DCIT, C-1, Ludhiana V. M/s Vardhman Textiles Limited, Ludhiana

ITA 1479/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0040 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-05-2019
• Assessment Year: 2002-2003
• Appeal Filed On: 30-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S PHANI KISHORE
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Capital asset; Question of law; Bad and doubtful debts; Capital receipt; Provision of bad debts; Set aside
• Section: 244A; 143(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B, CHANDIGARH , ! ' , $ % & ' ( , ' BEFORE: SMT.DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, A M ./ ITA NO.1429/CHD/2018 / ASSESSMENT YEAR : 2002-03 M/S VARDHMAN TEXTILES LTD., LUDHIANA. THE D.C.I.T., RANGE-1, LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT ./ ITA NO.1479/CHD/2018 / ASSESSMENT YEAR : 2002-03 THE D.C.I.T., CIRCLE-1, LUDHIANA. M/S VARDHMAN TEXTILES LTD., LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT ./ ITA NO.1430/CHD/2018 / ASSESSMENT YEAR : 2003-04 M/S VARDHMAN TEXTILES LTD., LUDHIANA. THE A.C.I.T., CIRCLE-1, LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 2 ./ ITA NO.1480/CHD/2018 / ASSESSMENT YEAR : 2003-04 THE D.C.I.T., CIRCLE-1, LUDHIANA. M/S VARDHMAN TEXTILES LTD., LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT ./ ITA NO.1404/CHD/2018 / ASSESSMENT YEAR : 2004-05 M/S VARDHMAN TEXTILES LTD., LUDHIANA. THE J.C.I.T., RANGE-1, LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDEN T ./ ITA NO.1481/CHD/2018 / ASSESSMENT YEAR : 2004-05 THE D.C.I.T., CIRCLE-1, LUDHIANA. M/S VARDHMAN TEXTILES LTD., LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT ./ ITA NO.1405/CHD/2018 / ASSESSMENT YEAR : 2005-06 ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 3 M/S VARDHMAN TEXTILES LTD., LUDHIANA. THE ADDL.CIT, RANGE-1, LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT & ./ ITA NO.1482/CHD/2018 / ASSESSMENT YEAR : 2005-06 THE D.C.I.T., CIRCLE-1, LUDHIANA. M/S VARDHMAN TEXTILES LTD., LUDHIANA. ./PAN NO: AABCM4692E /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI SUBHASH AGGARWAL, ADV. ! / REVENUE BY : SHRI G.S.PHANI KISHORE, CIT DR ' # $ /DATE OF HEARING : 16.05.2019 %&'( $ /DATE OF PRONOUNCEMENT : 29.05.2019 / ORDER PER BENCH: THE CAPTIONED CROSS APPEALS RELATE TO THE SAME ASSESSEE AND HAVE BEEN FILED AGAINST SEPARATE ORD ERS PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-I, LUDHIANA, (IN SHORT (CIT(A)) ALL DATED 24.9.2018 RELATING ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 4 TO ASSESSMENT YEAR 2002-03, 2003-04, 2004-05 AND 20 05- 06, PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). IT WAS COMMON GROUND THAT IDENTICAL ISSUE WAS INVOLVED IN ALL THE APPEALS. THESE WERE THEREFORE H EARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON CONSOLIDATED ORDER. 2. AT THE OUTSET IT WAS POINTED OUT THAT IN ALL T HE CAPTIONED APPEALS, THIS WAS THE SECOND ROUND BEFORE US. THAT IN THE FIRST ROUND OF APPEAL BEFORE THE I.T.A .T., THE ASSESSEE HAD RAISED AN ADDITIONAL GROUND VIS--VIS THE TREATMENT OF INTEREST REIMBURSEMENT UNDER TUFS (TECHNOLOGY UPGRADATION FUND SCHEME),WHETHER CAPITA L OR REVENUE IN NATURE, FOR ALL THE IMPUGNED YEARS. THAT THE I.T.A.T. IN ITS CONSOLIDATED ORDER DATED 4.5.2018 I N ITA NO.681/CHD/2017 & OTHERS, HAD REMANDED THE ISSUE TO THE FILE OF THE LD. CIT(A), NOTING THAT SINCE THE GRO UND HAD BEEN TAKEN FOR THE FIRST TIME BEFORE IT, THE BENEFI T OF GOING THROUGH THE ISSUES HAD BEEN DENIED TO THE REVENUE. THAT THE LD.CIT(A) WAS DIRECTED TO PASS A SPEAKING ORDER IN ALL ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 5 THE YEARS IN A COMPREHENSIVE MANNER. THAT ACCORDIN GLY, THE CIT(A) HEARD THE ASSESSEE ON THE ISSUE AND ALLO WED THE ASSESSEES CLAIM OF TREATING THE INTEREST REIMBURSE MENT UNDER TUF SCHEME AS CAPITAL IN NATURE. THAT FURTHER THE LD.CIT(A) HELD THAT THE ASSESSEE WOULD NOT BE ENTI TLED FOR INTEREST ON THE REFUND OF TAX IF ANY ON ACCOUNT OF ALLOWANCE OF ITS AFORESAID CLAIM. 3. IT WAS POINTED OUT THAT AGGRIEVED BY THE SAME, BOTH THE REVENUE AND THE ASSESSEE HAVE COME UP IN APPEAL BEFORE US, IN ALL THE CAPTIONED CROSS APPEALS, WITH THE RE VENUE CHALLENGING THE ORDER OF THE CIT(A) IN HOLDING THAT THE INTEREST REIMBURSEMENT UNDER TUF SCHEME WAS A CAPIT AL RECEIPT AND THE ASSESSEE CONTESTING THE ORDER OF TH E CIT(A) HOLDING THAT NO INTEREST BE GRANTED TO THE ASSESSEE ON THE REFUND OF TAX ON ACCOUNT OF HOLDING INTEREST REIMB URSEMENT UNDER TUFS AS NON TAXABLE. WE SHALL FIRST BE DEALING WITH THE APPEALS OF THE REVENUE. THE GROUNDS RAISED IN ALL THE APPEALS WAS IDENTICAL AND READ AS UNDER: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.C1T(A) WAS JUSTIFIED ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 6 IN TREATING THE REIMBURSEMENT OF INTEREST UNDER TUF SCHEME OF THE MINISTRY OF TEXTILES, GOVERNMENT OF INDIA, AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEIPT WITHOUT GIVING AN OPPORTUNITY TO ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE?' 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS JUSTIFIED IN TREATING THE REIMBURSEMENT OF INTEREST UNDER TUF SCHEME OF THE MINISTRY OF TEXTILES, GOVERNMENT OF INDIA, AS CAPITAL RECEIPT INSTEAD OF REVENUE RECEIPT WITHOUT EXAMINING IN THE ORDER THE CHARACTER/PURPOSE OF THE SUBSIDY RECEIPTS IN THE HAND OF ASSESSEE?' 3. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN CURSORILY ADDRESSING THE FACT THAT THE ASSESSEE IN HIS RETURN OF INCOME HAD ITSELF OFFERED THE SUBSIDY AS A REVENUE RECEIPT?' 4. THAT THE ORDER OF THE LD. CIT (A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 4. AS STATED ABOVE, THE REVENUE HAS CHALLENGED THE ORDER OF THE LD.CIT(A) TREATING THE INTEREST REIMBURSEMEN T RECEIVED BY THE ASSESSEE UNDER TUFS, AS CAPITAL IN NATURE. 5. A PERUSAL OF THE ORDER OF THE LD.CIT(A) REVEALS THAT BEFORE THE LD.CIT(A) THE ASSESSEE HAD EXPLAINED THE PROVISIONS AND OBJECTIVES OF THE TUF SCHEME AS ENAB LING ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 7 MODERNIZATION OF PLANT AND MACHINERY FOR MAKING THE TEXTILE INDUSTRY COST EFFECTIVE ,AND WHICH WERE RECORDED IN BRIEF BY THE CIT(A) AT PARA NOS. 5 AND 6 OF HIS ORDER AS UND ER: 5. EXPLAINING THE PROVISIONS AND OBJECTIVES OF THE TUF SCHEME, IT WAS STATED THAT TO MEET THE CHALLENGES OF POST-QUOTA REGIME WHICH REQUIRED THE TEXTILE INDUSTRY TO BECOME MORE COMPETITIVE, COST- EFFECTIVE AND QUALITY ORIENTED, THE GOVERNMENT OF INDIA LAUNCHED THE TECHNOLOGY UPGRADATION FUND SCHEME FOR TEXTILE, JUTE AND COTTON AND GINNING & PRESSING INDUSTRIES W.E.F. 01/04/1999 FOR A PERIOD OF FIVE YEARS I.E. UP TO 31/03/2004 WHICH WAS SUBSEQUENTLY EXTENDED UP TO 31/03/2007. 6. THE SAID SCHEME WAS STATED TO BE AIMED AT MEETING A PART OF THE CAPITAL INVESTMENT OF THE ELIGIBLE UNDERTAKINGS IN MODERNISING THEIR PLANT AND MACHINERY. WITH EFFECT FROM 01/01/2002, AN OPTION WAS PROVIDED TO THE ELIGIBLE ENTREPRENEURS T O AVAIL THE INCENTIVE EITHER IN THE FORM OF CREDIT LINKED CAPITAL SUBSIDY (CLCS) OR BY WAY OF 5% INTEREST REIMBURSEMENT UNDER THE TUF SCHEME. THE METHODOLOGY AS APPLICABLE TO THE APPELLANT UNDER THE SCHEME WAS THAT OF REIMBURSEMENT OF FIVE (5) PERCENTAGE POINTS PROVIDED ON INTEREST CHARGED BY THE LENDING INSTITUTIONS ON A PROJECT OF TECHNOLOGY UPGRADATION IN CONFORMITY WITH THE SCHEME. IT WAS FURTHER STATED THAT ACCORDING TO THE SAID SCHEME APPLICABLE TO THE APPELLANT COMPANY, INTEREST PAID TO BANKS/FINANCIAL INSTITUTIONS WAS DIVIDED INTO TWO PARTS, WITH ONE PART INCURRED BY THE COMPANY HAVING BEEN BOOKED AS AN EXPENSE AND THE PART REIMBURSED BY THE GOVERNMENT SHOWN AS AMOUNT RECOVERABLE FROM THE GOVERNMENT IN THE BOOKS OF ACCOUNTS. IT WAS, THUS, REITERATED THAT THE APPELLANT COMMISSIONER CLAIMED INTEREST EXPENSE ONLY TO THE EXTENT OF THE AMOUNT INCURRED BY IT. ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 8 6. THE ASSESSEE ALSO RELIED UPON CERTAIN JUDICIAL D ECISIONS IN SUPPORT OF ITS CONTENTION THAT CONSIDERING THE O BJECTIVE OF THE SCHEME, THE INTEREST REIMBURSEMENT UNDER TUF SC HEME WAS CAPITAL IN NATURE, AS REPRODUCED IN PARA 4 OF T HE CIT(A)S ORDER AS UNDER: 4. IN THE PRESENT APPELLATE PROCEEDINGS, A FORCEF UL PLEA WAS MADE FOR TREATING THE SUBSIDY IN THE FORM OF INTEREST REIMBURSEMENT AMOUNTING TO RS.6,91,78,340 /- AS CAPITAL RECEIPT ON THE STRENGTH OF THE FOLLOWING JUDICIAL PRECEDENTS: (I) CIT VS. SHAM LAI BANSAL, I TA NO. 472/2010 (P & H), (II) DOT VS. SUTLEJ TEXTILES & IN DUSTRIES LTD., ITA NO. 5124/2013 (IT 80, DELHI), (III) CNV T EXTILES P. LTD. VS. DCIT, ITA NO. 746/2014 (ITAT, CHENNAI), (I V) CIT VS. RASOI LTD.,[2011] 335 ITR 438 (CALCUTTA HIGH CO URT), (V) SHRI BALAJI ALLOYS VS. CIT [2011] 333 ITR 335 ( J & K HIGH COURT), & (VI) CIT VS. PONNI SUGARS & CHEMICAL S LTD.,[2008] 306 ITR 392 (SUPREME COURT). 7. FINDING MERIT IN THE CONTENTIONS OF THE ASSESSEE THE LD.CIT(A) ALLOWED THE ASSESSES CLAIM HOLDING THAT T HE ISSUE WAS COVERED BY THE DECISION OF THE JURISDICTIONAL H IGH COURT IN THE CASE OF SHAM LAL (SUPRA) AND THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT ,KO LKATA-1 VS GLOSTER JUTE MILLS LTD.(2018)96 TAXMANN.COM 303. THE RELEVANT FINDINGS OF THE LD.CIT(A) AT PARAS 7 TO 9 OF THE ORDER IS AS UNDER: ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 9 7. THE OBJECTIVES OF THE TUF SCHEME HAVE BEEN C AREFULLY EXAMINED FROM THE RESOLUTION OF THE MINISTRY OF TEX TILES [NO. 28/1/99-CTI DATED 31 ST OF MARCH, 1999]. THERE CANNOT BE ANY MANNER OF DOUBT ABOUT THE PURPOSE OF THE SUBSID Y BEING UPGRADATION OF THE PLANT AND MACHINERY AND, T HEREBY, THE CAPITAL APPARATUS OF THE APPELLANT COMPANY. THE JURISDICTIONAL HIGH COURT OF AND PUNJAB & HARYANA H AD AN OCCASION TO EXAMINE THIS ISSUE IN THE CASE OF CI T VS. SHAM LAI BANSAL [ITA NO. 472 OF 2010 O&M; DATE OF DECISI ON: 17/01/2011] WHO WAS ALSO ENGAGED IN THE MANUFACTURE AND SALE OF WOOLEN GARMENTS AND HAD RECEIVED SUBSIDY FO R REPAYMENT OF LOAN TAKEN FOR BUILDING, PLANT AND MAC HINERY UNDER THE CREDIT LINKED CAPITAL SUBSIDY SCHEME UNDE R TUFS OF MINISTRY OF TEXTILES, GOVERNMENT OF INDIA. WHILE DELIVERING THE DECISION ON THE MATTER, THE HON'BLE HIGH COURT OF PUNJAB & HARYANA REFERRED TO THE TWO CONCLUSIVE DECISIONS OF THE HON'BLE SUPREME COURT ON THE ISSUE OF TAXABI LITY OF SUBSIDIES VIZ SAHNEY STEEL & PRESS WORKS LTD., VS. CIT [1997] 94 TAXMAN 368 AND CIT, MADRAS VS. PONNI SUGARS & CHEMICALS LTD.,[2008] 174 TAXMAN 87. IT WAS CATEGOR ICALLY HELD THEREIN THAT '.... FOR DETERMINING WHETHER SUBSIDY PAYMENT WAS 'REVENUE RECEIPT' OR 'CAPITAL RECEIPT', CHARACTER OF RECEIPT IN THE HANDS OF THE ASSESSEE H AD TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH SU BSIDY IS GIVEN BY APPLYING THE PURPOSE TEST, AS HELD IN S AHNEY STEEL & PRESS WORKS LTD., & ORS. ITSELF AND REITERA TED IN LATER JUDGEMENT IN CIT VS. PONNI SUGARS & CHEMICALS LTD. & ORS. (2008) 306ITR 392, REFERRED TO IN THE IMPUGN ED ORDER OF THE TRIBUNAL. (CHANDIGARH ITAT, ORDER DATED 22/09/2009 IN ITA NO. 639/2009 EMPHASIS SUPPLIED). IN VIEW OF THE ABOVE, SINCE THE MATTER IS COVERED BY JUDGEMENT OF THE HON'BLE SUPREME COURT IN PONNI SUG ARS & CHEMICALS LTD. & ORS. AGAINST THE REVENUE, NO SUBSTANTIAL QUESTION OF LAW ARISES. THE APPEAL IS DISMISSED.' 8. VERY RECENTLY, ON JUNE 18, 2018, THE HON'BLE HIGH O UR OF CALCUTTA ALSO EXAMINED THIS MATTER IN AN APPEAL PREFERRED BY CIT, KOLKATA-1 IN THE CASE OF GLOSTER JUTE MILLS LTD.,[2018] 96 TAXMAN.COM 303. IT WOULD BE EXPEDIEN T TO ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 10 EXTRACT HEREINBELOW THE RELEVANT PORTION OF THE AFO RESAID DECISION IN EXTENSO: '2. TWO QUESTIONS ARE SOUGHT TO BE RAISED BY THE RE VENUE IN THIS APPEAL. THE FIRST IS AS TO WHETHER THE MONE Y RECEIVED UNDER A CENTRAL GOVERNMENT SUBSIDY BY THE ASSESSEE HAD TO BE REGARDED AS CAPITAL RECEIPT OR A REVENUE RECEIPT.' '4. ACCORDINGLY, IT IS ONLY THE FIRST QUESTION THAT NEEDS TO BE GONE INTO. THE COMMISSIONER (APPEALS) READ THE RELEVANT SCHEME AND WAS OF THE OPINION THAT THE SUB SIDY RECEIVED HAD TO BE REGARDED AS A REVENUE RECEIPT. B EFORE THE COMMISSIONER (APPEALS) SEVERAL JUDGEMENTS WERE CITED INCLUDING THE JUDGEMENT OF THIS COURT CIT V. BALRAMPUR CHINI MILLS LTD.,[1999] 238ITR 445/105 TA XMAN 200 (CAL), AND THE DECISIONS OF THE SUPREME COURT S AHNEY STEEL & PRESS WORKS LTD.,[1997] 228 ITR 253/94 TAXM AN 368 AND CIT V. PONNI SUGARS & CHEMICALS LTD.,[2008] 174 TAXMAN 87/306 ITR 392 (SC).' '5. IN BALRAMPUR CHINI MILLS LTD., THIS COURT HELD THAT IT IS THE PURPOSE OF THE SCHEME THAT HAS TO BE ASSESSE D BEFORE DETERMINING WHETHER THE SUBSIDY OUGHT TO BE TREATED AS A REVENUE RECEIPT OR A CAPITAL RECEIPT. IT ALSO HELD THAT IF THE SUBSIDY WAS GIVEN FOR THE RUNNING OF THE BUSINESS OF THE ASSESSEE IT HAD TO BE REGARDED AS A REVENUE RECEIPT AND IF IT WAS GIVEN TO MEET ANY CAP ITAL COST OF ANY ASSET, IT HAD TO BE SEEN AS A CAPITAL R ECEIPT. IN SAHNEY STEEL AND PRESS WORKS LTD., (SUPRA) THE SUP REME COURT HELD THAT IF THE SUBSIDY WAS TO HELP THE ASSE SSEE TO SET UP ITS BUSINESS OR COMPLETE A PROJECT, THE MONE Y HAD TO BE TREATED AS HAVING BEEN RECEIVED FOR CAPITAL PURP OSES. IN PONNI SUGARS & CHEMICALS LTD. (SUPRA) THE SUPREM E COURT HELD THAT THE CHARACTER OF THE SUBSIDY IS DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH IT IS GRANTED AND THE POINT OF TIME WHEN THE SUBSIDY IS M ADE AVAILABLE TO THE ASSESSEE MAY NOT BE OF ANY CONSEQUENCE.' '6. THE SALIENT FEATURES OF THE SCHEME INVOLVED IN THIS CASE HAVE BEEN NOTED IN THE ORDER OF THE COMMISSIONER ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 11 (APPEALS). THE SCHEME WAS INSTITUTED AS THE 'TECHNOLOGY UPGRADATION FUND SCHEME'. THE MINISTRY OF TEXTILES AIMED AT MAKING AVAILABLE FUNDS TO THE DOMESTIC TEXTILE INDUSTRY FOR TECHNOLOGY UPGRADATIO N OF THE EXISTING UNITS AS WELL AS TO SET UP NEW UNITS W ITH THE LATEST TECHNOLOGY TO ENHANCE THEIR VIABILITY AND COMPETITIVENESS IN THE DOMESTIC AND INTERNATIONAL MARKETS. THE PREAMBLE TO THE SCHEME RECOGNISED THAT IN THE POST-QUOTA REGIME, THE INDUSTRY HAD TO BECOME COMPETITIVE, COST EFFECTIVE AND QUALITY ORIENTED.' '7. THE AVOWED PURPOSE OF THE SCHEME WAS TO INDUCE THE ENTREPRENEUR TO UNDERTAKE INVESTMENT IN MODERNISING THE PLANT AND MACHINERY AND ASSETS AND THE OBJECTIVES O F THE SCHEME CLEARLY SPELT OUT SUCH PURPOSE. IN THE CONTE XT OF THE SCHEME, IT COULD NEVER HAVE BEEN UNDERSTOOD TO IMPL Y THAT THE SUBSIDY WAS FOR THE PURPOSE OF THE DAY-TO-DAY BUSINESS OF THE ASSESSEE OR ANY ENTREPRENEUR QUALIF IED TO RECEIVE IT. THE SUBSIDY WAS CLEARLY FOR THE PUR POSE OF UPGRADING THE MACHINERY AND PLANT AND FOR ACQUIRING CAPITAL ASSETS. IN THE LIGHT OF THE JUDGEMENTS WHIC H WERE CARRIED TO THE COMMISSIONER (APPEALS), THE COMMISSIONER OUGHT TO HAVE CONSTRUED THE QUANTUM OF SUBSIDY RECEIVED BY THE ASSESSEE TO BE A CAPITAL RECEIPT.' [ EMPHASIS SUPPLIED]. '8. THE JUDGEMENTS RELIED UPON BEFORE THE COMMISSIONER, PARTICULARLY, THE SUPREME COURT JUDGEMENTS IN SAHNEY STEEL & PRESS WORKS LTD. AND PONNI SUGARS & CHEMICALS LTD. (SUPRA) WERE REFERRED TO BY THE APPELLATE TRIBUNAL IN CORRECTING THE ERROR COMMITTED BY THE COMMISSIONER IN TREATING THE SUBSI DY IN THE HANDS OF THE ASSESSEE AS A REVENUE RECEIPT. IN THE LIGHT OF THE CONCLUSIVE PRONOUNCEMENTS ON THE SUBJECT, THE ORDER OF THE APPELLATE TRIBUNAL DOES N OT REQUIRE TO BE REVISITED. ON THE STRENGTH OF THE TERMS OF THE SCHEME AND ITS PURPOSE, THE SUBSIDY RECEIVED THERE UNDER HAD ONLY TO BE REGARDED AS A CAPITAL RECEIPT AND NOT A REVENUE RECEIPT. [EMPHASIS SUPPLIED]. ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 12 9. IN VIEW OF THE AFORESAID, THIS APPELLATE AUTHORI TY CANNOT BE DETAINED ANY LONGER IN TREATING THE REIMBURSEMEN T OF INTEREST UNDER THE TUF SCHEME OF MINISTRY OF TEXTIL ES, GOVERNMENT OF INDIA, AS CAPITAL RECEIPT, EX CATHEDR A. 8. BEFORE US THE LD. COUNSEL FOR ASSESSEE RELIED UP ON THE FACTUAL CONTENTIONS MADE BEFORE THE LD.CIT(A), THE JUDICIAL DECISIONS RELIED UPON BEFORE HIM AND ALSO ON THE F INDINGS OF THE LD.CIT(A). 9. THE LD. DR, ON THE OTHER HAND, VEHEMENTLY ARGUED THAT THE INTEREST SUBSIDY/REIMBURSEMENT RECEIVED BY THE ASSESSEE WAS REVENUE IN NATURE THOUGH HE WAS UNABLE TO REBUT/CONTROVERT THE FACTUAL CONTENTIONS AND WAS AL SO NOT ABLE TO DRAW OUR ATTENTION TO ANY JUDICIAL DECISION CONTRARY TO THAT CITED BY THE ASSESSEE AND FOLLOWED BY THE L D.CIT(A) WHILE ALLOWING THE ASSESSEES CLAIM. 10. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO GO NE THROUGH THE ORDER OF THE LD.CIT(A). THE ISSUE BEFO RE US RELATES TO THE NATURE OF INTEREST SUBSIDY RECEIVED UNDER THE TUF SCHEME OF THE GOVERNMENT OF INDIA. THE FACTUAL FINDINGS OF THE CIT(A) THAT THE PURPOSE OF THE INTE REST SUBSIDY WAS UPGRADATION OF PLANT & MACHINERY AND T HUS THE ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 13 CAPITAL APPARATUS OF THE ASSESSEE COMPANY, HAS NOT BEEN CONTROVERTED BY THE REVENUE. THE LD.CIT(A), WE FIND , HAS RELIED UPON THE DECISION OF THE HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. SHAM LAL BANSAL, ITA NO.472/2010 (P&H) AND THE DECISION OF THE HON'BLE H IGH COURT OF CALCUTTA IN THE CASE OF CIT VS. GLOSTER JU TE MILLS LTD.(2018) 96 TAXMAN.COM 303 FOR HOLDING THE INTER EST SUBSIDY TO BE CAPITAL IN NATURE.WE HAVE GONE THROUG H THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SHAM LAL BANSAL(SUPRA),COPY OF WHIC H ORDER WAS PLACED BEFORE US, AND WE AGREE WITH THE LD.CIT( A) THAT IN THE SAID CASE ALSO, THE ISSUE RELATED TO NATURE OF SUBSIDY RECEIVED UNDER TUF SCHEME OF THE MINISTRY O F TEXTILES. THE HON'BLE HIGH COURT , HELD THAT FOR TH E PURPOSE OF DETERMINING THE NATURE OF THE SUBSIDY ,THE PURPO SE FOR WHICH THE SUBSIDY WAS GIVEN WAS TO BE DETERMINED AN D RELIED UPON THE DECISION OF THE HON'BLE SUPREME COU RT IN THE CASE OF SAHNI STEEL & PRESS WORKS LTD. VS. CIT (199 7) 94 TAXMAN 368 AND CIT VS. PONNI SUGARS & CHEMICALS LTD . (2008) 174 TAXMAN 87 FOR THE AFORESAID PROPOSITION. THEREAFTER THE HONBLE HIGH COURT NOTED THAT THE PU RPOSE OF ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 14 THE TUF SCHEME WAS TO INDUCE THE ENTREPRENEUR TO UNDERTAKE INVESTMENT IN MODERNIZING THE PLANT AND MACHINERY AND WAS DEFINITELY NOT FOR THE PURPOSE OF DAY TO DAY BUSINESS OF THE ASSESSEE. ACCORDINGLY THE HON BLE HIGH COURT HELD THAT THE NATURE OF THE SUBSIDY WAS CAPIT AL. 11. IN THE CASE OF GLOSTER JUTE MILLS(SUPRA),COPY O F ORDER OF WHICH WAS ALSO PLACED BEFORE US, THE HON'BLE HIGH C OURT EXAMINED THE FEATURES OF THE TUF SCHEME AND FOUND T HE PURPOSE WAS TO INDUCE THE ENTREPRENEUR TO UNDERTAKE INVESTMENT IN MODERNIZING THE PLANT AND MACHINERY A ND ASSETS AND, THEREFORE WAS CLEARLY A CAPITAL RECEIPT . 12. THE AFORESAID TWO DECISIONS RELIED UPON BY THE CIT(A), WE FIND THEREFORE, HAVE ALREADY DEALT WITH THE NATU RE OF THE SUBSIDY RECEIVED UNDER TUFS SCHEME AND AFTER ANALYZ ING THE TERMS OF THE SCHEME AND FINDING THAT THE PURPOS E OF THE SCHEME WAS TO INDUCE MODERNIZATION OF PLANT AND MAC HNIERY USED IN TEXTILE INDUSTRY ,HELD THE SAME TO BE CAPIT AL IN NATURE FOLLOWING THE PROPOSITION LAID DOWN BY THE A PEX COURT FOR DETERMINING THE NATURE OF SUBSIDY IN THE CASE O F SAWHNEY STEELS(SUPRA) AND PONNI SUGARS(SUPRA). THE LD. DR ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 15 HAS BEEN UNABLE TO BRING TO OUR NOTICE ANY CONTRARY DECISION EITHER OF THE HON'BLE JURISDICTIONAL HIGH COURT OR THE HON'BLE APEX COURT ON THIS ISSUE NOR WAS THE DECISI ONS RELIED UPON BY THE LD.CIT(A) DISTINGUISHED BEFORE US. 13. IN VIEW OF THE SAME, WE HAVE NO HESITATION IN U PHOLDING THE ORDER OF THE CIT(A) THAT CONSIDERING THE OBJECT IVE OF THE TUF SCHEME AND JUDICIAL DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT AND HON'BLE HIGH COURT OF CALCUTTA , THE INTEREST RECEIVED UNDER TUF SCHEME I S CAPITAL IN NATURE. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE, THEREFORE, DISMISSED. IN EFFECT, ALL THE APPEALS OF THE REVENUE ARE DISM ISSED. 14. WE SHALL NOW TAKE UP THE APPEALS OF THE ASSESSE E .THE GROUNDS RAISED BY THE ASSESSEE IN ALL ITS APPEALS W AS IDENTICAL CHALLENGING THE ORDER OF THE CIT(A) STATI NG THAT NO INTEREST BE PAID ON THE REFUND GRANTED TO THE ASSES SEE ON ACCOUNT OF HOLDING THAT THE INTEREST RECEIVED UNDER TUF SCHEME WAS NOT TAXABLE. ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 16 GROUND OF APPEAL RAISED BY THE ASSESSEE READS AS UNDER: 1. THAT THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER THAT INTEREST U/S 244A OF THE INCOME TAX ACT, 1961 SHALL NOT BE GRANTED ON THE AMOUNT OF REFUND DUE TO THE ASSESSEE IN RELATION TO INTEREST REIMBURSEMENT UNDER TUFS (TECHNOLOGY UPGRADATION FUND SCHEME). 15. BRIEFLY STATED, THE ASSESSEE HAD ORIGINALLY RET URNED THE INTEREST SUBSIDY FOR TAXATION IN ITS RETURN OF INCO ME FILED, AND ONLY WHEN THE MATTER CAME UP BEFORE THE ITAT, T HE ASSESSEE RAISED ADDITIONAL GROUND FOR TREATING THE SAME AS NON TAXABLE, BEING CAPITAL IN NATURE. THE ITAT REST ORED THE MATTER TO THE LD.CIT(A). THE LD.CIT(A) AFTER HOLDIN G THAT THE INTEREST UNDER TUF SCHEME WAS TO BE TREATED AS A CA PITAL RECEIPT, NOTED THAT IT WAS THE ASSESSEE WHO HAD ALL ALONG OFFERED THE SAME FOR TAXATION AS REVENUE RECEIPT AN D HAD FOR THE FIRST TIME RAISED THIS ISSUE BEFORE THE I.T.A.T . ONLY. THE LD.CIT(A) NOTED THAT THE AUTHORITIES BELOW HAD, THE REFORE, COMMITTED NO ERROR OF JUDGMENT REGARDING TREATMENT AND CONSEQUENT TAXABILITY OF INTEREST REIMBURSEMENT UND ER TUF ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 17 SCHEME. HE, THEREFORE, HELD THAT SHOULD HIS ORDER H OLDING THE INTEREST UNDER TUF SCHEME AS CAPITAL IN NATURE RESULT IN A REFUND OF EXCESS TAX, NO INTEREST BE PAID ON THE SAME SINCE IT WAS THE ASSESSEE COMPANY ITSELF WHICH WAS SOLELY RESPONSIBLE FOR PAYING EXCESS TAX BY TREATING THE I NTEREST REIMBURSEMENT AS TAXABLE RECEIPT. THE RELEVANT FIND INGS OF THE CIT(A) AT PARA NOS. 9 & 10 OF HIS ORDER ARE AS UNDER: 9. IN VIEW OF THE AFORESAID, THIS APPELLATE AUTHOR ITY CANNOT BE DETAINED ANY LONGER IN TREATING THE REIMBURSEMENT OF INTEREST UNDER THE TUF SCHEME OF THE MINISTRY OF TEXTILES, GOVERNMENT OF INDIA, AS C APITAL RECEIPT, EX CATHEDRA. HOWEVER, IT IS DEEMED NECESSA RY TO RECORD HERE THAT THE APPELLANT COMPANY HAD VOLUNTARILY OFFERED THE INTEREST REIMBURSEMENT TO TAX, WHILE FILING ITS RETURN OF INCOME. NO CLAIM WA S MADE DURING THE ASSESSMENT PROCEEDINGS REGARDING THE MISTAKE COMMITTED BY THE APPELLANT QUA THE REIMBURSEMENT OFINTEREST UNDER THE TUF SCHEME. EVEN IN THE SUBSEQUENT APPELLATE PROCEEDINGS, THIS GROUND WAS NEVER RAISED. HOWEVER, WHEN THE APPELLANT CHOSE TO CHALLENGE THE APPELLATE ORDER BE FORE THE HON'BLE ITAT, ADDITIONAL GROUND WAS RAISED ON T HE STRENGTH OF THE DECISION OF THE JURISDICTIONAL HIGH COURT OF PUNJAB & HARYANA, WHICH GROUND WAS ADMITTED FOR ADJUDICATION AND RESTORED TO THIS APPELLATE AUTHORI TY. IT NEEDS NO ASSERTION TO STATE THAT THE AUTHORITIES BE LOW THE HON'BLE TRIBUNAL NEVER COMMITTED ANY ERROR OF JUDGEMENT INSOFAR AS THE TREATMENT AND CONSEQUENT TAXABILITY OF INTEREST REIMBURSEMENT WAS CONCERNED. IN THE CIRCUMSTANCES, SHOULD THE PRESENT ORDER RESULT IN A REFUND OF EXCESS TAX WRONGLY PAID, THERE CANNOT BE AN ACCRETION TO THE SAID REFUND WITH THE APPLICABLE INTEREST, NORMALLY PAYABLE UNDER THE PROVISIONS OF ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 18 SECTION 244A OF THE ACT. IT IS BEING SPECIFICALLY RECORDED HERE THAT THE APPELLANT COMPANY ITSELF WAS SOLELY RESPONSIBLE FOR PAYING EXCESS TAX BY TREATIN G THE INTEREST REIMBURSEMENT AS TAXABLE RECEIPT AND, THEREFORE, WOULD NOT BE ENTITLED FOR INTEREST ON RE FUND OF SUCH TAX. IT IS ORDERED ACCORDINGLY. 16. BEFORE US THE LD. COUNSEL FOR ASSESSEE CHALLENG ED THIS ORDER OF THE LD.CIT(A) ON THREE GROUNDS; I) THAT THE LD. CIT(A) HAD EXCEEDED HIS JURISDICTI ON BY HOLDING SO SINCE THE I.T.A.T. HAD REMANDED ONLY THE ISSUE OF TREATMENT OF INTEREST RECEIVED UNDER TUF SCHEME TO HIM AND THE INTEREST ON REFUND SO GENERAT ED HAD NOT BEEN REFERRED TO HIM BY THE I.T.A.T., II) THAT WHILE HOLDING SO, THE CIT(A) HAD GIVEN NO OPPORTUNITY OF HEARING TO THE ASSESSEE AND, III) EVEN ON MERITS THE ORDER OF THE CIT(A) WAS INC ORRECT IN VIEW OF VARIOUS DECISIONS OF COURTS HOLDING INTE REST ON REFUND TO BE AUTOMATIC. ATTENTION WAS DRAWN TO T HE ORDER OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF AJANTA MANUFACTURING LTD. VS. DCIT (2017) 391 ITR 3 3, UNION OF INDIA VS. TATA CHEMICALS LTD. (2014) 363 I TR 658 (SC). ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 19 17. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(A). HE FURTHER CONCEDED THAT THE ORDER HAD BEEN PASSED BY THE CIT(A) WITHOUT AFFORDING AN OPPORTUNI TY OF HEARING TO THE ASSESSEE. HE, THEREFORE, PLEADED THA T THE ISSUE BE RESTORED BACK TO THE CIT(A) TO BE ADJUDICA TED AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE LD. DR STATED THAT THE ISSUE OF INTEREST ON REFUND WAS TO BE ADJUDICATED BASED ON THE FACTUAL MATRIX OF THE CASE AND, THEREFORE, IT WOULD BE BETTER IF THE ISSUE IS REMAN DED BACK TO THE CIT(A) FOR CONSIDERATION AFRESH. 18. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS AN ADMITTED FACT THAT THE LD.CIT(A) HAD DIRECTED THAT NO INTEREST BE GRAN TED ON THE REFUND GENERATED ON ACCOUNT OF TREATMENT OF INTERES T SUBSIDY RECEIVED UNDER TUFS ,AS CAPITAL IN NATURE, WITHOUT GIVING ANY OPPORTUNITY OF HEARING TO THE ASSESSEE. WE HAVE ALSO NOTED THAT THE ASSESSEE HAS VEHEMENTLY ARGUED THAT IT WAS ENTITLED TO INTEREST ON REFUND AND RELIED UPON VARI OUS CASE LAWS AND JUDGMENTS OF THE HIGH COURT AND EVEN OF TH E HON'BLE SUPREME COURT IN SUPPORT OF ITS CONTENTION .OUR ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 20 ATTENTION WAS DRAWN TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF TATA CHEMICALS LTD.(SUPRA) AT PARA30-31 AS UNDER: 30. THE REFUND BECOMES DUE WHEN TAX DEDUCTED AT SO URCE, ADVANCE TAX PAID, SELF ASSESSMENT TAX PAID AND TAX PAID ON REGULAR ASSESSMENT EXCEEDS TAX CHARGEABLE FOR THE Y EAR AS A RESULT OF AN ORDER PASSED IN APPEAL OR OTHER PROCEE DINGS UNDER THE ACT. WHEN REFUND IS OF ANY ADVANCE TAX (I NCLUDING TAX DEDUCTED/COLLECTED AT SOURCE), INTEREST IS PAYA BLE FOR THE PERIOD STARTING FROM THE FIRST DAY OF THE ASSESSMEN T YEAR TO THE DATE OF GRANT OF REFUND. NO INTEREST IS, HOWEVE R, PAYABLE IF THE EXCESS PAYMENT IS LESS THAN 10 PERCENT OF TAX D ETERMINED UNDER SECTION 143(1) OR ON REGULAR ASSESSMENT. NO I NTEREST IS PAYABLE FOR THE PERIOD FOR WHICH THE PROCEEDINGS RE SULTING IN THE REFUND ARE DELAYED FOR THE REASONS ATTRIBUTABLE TO THE ASSESSEE (WHOLLY OR PARTLY). THE RATE OF INTEREST A ND ENTITLEMENT TO INTEREST ON EXCESS TAX ARE DETERMINE D BY THE STATUTORY PROVISIONS OF THE ACT. INTEREST PAYMENT I S A STATUTORY OBLIGATION AND NON-DISCRETIONARY IN NATURE TO THE A SSESSEE. IN TUNE WITH THE AFORESAID GENERAL PRINCIPLE, SECTION 244A IS DRAFTED AND ENACTED. THE LANGUAGE EMPLOYED IN SECTI ON 244A OF THE ACT IS CLEAR AND PLAIN. IT GRANTS SUBSTANTIV E RIGHT OF INTEREST AND IS NOT PROCEDURAL. THE PRINCIPLES FOR GRANT OF INTEREST ARE THE SAME AS UNDER THE PROVISIONS OF SE CTION 244 APPLICABLE TO ASSESSMENTS BEFORE 01.04.1989, ALBEIT WITH CLARITY OF APPLICATION AS CONTAINED IN SECTION 244A . 31. THE DEPARTMENT HAS ALSO ISSUED CIRCULAR CLARIFY ING THE PURPOSE AND OBJECT OF INTRODUCING SECTION 244A OF T HE 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 B Y THE REVENUE TO THE ASSESSEE FOR THE MONEY REMAINING WIT H THE GOVERNMENT, THE SAID SECTION IS INTRODUCED FOR PAYM ENT OF INTEREST BY THE DEPARTMENT FOR DELAY IN GRANT OF RE FUNDS. A GENERAL RIGHT EXISTS IN THE STATE TO REFUND ANY TAX COLLECTED FOR ITS PURPOSE, AND A CORRESPONDING RIGHT EXISTS TO RE FUND TO INDIVIDUALS ANY SUM PAID BY THEM AS TAXES WHICH ARE FOUND ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 21 TO HAVE BEEN WRONGFULLY EXACTED OR ARE BELIEVED TO BE, FOR ANY REASON, INEQUITABLE. THE STATUTORY OBLIGATION TO RE FUND CARRIED WITH IT THE RIGHT TO INTEREST ALSO. THIS IS TRUE IN THE CASE OF ASSESSEE UNDER THE ACT. 19. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF AJANTA MANUFACTURING ,WHEREIN IT WAS HELD AS UNDER AT PARA S 16 TO 18: 16. WE WOULD ALSO EXAMINE THE ORDER OF THE COMMISS IONER ON MERITS. AS NOTED, ACCORDING TO THE COMMISSIONER THE ASSESSEE HAD RAISED A BELATED CLAIM DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WHICH RESULTED INTO DELAY IN GRANTING OF REFUND AND THEREFORE, THE ASSESSEE WAS NOT ENTIT LED TO INTEREST FOR THE ENTIRE PERIOD FROM THE FIRST DATE OF ASSESSMENT YEAR TILL THE ORDER GIVING EFFECT TO THE APPELLATE ORDER WAS PASSED. WE CANNOT UPHOLD THE VIEW OF THE COMMISSION ER. FIRST AND FOREMOST REQUIREMENT OF SUB-SECTION (2) O F SECTION 244A IS THAT THE PROCEEDINGS RESULTING INTO REFUND SHOULD HAVE BEEN DELAYED FOR THE REASONS ATTRIBUTABLE TO T HE ASSESSEE, WHETHER WHOLLY OR IN PART. IF SUCH REQUIR EMENT IS SATISFIED, TO THE EXTENT OF THE PERIOD OF DELAY SO ATTRIBUTABLE TO THE ASSESSEE, HE WOULD BE DISENTITLED TO CLAIM INTE REST ON REFUND. THE ACT OF REVISING A RETURN OR RAISING A C LAIM DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS CANNOT BE SAID TO BE THE REASONS FOR DELAYING THE PROCEEDINGS WHICH C AN BE ATTRIBUTABLE TO THE ASSESSEE. MERE FACT THAT THE CL AIM CAME TO BE GRANTED BY THE APPELLATE COMMISSIONER, WOULD NOT CHANGE THIS POSITION. IN ESSENCE, WHAT THE COMMISSIONER (A PPEALS) DID WAS TO ALLOW A CLAIM WHICH IN LAW, IN HIS OPINI ON, WAS ALLOWABLE BY THE ASSESSING OFFICER. IN OTHER WORDS, BY PASSING ORDER IN APPEAL, HE MERELY RECOGNIZED A LEG AL POSITION WHEREBY, THE ASSESSEE WAS ENTITLED TO CLAIM CERTAIN BENEFITS OF REDUCED TAX. SURELY, THE FACT THAT THE ASSESSEE HAD FILED THE APPEAL WHICH ULTIMATELY CAME TO BE ALLOWED BY THE COMMISSIONER, CANNOT BE A REASON FOR DELAYING THE PROCEEDINGS WHICH CAN BE ATTRIBUTED TO THE ASSESSEE . ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 22 17. THE DEPARTMENT DOES NOT CONTEND THAT THE ASSESS EE HAD NEEDLESSLY OR FRIVOLOUSLY DELAYED THE ASSESSMENT PR OCEEDINGS AT THE ORIGINAL OR APPELLATE STAGE. IN ABSENCE OF A NY SUCH FOUNDATION, MERE FACT THAT THE ASSESSEE MADE A CLAI M DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WHICH WAS ALLOWED AT THE APPELLATE STAGE WOULD NOT IPSO FACTO IMPLY T HAT THE ASSESSEE WAS RESPONSIBLE FOR CAUSING THE DELAY IN T HE PROCEEDINGS RESULTING INTO REFUND. WE MAY REFER THE DECISION OF THE KERALA HIGH COURT IN CASE OF COMMISSIONER OF INCOME- TAX V/S. SOUTH INDIAN BANK LTD., REPORTED IN (2012) 340 ITR (KER) IN WHICH THE ASSESSEE HAD RAISED A BELATED CL AIM FOR DEDUCTION WHICH WAS ALLOWED BY THE COMMISSIONER (AP PEALS). THE REVENUE, THEREFORE, CONTENDED THAT FOR SUCH DEL AY, INTEREST SHOULD BE DECLINED UNDER SECTION 244A OF T HE ACT. IN THE SAID CASE ALSO, THE ASSESSEE HAD NOT MADE ANY C LAIM FOR DEDUCTION OF PROVISION OF BAD DEBTS IN THE ORIGINAL RETURN. BUT BEFORE COMPLETION OF THE ASSESSMENT, THE ASSESSEE H AD MADE SUCH A CLAIM WHICH WAS REJECTED BY THE ASSESSING OF FICER. THE COMMISSIONER ALLOWED THE CLAIM AND REMANDED THE MATTER TO THE ASSESSING OFFICER. PURSUANT TO WHICH, THE ASSESSEE BECAME ENTITLED TO REFUND. REVENUE ARGUED THAT THE ASSESSEE WOULD NOT BE ENTITLED TO INTEREST IN VIEW OF SECTION 244A(2). IN THIS CONTEXT, THE COURT HELD IN PARA.6 AS UNDER : 6. SUB-SECTION (2) OF SECTION 244A PROVIDES THAT T HE ASSESSEE SHALL NOT BE ENTITLED TO INTEREST FOR THE PERIOD OF DELAY IN ISSUING THE PROCEEDINGS LEADING TO THE REFUND THAT IS ATTRIBUTABLE TO THE ASSESSEE. IN OTH ER WORDS, IF THE ISSUE OF THE REFUND ORDER IS DELAYED FOR ANY PERIOD ATTRIBUTABLE TO THE ASSESSEE, THEN THE ASSESSEE SHALL NOT BE ENTITLED TO INTEREST FOR SUCH PERIOD. THIS IS OF COURSE AN EXCEPTION TO CLAUSES ( A) AND (B) OF SECTION 244A(1) OF THE ACT. IN OTHER WORDS, IF THE ISSUE OF THE PROCEEDINGS, THAT IS, REFUND ORDER, IS DELAYED FOR ANY PERIOD ATTRIBUTABLE TO THE ASSESSEE , THEN THE ASSESSEE IS NOT ENTITLED TO INTEREST OF SU CH PERIOD. FURTHER, WHAT IS CLEAR FROM SUB-SECTION (2) IS THAT, IF THE OFFICER FEELS THAT DELAY IN REFUND FOR ANY PERIOD IS ATTRIBUTABLE TO THE ASSESSEE, THE MATTER SHOULD BE REFERRED TO THE COMMISSIONER OR CHIEF COMMISSION ER OR ANY OTHER NOTIFIED PERSON FOR DECIDING THE ISSUE AND ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 23 ORDERING EXCLUSION OF SUCH PERIODS FOR THE PURPOSE OF GRANTING INTEREST TO THE ASSESSEE UNDER SECTION 244 A(1) OF THE ACT. IN THIS CASE, THERE WAS NO DECISION BY THE COMMISSIONER OR CHIEF COMMISSIONER ON THIS ISSUE AN D SO MUCH SO, WE DO NOT THINK THE ASSESSING OFFICER M ADE OUT THE CASE OF DELAY IN REFUND FOR ANY PERIOD ATTRIBUTABLE TO THE ASSESSEE DISENTITLING FOR INTER EST. SO MUCH SO, IN OUR VIEW, THE OFFICER HAS NO ESCAPE FRO M GRANTING INTEREST TO THE ASSESSEE IN TERMS OF SECTI ON 244A(1)(A) OF THE ACT. 18. UNDER THE CIRCUMSTANCES, IMPUGNED ORDERS DATED 18.2.2016 AND 16.3.2016 PASSED BY THE COMMISSIONER OF INCOME-TAX AND ASSESSING OFFICER RESPECTIVELY AND T HE DEMAND NOTICE DATED 16.3.2016 ARE QUASHED. PETITION S ARE DISPOSED OF ACCORDINGLY. 20. A BARE PERUSAL OF THE ABOVE JUDGEMENTS REVEALS THAT AS PER THE PROVISIONS OF THE RELEVANT SECTION RELATING TO INTEREST ON REFUNDS, I.E. 244A OF THE ACT, THE DENIAL OF INT EREST CAN BE IN CERTAIN SPECIFIC CIRCUMSTANCES, AS IN CASES WHER E THE DELAY IN PROCEEDING FOR GRANTING REFUND IS ATTRIBUT ABLE TO THE ASSESSEE. 21. SINCE IN THE PRESENT CASE, THE LD.CIT(A) HAS GI VEN THE DIRECTION OF NO INTEREST BEING GRANTED ON REFUND, W ITHOUT GIVING THE ASSESSEE ANY OPPORTUNITY OF HEARING AND CONSIDERING THE FORCEFUL ARGUMENTS OF THE LD.COUNSE L FOR THE ASSESSEE BEFORE US BASED ON DECISIONS OF COURTS AS CITED ABOVE, WE HOLD ,THAT THE ISSUE NEEDS RECONSIDERATIO N. ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 24 FURTHER NOTING THE INTERPRETATION OF THE RELEVANT S ECTION DEALING WITH INTEREST ON REFUNDS I.E. SECTION 244A OF THE ACT, AS ABOVE, WE ARE IN AGREEMENT WITH THE LD.DR T HAT THE ISSUE NEEDS TO BE CONSIDERED IN THE FACTUAL MATRIX OF THE CASE BEFORE US. WE THEREFORE CONSIDER IT FIT TO RES TORE THE ISSUE BACK TO THE CIT(A) TO CONSIDER THE SAME AFRES H. THE LD.CIT(A) IS DIRECTED TO GIVE DUE OPPORTUNITY OF HE ARING TO THE ASSESSEE AND THEREAFTER DECIDE THE ISSUE IN ACC ORDANCE WITH LAW. 22. IN EFFECT ALL THE APPEALS OF THE ASSESSEE ARE A LLOWED FOR STATISTICAL PURPOSES. 23. IN THE RESULT, ALL THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES AND ALL THE APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- $ % & ' ( (DIVA SINGH) (ANNAPURNA GUPTA) , ' / JUDICIAL MEMBER * ' / ACCOUNTANT MEMBER $ /DATED: 29 TH MAY, 2019 * * ITA NOS.1429 &1479/CHD/2018 A.Y.2002-03 ITA NOS.1430 &1480/CHD/2018 A.Y.2003-04 ITA NOS.1404 &1481/CHD/2018 A.Y.2004-05 ITA NOS.1405 &1482/CHD/2018 A.Y.2005-06 25 &) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $ 0 , 123/4 / DR, ITAT, CHANDIGARH 6. /3 5# / GUARD FILE &) ' / BY ORDER, ! / ASSISTANT REGISTRAR