT THE EXPRESSION 'REFUND OF ANY AMOUNT' USED BY SECTIONS 240 AND 244 WOULD INCLUDE NOT ONLY TAX AND PENALTY BUT INTEREST ALSO. IT WAS, THEREFORE, HELD THAT THE CLEAR INTENTION OF PARLIAMENT IS THAT THE RIGHT TO INTEREST WILL COMPENSATE THE ASSESSEE FOR THE EXCESS PAYMENT DURING THE INTERVENING PERIOD WHEN THE ASSESSEE DID NOT HAVE THE BENEFIT OF USE OF SUCH MONEY PAID IN WHATSOEVER CHARACTER. 11. THE COURT HELD THAT THE RESULT WOULD BE THAT THE ASSESSEE WOULD BE ENTITLED TO INTEREST ON REFUND ALSO. 4 I.T.A. NO. 1427/KOL/2017 ASSESSMENT YEAR: 1990-91 THE PEERLESS GEN. FIN. & INV. CO. LTD 'INTEREST PAYMENT IS A STATUTORY OBLIGATION AND NON- DISCRETIONARY IN NATURE TO THE ASSESSEE. IN TUNE WITH THE AFORESAID GENERAL PRINCIPLE, SECTION 244A IS DRAFTED AND ENACTED. THE LANGUAGE EMPLOYED IN SECTION 244A OF THE ACT IS CLEAR AND PLAIN. IT GRANTS SUBSTANTIVE RIGHT OF INTEREST AND IS NOT PROCEDURAL. THE PRINCIPLES FOR GRANT OF INTEREST ARE THE SAME AS UNDER THE PROVISIONS OF SECTION 244 APPLICABLE TO ASSESSMENTS BEFORE 01.04.1989, ALBEIT WITH CLARITY OF APPLICATION AS CONTAINED IN SECTION 244A. 31. THE DEPARTMENT HAS ALSO ISSUED A CIRCULAR CLARIFYING THE PURPOSE AND OBJECT OF INTRODUCING SECTION 244A OF THE ACT TO REPLACE SECTIONS 214, 243 AND 244 OF THE ACT. IT IS CLARIFIED THEREIN, THAT, SINCE THERE WAS SOME LACUNAE IN THE EARLIER PROVISIONS WITH REGARD TO NON-PAYMENT OF INTEREST BY THE REVENUE TO THE ASSESSEE FOR THE MONEY REMAINING WITH THE GOVERNMENT, THE SAID SECTION IS INTRODUCED FOR PAYMENT OF INTEREST BY THE DEPARTMENT FOR DELAY IN GRANT OF REFUNDS. A GENERAL RIGHT EXISTS IN THE STATE TO REFUND ANY TAX COLLECTED FOR ITS PURPOSE, AND A CORRESPONDING RIGHT EXISTS TO REFUND TO INDIVIDUALS ANY SUM PAID BY THEM AS TAXES WHICH ARE FOUND TO HAVE BEEN WRONGFULLY EXACTED OR ARE BELIEVED TO BE, FOR ANY REASON, INEQUITABLE. THE STATUTORY OBLIGATION TO REFUND CARRIED WITH IT THE RIGHT TO INTEREST ALSO. THIS IS TRUE IN THE CASE OF ASSESSEE UNDER THE ACT.' 16. THE ABOVE EXTRACT WOULD CLEARLY SHOW THAT A CORRESPONDING RIGHT EXISTS, TO REFUND TO INDIVIDUALS ANY SUM PAID BY THEM AS TAXES WHICH ARE FOUND TO HAVE BEEN WRONGFULLY EXASTED OR BELIEVED TO BE, FOR ANY REASON, INEQUITABLE. THE STATUTORY OBLIGATION TO REFUND, BEING NON DISCRETIONARY, CARRIES WITH IT THE RIGHT TO INTEREST, ALSO MAKING IT CLEAR THAT THE RIGHT TO INTEREST IS PARASITICAL. THE RIGHT TO CLAIM REFUND IS AUTOMATIC ONCE THE STATUTORY PROVISIONS HAVE BEEN COMPLIED WITH. HOWEVER, MR. K.RADHAKRISHNAN, LEARNED SENIOR COUNSEL APPEARING FOR THE RESPONDENT- REVENUE, HAS STRONGLY RELIED UPON THE DECISION OF THIS COURT IN ANJUM M.H. GHASWALA'S CASE (SUPRA). IN THIS JUDGMENT, THIS COURT HELD THAT THE SETTLEMENT COMMISSION WAS INTRODUCED INTO THE INCOME-TAX ACT FOR THE PURPOSE OF QUICK SETTLEMENT OF CASES BEFORE IT, SO THAT THE THE TAX DUE TO THE REVENUE GETS COLLECTED AT THE EARLIEST. THE OBJECT OF THIS EXERCISE IS NOT TO ASSIST TAX EVADERS. IN SO HOLDING, THIS COURT HELD THAT SECTION 245(D)(6) BEING PROCEDURAL IN NATURE, CANNOT BE USED TO LOCATE ANY POWER TO WAIVE INTEREST, IF IT IS NOT OTHERWISE WAIVED UNDER SOME OTHER SUBSTANTIVE PROVISION IN THE INCOME-TAX ACT. 17. ULTIMATELY, THIS COURT ARRIVED AT THE CONCLUSION THAT THE COMMISSION CANNOT EITHER WAIVE OR REDUCE INTEREST WHICH IS STATUTORILY PAYABLE UNLESS THERE IS EXPRESS POWER TO DO SO IN THAT BEHALF. HOWEVER, WHILE SO SAYING, THE COURT WENT ON TO CLARIFY THAT THE CIRCULARS ISSUED PURSUANT TO THE POWERS UNDER SECTION 119 OF THE ACT, WHICH EMPOWER THE AUTHORITIES UNDER THE ACT TO WAIVE OR REDUCE INTEREST, MAY BE AVAILED BY THE SETTLEMENT COMMISSION TO WAIVE INTEREST. 18. WE ARE OF THE VIEW THAT THE EXPRESSION 'DUE' ONLY MEANS THAT A REFUND BECOMES DUE IF THERE IS AN ORDER UNDER THE ACT WHICH EITHER REDUCES OR WAIVES TAX OR INTEREST. IT IS OF NO MATTER THAT THE INTEREST THAT IS WAIVED IS DISCRETIONARY IN NATURE, FOR THE MOMENT THAT DISCRETION IS EXERCISED, A CONCOMITANT RIGHT SPRINGS INTO BEING IN FAVOUR OF THE ASSESSEE. WE ARE, THEREFORE OF VIEW THAT THE C.I.T. (APPEALS) AND THE ITAT WERE CORRECT IN THEIR VIEW AND THAT CONSEQUENTLY, THE HIGH COURT WAS INCORRECT IN ITS VIEW THAT SINCE A DISCRETIONARY POWER HAS BEEN EXERCISED, NO CONCOMITANT RIGHT WAS FOUND FOR REFUND OF INTEREST TO THE ASSESSEE. 19. THE APPEALS ARE ACCORDINGLY ALLOWED AND THE IMPUGNED JUDGMENT IS SET ASIDE. 6 I.T.A. NO. 1427/KOL/2017 ASSESSMENT YEAR: 1990-91 THE PEERLESS GEN. FIN. & INV. CO. LTD BY THE ASSESSEE FOR WHICH THE ASSESSEE WAS GRANTED REFUND, NAMELY TDS OF RS. 45,73,528 AND TAX PAID AFTER ORIGINAL ASSESSMENT OF RS. 1,71,00,320. THE DEPARTMENT CONTENDS THAT THE WORDS 'ANY AMOUNT' WILL NOT INCLUDE THE INTEREST WHICH ACCRUED TO THE RESPONDENT FOR NOT REFUNDING RS. 45,73,528 FOR 57 MONTHS. WE SEE NO MERIT IN THIS ARGUMENT. THE INTEREST COMPONENT WILL PARTAKE OF THE CHARACTER OF THE 'AMOUNT DUE' UNDER SECTION 244A. IT BECOMES AN INTEGRAL PART OF RS. 45,73,528 WHICH IS NOT PAID FOR 57 MONTHS AFTER THE SAID AMOUNT BECAME DUE AND PAYABLE. AS CAN BE SEEN FROM THE FACTS NARRATED ABOVE, THIS IS THE CASE OF SHORT PAYMENT BY THE DEPARTMENT AND IT IS IN THIS WAY THAT THE ASSESSEE CLAIMS INTEREST UNDER SECTION 244A OF THE INCOME-TAX ACT. THEREFORE, ON BOTH THE AFORE-STATED GROUNDS, WE ARE OF THE VIEW THAT THE ASSESSEE WAS ENTITLED TO INTEREST FOR 57 MONTHS ON RS. 45,73,528/-. THE PRINCIPAL AMOUNT OF RS. 45,73,528 HAS BEEN PAID ON DECEMBER 31, 1997 BUT NET OF INTEREST WHICH, AS STATED ABOVE, PARTOOK OF THE CHARACTER OF 'AMOUNT DUE' UNDER SECTION 244A.' 15. A READING OF THE AFORESAID PASSAGE FROM THE DECISION OF THE SUPREME COURT IN HEG LIMITED (SUPRA) INDICATES THAT IT WOULD BE INCORRECT AND IMPROPER TO REGARD PAYMENT OF INTEREST WHEN PART PAYMENT IS MADE AS INTEREST ON INTEREST. WHAT HAS BEEN ELUCIDATED AND CLARIFIED BY THE SUPREME COURT IS THAT WHEN REFUND ORDER IS ISSUED, THE SAME SHOULD INCLUDE THE INTEREST PAYABLE ON THE AMOUNT, WHICH IS REFUNDED. IF THE REFUND DOES NOT INCLUDE INTEREST DUE AND PAYABLE ON THE AMOUNT REFUNDED, THE REVENUE WOULD BE LIABLE TO PAY INTEREST ON THE SHORTFALL. THIS DOES NOT AMOUNT TO PAYMENT OF INTEREST ON INTEREST. AN EXAMPLE WILL CLARIFY THE SITUATION AND HELP US TO UNDERSTAND WHAT IS DUE AND PAYABLE UNDER SECTION 244A OF THE ACT. SUPPOSE REVENUE IS LIABLE TO REFUND RS. 1 LAC TO AN ASSESSEE WITH EFFECT FROM 1ST APRIL, 2010, THE SAID AMOUNT IS REFUNDED ALONG WITH INTEREST DUE AND PAYABLE UNDER SECTION 244A ON 31ST MARCH, 2013, THEN NO FURTHER INTEREST IS PAYABLE. HOWEVER, IF ONLY RS. 1 LAC IS REFUNDED BY THE REVENUE ON 31ST MARCH, 2013 AND THE INTEREST ACCRUED ON RS. 1 LAC UNDER SECTION 244A IS NOT REFUNDED, THE REVENUE WOULD BE LIABLE TO PAY INTEREST ON THE AMOUNT DUE AND PAYABLE BUT NOT REFUNDED. INTEREST WILL NOT BE DUE AND PAYABLE ON THE AMOUNT REFUNDED BUT ONLY ON THE AMOUNT WHICH REMAINS UNPAID, I.E, THE INTEREST ELEMENT, WHICH SHOULD HAVE BEEN REFUNDED BUT IS NOT PAID. IN ANOTHER SITUATION WHERE PART PAYMENT IS MADE, SECTION 244A WOULD BE STILL APPLICABLE IN THE SAME MANNER. FOR EXAMPLE, IF RS. 60,000/- WAS PAID ON 31ST MARCH, 2013, REVENUE WOULD BE LIABLE TO PAY INTEREST ON RS. 1 LAC FROM 1ST APRIL, 2010 TILL 31ST MARCH, 2013 AND THEREAFTER ON RS. 40,000/-. FURTHER, INTEREST PAYABLE ON RS. 60,000/-, WHICH STANDS PAID, WILL BE QUANTIFIED ON 31ST MARCH, 2013 AND ON THIS AMOUNT, I.E., INTEREST AMOUNT QUANTIFIED, REVENUE WOULD BE LIABLE TO PAY INTEREST UNDER SECTION 244A TILL PAYMENT IS MADE. . . . . . . . . . ' 3.6 THE FACTS OF THE CASE BEFORE US ARE SIMILAR IN THE SENSE THAT HERE ALSO ONLY PART AMOUNT WAS REFUNDED IN THE FIRST PHASE BY THE DEPARTMENT AND WHEN THE BALANCE AMOUNT WAS PAID BY THE DEPARTMENT IN THE SECOND PHASE, THE ASSESSEE WAS ENTITLED FOR INTEREST ON THE BALANCE AMOUNT OF REFUND DUE. THUS, FROM THE AFORESAID OBSERVATIONS OF HON'BLE DELHI HIGH COURT, WE CAN SAY THAT IT IS NOT A CASE OF PAYMENT OF INTEREST ON INTEREST. THUS, IN VIEW OF THESE FACTS AND AFORESAID JUDGMENTS, LD COUNSEL CONTENDED THAT LD. CIT (A) HAD WRONGLY APPLIED THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF GUJARAT FLUORO CHEMICALS (SUPRA), SINCE IT WAS NOT APPLICABLE ON THE FACTS OF THIS CASE. 8 I.T.A. NO. 1427/KOL/2017 ASSESSMENT YEAR: 1990-91 THE PEERLESS GEN. FIN. & INV. CO. LTD REFUND THE SAME. WHEN THE SAID AMOUNT IS REFUNDED IT SHOULD CARRY INTEREST IN THE MATTER OF COURSE. AS HELD BY THE COURTS WHILE AWARDING INTEREST, IT IS A KIND OF COMPENSATION OF USE AND RETENTION OF THE MONEY COLLECTED UNAUTHORIZEDLY BY THE DEPARTMENT. WHEN THE COLLECTION IS ILLEGAL, THERE IS CORRESPONDING OBLIGATION ON THE REVENUE TO REFUND SUCH AMOUNT WITH INTEREST IN AS MUCH AS THEY HAVE RETAINED AND ENJOYED THE MONEY DEPOSITED. EVEN THE DEPARTMENT HAS UNDERSTOOD THE OBJECT BEHIND INSERTION OF SECTION 244A, AS THAT, AN ASSESSEE IS ENTITLED TO PAYMENT OF INTEREST FOR MONEY REMAINING WITH THE GOVERNMENT WHICH WOULD BE REFUNDED. THERE IS NO REASON TO RESTRICT THE SAME TO AN ASSESSEE ONLY WITHOUT EXTENDING THE SIMILAR BENEFIT TO A RESIDENT/DEDUCTOR WHO HAS DEDUCTED TAX AT SOURCE AND DEPOSITED THE SAME BEFORE REMITTING THE AMOUNT PAYABLE TO A NON-RESIDENT/FOREIGN COMPANY. 38. PROVIDING FOR PAYMENT OF INTEREST IN CASE OF REFUND OF AMOUNTS PAID AS TAX OR DEEMED TAX OR ADVANCE TAX IS A METHOD NOW STATUTORILY ADOPTED BY FISCAL LEGISLATION TO ENSURE THAT THE AFORESAID AMOUNT OF TAX WHICH HAS BEEN DULY PAID IN PRESCRIBED TIME AND PROVISIONS IN THAT BEHALF FORM PART OF THE RECOVERY MACHINERY PROVIDED IN A TAXING STATUTE. REFUND DUE AND PAYABLE TO THE ASSESSEE IS DEBT-OWED AND PAYABLE BY THE REVENUE. THE GOVERNMENT, THERE BEING NO EXPRESS STATUTORY PROVISION FOR PAYMENT OF INTEREST ON THE REFUND OF EXCESS AMOUNT/TAX COLLECTED BY THE REVENUE, CANNOT SHRUG OFF ITS APPARENT OBLIGATION TO REIMBURSE THE DEDUCTORS LAWFUL MONIES WITH THE ACCRUED INTEREST FOR THE PERIOD OF UNDUE RETENTION OF SUCH MONIES. THE STATE HAVING RECEIVED THE MONEY WITHOUT RIGHT, AND HAVING RETAINED AND USED IT, IS BOUND TO MAKE THE PARTY GOOD, JUST AS AN INDIVIDUAL WOULD BE UNDER LIKE CIRCUMSTANCES. THE OBLIGATION TO REFUND MONEY RECEIVED AND RETAINED WITHOUT RIGHT IMPLIES AND CARRIES WITH IT THE RIGHT TO INTEREST. WHENEVER MONEY HAS BEEN RECEIVED BY A PARTY WHICH EX AEQUO ET BONO OUGHT TO BE REFUNDED, THE RIGHT TO INTEREST FOLLOWS, AS A MATTER OF COURSE.' 3.10 IT IS NOTED FROM THE OBSERVATIONS OF THE HON'BLE SUPREME COURT THAT IT HAS BEEN OBSERVED THAT WHATEVER MONEY HAS BEEN RECEIVED BY THE DEPARTMENT, IT OUGHT TO BE REFUNDED EX AEQUO ET BONO. IT IS A LATIN PHRASE WHICH MEANS 'WHAT IS JUST AND FAIR' OR 'ACCORDING TO EQUITY AND GOOD CONSCIENCE'. SOMETHING TO BE DECIDED EX AEQUO ET BONO IS SOMETHING THAT IS TO BE DECIDED BY PRINCIPLES OF WHAT IS FAIR AND JUST. A DECISION-MAKER WHO IS AUTHORIZED TO DECIDE EX AEQUO ET BONO IS NOT BOUND BY LEGAL RULES BUT MAY TAKE ACCOUNT OF WHAT IS JUST AND FAIR. THUS, IF WE DECIDE THE ISSUE BEFORE US EX AEQUO ET BONO, THEN IT WOULD BE DECIDED BY THE PRINCIPLES OF WHAT IS FAIR AND JUST AND NOT NECESSARILY AS PER STRICT RULE OF LAW. THUS, SINCE THE STATUTE ITSELF HAS ALREADY PRESCRIBED A PARTICULAR METHOD OF ADJUSTMENT IN EXPLANATION TO SECTION 140A(1), THEN JUSTICE, FAIRNESS, EQUITY AND GOOD CONSCIENCE DEMANDS THAT SAME METHOD SHOULD BE FOLLOWED WHILE MAKING ADJUSTMENT FOR REFUND OF TAXES, ESPECIALLY WHEN NO CONTRARY PROVISION HAS BEEN PROVIDED. UNDER THESE CIRCUMSTANCES AND AFORESAID DISCUSSION, WE FIND THAT THE JUDICIAL PROPRIETY DEMANDS THAT ORDER OF THE TRIBUNAL OF EARLIER YEARS MUST BE FOLLOWED AND THEREFORE WE DIRECT THE AO TO RE-COMPUTE THE AMOUNT OF INTEREST U/S. 244A BY FIRST ADJUSTING THE AMOUNT OF REFUND ALREADY GRANTED TOWARDS THE INTEREST COMPONENT AND BALANCE LEFT IF ANY SHALL BE ADJUSTED TOWARDS THE TAX COMPONENT. THUS, WITH THESE DIRECTIONS, THE APPEAL OF THE ASSESSEE IS ALLOWED. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 10 I.T.A. NO. 1427/KOL/2017 ASSESSMENT YEAR: 1990-91 THE PEERLESS GEN. FIN. & INV. CO. LTD ACCORDANCE WITH LAW. NO OTHER GROUNDS WERE ARGUED BEFORE US. HENCE, THOUGH ADDITIONAL GROUNDS WERE TAKEN, WE DO NOT ADJUDICATE THE SAME. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. KOLKATA, THE 28 TH DAY OF SEPTEMBER, 2018. SD/- SD/- [ S.S. GODARA ] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28.09.2018 {SC SPS} COPY OF THE ORDER FORWARDED TO: 1. THE PEERLESS GEN. FIN. & INV. CO. LTD 3, ESPLANADE EAST KOLKATA 700 069 2. DEPUTY COMMISSIONER OF INCOME TAX , CIRCLE-3(1), KOLKATA 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES