DCIT, CHENNAI V. Indian Overseas Bank, CHENNAI

ITA 2408/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7713 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 13-02-2017
• Assessment Year: 1997-1998
• Appeal Filed On: 19-08-2016
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Condonation of delay
• Section: 244A; 154; 2

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI M. BALAGANESH , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, J UDICIAL MEMBER I.T.A. NO S . 2 4 08 TO 2418 /MDS/201 6 ASSESSMENT YEAR S : 1997 - 98, 2000 - 01, 06 - 07 TO 07 - 08, 09 - 10 TO 11 - 12, 96 - 97, 92 - 93, 91 - 92 & 1990 - 91 THE DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT 2, CHENNAI 600 101 . VS. INDIAN OVERSEAS BANK , 763, ANNA SALAI, CHENNAI 600 0 02 . [PAN:AA A C I1223J ] ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI SUNDAR RAO, CIT SHRI A.V. SREEKANTH, JCIT / RESPONDENT BY : SHRI C. NARESH , C.A. / DATE OF HEARING : 13 . 02 .201 7 / DATE OF P RONOUNCEMENT : 28 . 02 .201 7 / O R D E R PER BENCH : TH E S E ELEVEN APPEAL S FILED BY THE REVENUE PERTAIN TO SAME ASSESSEE ARE DIRECTED AGAINST TWO CONSOLIDATED ORDER S OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 17 , CHENNA I, BOTH DATED 3 0 . 03.2016 RELEVANT TO VARIOUS ASSESSMENT YEAR S AS STATED ABOVE . 2. ALL T HE APPEALS OF THE REVENUE ARE FOUND TO HAVE BEEN FILED LATE BY THREE DAYS BEFORE THE TRIBUNAL . THE ASSESSING OFFICER HAS FILED AN AFFIDAVIT I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 2 FOR CONDONATION OF DELAY B Y STATING THAT THE RECORDS OF THE CASES INADVERTENTLY GOT MIXED UP WITH OTHER FILES AND THEREFORE COULD NOT FILE THE APPEALS WITHIN TIME. T HE LD. DR , CITING THE REASONS AS STATED BY THE ASSESSING OFFICER, REQUESTED FOR CONDONING THE DELAY AND TO ADMIT THE APPEAL S FOR HEARING. THE LD. COUNSEL FOR THE ASSESSEE DID NOT OBJECT TO THE SUBMISSIONS OF THE LD. DR AND THUS , WE CONDONE THE DELAY OF THREE DAYS IN FILING THE APPEAL S AND ADMIT THE APPEAL S FOR HEARING. 3 . THE FIRST COMMON GROUND RAISED BY THE REVENUE I N THE ASSESSMENT YEARS 1990 - 91, 1991 - 92, 1992 - 93, 1996 - 97, 2006 - 07, 2007 - 08, 2 009 - 10, 2010 - 11 AND 2011 - 12 IS THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO GRANT INTEREST UNDER SECTION 244A OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. 4 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A NATIONALIZED BANK, THE ACCOUNTS OF THE ASSESSEE WERE SCRUTINIZED AND ADDITIONS MADE TO THE INCOME, WHICH WAS TAKEN IN APPEAL TO THE LD. CIT(A) & SUBSEQUENTLY TO THE ITAT, WHICH PASSED ORDERS, GIVING CERTAIN RELIEFS TO THE ASSESSEE/DIRECTIONS/ RULING TO GIVE EFFECT/ AS PER THE ACT. HOWEVER, WHILE GIVING EFFECT TO SUCH ORDERS, THE RESPECTIVE ASSESSING OFFICERS HAVE WRONGLY LEVIED INTEREST UNDER SECTION 220(2) OF THE ACT, RESTRICTING THE CLAIM OF INTERE ST UNDER SECTION 244A OF THE ACT, DENIED DEPRECI A TION & CLAIM UNDER SECTION 36(1 ) (VIII) OF THE ACT , I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 3 THEREBY THE ASSESSEE PREFERRED THESE APPEALS AGAINST SUCH ORDERS OF THE ASSESSING OFFICERS. 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL FOR ALL THE RELE VANT ASSESSMENT YEARS UNDER CONSIDERATION WITH REGARD RESTRICTING THE CLAIM OF INTEREST UNDER SECTION 244A OF THE ACT. AFTER CONSIDERING THE WRITTEN SUBMISSIONS, INCLUDING CASE LAWS ETC., IN ADDITION TO AND IN SUPPORT OF THE SELF - EXPLANATORY STATEMENT OF F ACTS , THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO REWORK THE CALCULATION OF INTEREST UNDER SECTION 224A OF THE ACT NOT ONLY ON THE EXCESS TAX PAID COMPONENT BUT ALSO ON INTEREST THEREON, AFTER PROPER VERIFICATION OF THE DATE(S) OF PAYMENT OF TAXES BY THE ASSESSEE. 6. ON BEING AGGRIEVED, THE REVENUE IS IN APPEAL FOR ALL THE RELEVANT ASSESSMENT YEARS UNDER CONSIDERATION. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSE SSING OFFICER, WHILE ORDERS GIVING EFFECT , THE RESPECTIVE A SSESSING O FFICERS HAVE COMPUTED INTEREST UNDER SECTION 244A OF THE ACT ONLY IN RESPECT OF REFUND DUE ON THE EXCESS TAX PAID COMPONENT AND NOT ON THE TOTAL AMOUNT DUE OF REFUND ON THE GROUND THAT TH E BALANCE PORTION OF REFUND PERTAINED TO INTEREST UNDER SECTION 244A OF THE ACT AND THEREFORE INTEREST THEREON CANNOT BE PAID ON INTEREST. ON APPEAL, THE ASSESSEE HAS SUBMITTED BEFORE THE LD. CIT(A) AS UNDER: I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 4 'THE AO HAD NOT GRANTED INTEREST FOR THE MONTH OF PAYMENT OF TAX OR GRANTING OF REFUND. THE AO HAD ADJUSTED PART REFUND GRANTED FIRST AGAINST THE TAX REFUND DUE AS AGAINST ADJUSTING THE SAME FIRST AGAINST THE INTEREST REFUND DUE. ON THE FIRST ISSUE THE APPELLANT SUBMITS THAT AS PER THE SPECIFIC PROVIS IONS OF RULE 119A, WHERE INTEREST IS CALCULATED FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD, FRACTION OF A MONTH SHOULD BE DEEMED TO BE A FULL MONTH AND INTEREST SHOULD BE ACCORDINGLY CALCULATED. ON THE SECOND ISSUE THE APPELLANT SUBMITS THA T AO SHOULD HAVE FIRST ADJUSTED THE PART REFUND GRANTED AGAINST THE INTEREST REFUND AND THE BALANCE TOWARDS THE TAX REFUND AND GRANTED FURTHER REFUND ON THE BALANCE TAX REFUND SINCE WHERE THERE IS A TAX DUE AND A PART OF THE TAX IS PAID BY THE APPELLANT, H IS METHOD IS FOLLOWED BY THE AO, WHERE PART REFUND IS GRANTED, THE SAME IS ADJUSTED AGAINST THE TAX REFUND DUE LEAVING THE INTEREST ASIDE ON WHICH NO FURTHER INTEREST IS PAID ON THE GROUND THAT IT WOULD AMOUNT TO PAYMENT OF INTEREST ON INTEREST. THE APPELL ANT SUBMITS THAT THE AO SHOULD GIVE THE SAME TREATMENT AS THAT OF TAX DUE WHEN COMPUTING INTEREST FOR THE REFUND ALSO. THIS VIEW IS SUPPORTED BY THE DECISION OF ITAT MUMBAI IN THE CASE OF UNION BANK OF INDIA (ITA NO.571, 574/MUM/2013)'. 7.1 AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED THAT T HE HON'BLE SUPREME COURT IN THE CASE OF CIT V. HEG [189 TAXMAN 335] (SC) HAS HELD T HAT THE INTEREST COMPONENT WOULD PARTAKE THE CHARACTER OF AMOUNT DUE U NDER SECTION 244A AND THEREFORE INTEREST NEEDS TO BE PAID ON IT TOO. ON GOING THROUGH THE HON'BLE SUPREME COURT'S ORDER SUPRA, THE LD. CIT(A) WAS OF THE VIEW THAT THE REQUEST OF THE ASSESSEE IS TO BE ACCEDED TO AND ACCORDINGLY, DIRECTED THE ASSESSING OFFICER TO REWORK INTEREST U NDER SEC TION 244A OF THE ACT NOT ONLY IN RESPECT OF REFUND DUE ON THE EXCESS TAX PAID COMPONENT BUT ALSO INTEREST THEREON CONSTITUTING THE 'AMOUNT DUE' IN TERMS OF S EC TION 244A(1) OF THE ACT . HENCE , THE LD. CIT(A) HAS ALLOWED THIS GROUND OF APPEAL FOR ALL THE YEAR S UNDER CONSIDERATION. I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 5 BEFORE US, THE LD. DR HAS SUBMITTED THAT THERE WAS NO PROVISION UNDER THE STATUTE TO GIVE INTEREST ON INTEREST AND THEREFORE PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED. BY RELYING ON THE DECISION IN THE CASE OF UNION BANK OF INDIA V. ACIT [2016] 72 TAXMANN.COM 348 (MUMBAI TRIB), THE LD. COUNSEL FOR THE ASSESSEE HAS VEHEMENTLY ARGUED THAT WHILE GRANTING REFUND IN PURSUANCE TO APPEAL EFFECT ORDER, THE AMOUNT OF REFUND GRANTED EARLIER SHOULD BE ADJUSTED FIRST AGAINST I NTEREST COMPONENT OF EARLIER REFUND AND THEREAFTER BALANCE AMOUNT SHOULD BE ADJUSTED AGAINST PRINCIPAL COMPONENT OF TAX IN REFUND GRANTED EARLIER. THUS, HE ARGUED THAT THE ASSESSEE WOULD BE ENTITLED TO GET INTEREST UNDER SECTION 244A OF THE ACT. ADMITTEDLY , UNDER SECTION 244A OF THE ACT, ADJUSTMENT OF INTEREST COMPONENT FOR COMPUTATION HAS NOT BEEN SPECIFICALLY MENTIONED. THEREFORE, FOR THE PURPOSE OF ADJUSTMENT FOR REFUND OF TAXES, ESPECIALLY WHEN NO CONTRARY PROVISION HAS BEEN PROVIDED, THE METHODOLOGY AS PROVIDED UNDER SECTION 140A SHOULD BE ADOPTED WHILE MAKING ADJUSTMENT FOR REFUND OF TAXES UNDER SECTION 244A OF THE ACT . WE HAVE ALSO PERUSED THE CASE LAW RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE CASE OF UNION BANK OF INDIA V. ACIT, WHEREIN, T HE MUMBAI BENCHES OF THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 3.4 WE HAVE GONE THROUGH THE FACTS OF THIS CASE AND SUBMISSIONS MADE BY BOTH SIDES, PROVISIONS OF LAW AS WELL AS JUDGMENTS PLACED BEFORE US. IT IS NOTED THAT THE ONLY ISSUE TO BE DECIDED B Y US IS THAT WHILE GRANTING THE REFUND IN PURSUANCE TO THE APPEAL EFFECT ORDER, WHETHER THE AMOUNT OF REFUND GRANTED EARLIER SHOULD BE ADJUSTED FIRST AGAINST THE I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 6 INTEREST COMPONENT OF THE EARLIER REFUND AND THEREAFTER THE BALANCE AMOUNT SHOULD BE ADJUSTED AGAINST THE PRINCIPAL COMPONENT OF TAX IN THE REFUND GRANTED EARLIER ORDER OR VICE - VERSA AS HAS BEEN DONE BY THE AO. IT IS NOTED THAT THIS ISSUE IS NOT COMING FOR THE FIRST TIME BEFORE THE TRIBUNAL AS THE SAME HAS ARISEN FOR A.YS. 1988 - 89, 2001 - 02 & 2005 - 0 6. COPIES OF THE ORDERS WERE PLACED BEFORE US AND IT WAS CONTENDED BY THE LD. COUNSEL THAT THE TRIBUNAL HAD ALREADY DECIDED THIS ISSUE IN FAVOUR OF THE TRIBUNAL THEREFORE, BEFORE PROCEEDING FURTHER WE FIND IT APPROPRIATE TO FIRST REPRODUCE AND DISCUSS THE REASONING GIVEN BY THE TRIBUNAL IN EARLIER YEARS. THE RELEVANT PART OF ORDER DATED 23.06.2014 IS REPRODUCED HEREUNDER FOR THE SAKE OF READY REFERENCE: '4. UNDISPUTEDLY FOR A.Y. 1988 - 89 THE ASSESSEE IS ENTITLED TO REFUND OF RS. 14.07 CRORES AS PER ASSESSM ENT ORDER AND INTEREST PAYABLE THEREON WORKS OUT TO RS. 1.58 CRORES; THUS TOTAL REFUND DUE IS RS. 15.65 CRORES. THE ASSESSING OFFICER GRANTED REFUND OF RS. 12.03 CRORES. THE DISPUTE BETWEEN THE ASSESSING OFFICER AND THE ASSESSEE IS WITH REGARD TO ADJUSTMEN T OF REFUND; ACCORDING TO THE ASSESSEE REFUND SHOULD FIRST BE ADJUSTED AGAINST INTEREST PAYABLE AND ONLY THE BALANCE AMOUNT SHALL BE ADJUSTED AGAINST TAX REFUNDABLE AND IN THIS PROCESS THE BALANCE REFUND DUE WOULD WORK OUT TO RS. 3,52,28.442/ - ON WHICH THE ASSESSEE IS ENTITLED TO INTEREST U/S. 244A OF THE ACT WHEREAS THE ASSESSING OFFICER CALCULATED THE BALANCE REFUND CLUE AT RS. 2,03,99,541/ - (TAX COMPONENT) AND RS. 1,58,28,901/ - (INTEREST COMPONENT). REASON FOR SUCH CALCULATION WAS THAT ACCORDING TO THE ASS ESSING OFFICER NO INTEREST IS PAYABLE ON INTEREST DUE IN WHICH EVENT, EVEN IF THERE IS SUBSTANTIAL DELAY IN INTEREST PAYABLE, THE ASSESSEE CAN BE MADE TO WAIT UNENDINGLY WITHOUT PAYMENT OF INTEREST. THOUGH, BEFORE THE ASSESSING OFFICER AS WELL LEARNED CIT (A), THE ASSESSEE'S CLAIM OF INTEREST U/S. 244A IS NOT PROPERLY FOCUSED BUT SUM AND SUBSTANCE OF THE ASSESSEE'S CASE BEFORE US IS THAT IN THE EVENT OF ADJUSTMENT OF REFUND AGAINST INTEREST DUE TO THE ASSESSEE TAX REFUND DUE SHALL WORK OUT TO RS. 3.62 CRORE S ON WHICH THE ASSESSEE WOULD BE ENTITLED TO GET INTEREST U/S. 244A OF THE ACT. IN THIS REGARD THE ASSESSEE RELIED UPON THE ORDER OF HON'BLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANISATION V. CIT ( 361 ITR 646 ) WHEREIN THE COURT OBSERVED THAT UNDER EXPLANATION TO SECTION 140A(1) OF THE ACT, WHEN AN ASSESSEE IS DUTY BOUND TO PAY THE OUTSTANDING TAX, AMOUNT PAID BY THE ASSESSE E SHALL FIRST BE ADJUSTED AGAINST INTEREST PAYABLE AND THE BALANCE SHALL BE ADJUSTED AGAINST TAX PAYABLE, THE SAME PROCEDURE NEEDS TO BE FOLLOWED IN RESPECT OF REFUND DUE TO THE I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 7 ASSESSEE I.E., THE AMOUNT SHALL FIRST BE ADJUSTED TOWARDS INTEREST PAYABLE AND BALANCE, IF ANY, SHALL BE ADJUSTED TOWARDS LAX PAYABLE (IN THE INSTANT CASE TAX REFUNDABLE TO THE ASSESSEE). 5. LEARNED COUNSEL, APPEARING ON BEHALF OF THE ASSESSEE, PLEADED ACCORDINGLY. ON THE OTHER HAND LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE ASSESSEE IS NOT ENTITLED TO INTEREST ON INTEREST. HOWEVER WITH REGARD TO THE PLEA OF THE ASSESSEE THAT II DOES NOT AMOUNT TO PAYMENT OF INTEREST ON INTEREST BUT ONLY ADJUSTMENT OF THE REFUND FROM THE REVENUE AGAINST INTEREST COMPONENT FIRST AND THE REAFTER AGAINST TAX COMPONENT, IN WHICH EVENT U/S. 244A ASSESSEE IS ENTITLED TO I NTEREST ON THE TAX COMPONENT, LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT PLACE ANY DECISION CONTRARY TO THE DECISION OF HON'BLE DELHI HIGH COURT CITED BY LEARNED COUNSEL FO R THE ASSESSEE. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. AS RIGHTLY POINTED OUT BY THE ASSESSEE HON'BLE DELHI HIGH COURT RIGHTLY EXPLAINED THAT THE AMOUNT REFUNDED BY THE REVENUE HAS TO BE ADJUSTED TOWARDS INTEREST PAYABLE TO THE ASSESSEE AND THE BALANCE, IF ANY, SHALL BE ADJUSTED TOWARDS TAX. ON THIS PRINCIPLE THERE IS NO CONTRARY DECISION PLACED BEFORE US, WE THEREFORE AGREE, WITH THE PLEA OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER ACCORDINGLY.' 3.5 FROM THE PERUSAL OF THE ABOVE, IT IS NOTED BY US THAT THE TRIBUNAL HAS RELIED UPON THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANISATION (SUPRA), WHEREIN IT WAS INTER - ALIA HELD THAT IN A SITUATION WHERE ONLY PART AMOUNT IS REFUNDED BY THE DEPARTMENT, THEN PAYMENT OF INTEREST ON THE BALANCE AMOUNT DUE FROM THE DEPARTMENT TO THE ASSESSEE, ON A PARTICULAR DATE, DOES NOT AMOUNT TO PAYMENT OF INTEREST ON INTEREST. THEIR LORDSHIPS, TAKING SUPPORT FROM THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT V. HEG LTD. [2010] 324 ITR 331/189 TAXMAN 335 , OBSERVED AS UNDER: '14. MATTER WAS TAKEN BY THE REVENUE BEFORE THE SUPREME COURT IN THE C ASE OF HEG LIMITED AND THE SLP WAS GRANTED AND CIVIL APPEAL WAS REGISTERED. THE SUPREME COURT THEREUPON ANSWERED THE QUESTION AGAINST THE REVENUE IN THE FOLLOWING WORDS: - I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 8 THEREFORE, THIS IS NOT A CASE WHERE THE ASSESSEE IS CLAIMING COMPOUND INTEREST OR IN TEREST ON INTEREST AS IS SOUGHT TO BE MADE OUT IN THE CIVIL APPEALS FILED BY THE DEPARTMENT. THE NEXT QUESTION WHICH WE ARE REQUIRED TO ANSWER IS - WHAT IS THE MEANING OF THE WORDS 'REFUND OF ANY AMOUNT BECOMES DUE TO THE ASSESSEE' IN SECTION 244A? IN THE PRESENT CASE, AS STATED ABOVE, THERE ARE TWO COMPONENTS OF THE TAX PAID 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 WORD S '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 BE COMES 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 DE CEMBER 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 INCO RRECT 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 2 44A ON 31ST MARCH, 2013, THEN NO FURTHER INTEREST IS PAYABLE. I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 9 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 ENTITL ED 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 CO NTENDED 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. 3.7 FURTHER, IT WAS ALSO HELD BY HON'BLE HIGH COURT THAT THE DEPART MENT OUGHT TO FOLLOW THE SAME PROCEDURE AND RULES WHILE COLLECTING TAX AND WHILE ISSUED REFUNDS. WE HAVE GONE THROUGH THE PROVISIONS OF SECTION 140A(1); EXPLANATION TO THE AFORESAID SECTION PROVIDES AS UNDER: 'EXPLANATION - WHERE THE AMOUNT PAID BY THE AS SESSEE UNDER THIS SUB - SECTION FALLS SHORT OF THE AGGREGATE OF THE TAX AND INTEREST AS AFORESAID, THE AMOUNT SO PAID SHALL FIRST BE ADJUSTED TOWARDS THE INTEREST PAYABLE AS AFORESAID AND THE BALANCE, IF ANY, SHALL BE ADJUSTED TOWARDS THE TAX PAYABLE.' 3.8 THUS, FROM THE PERUSAL OF THE ABOVE, IT IS CLEAR THAT WHERE THE AMOUNT OF TAX DEMANDED IS PAID BY THE ASSESSEE THEN IT SHALL FIRST BE I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 10 ADJUSTED TOWARDS INTEREST PAYABLE AND BALANCE IF ANY WHATEVER TAX PAYABLE. NOW, IF WE GO THROUGH SECTION 244A, WE FIND TH AT NO SPECIFIC PROVISION HAS BEEN BROUGHT ON THE STATUTE WITH RESPECT TO ADJUSTMENT OF REFUND ISSUED EARLIER FOR COMPUTING THE AMOUNT OF INTEREST PAYABLE BY THE REVENUE TO THE ASSESSEE ON THE AMOUNT OF REFUND DUE TO THE ASSESSEE. THUS, THE LAW IS SILENT ON THIS ISSUE. UNDER THESE CIRCUMSTANCES, FAIRNESS AND JUSTICE REMANDS THAT SAME PRINCIPLE SHOULD BE APPLIED WHILE GRANTING THE REFUND AS HAS BEEN APPLIED WHILE COLLECTING AMOUNT OF TAX. THE REVENUE IS NOT EXPECTED TO FOLLOW DOUBLE STANDARDS WHILE DEALING WI TH THE TAX PAYERS. THE FUNDAMENTAL PRINCIPLE OF FISCAL LEGISLATION IN ANY CIVILIZED SOCIETY SHOULD BE THAT THE STATE SHOULD TREAT ITS CITIZENS (I.E. TAX PAYERS IN THIS CASE) WITH THE SAME RESPECT, HONESTY AND FAIRNESS AS IT EXPECTS FROM ITS CITIZENS. IT IS FURTHER NOTED BY US THAT HON'BLE DELHI HIGH COURT HAS ALREADY DECIDED THIS ISSUE IN CLEAR WORDS WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSEE'S OWN CASE IN THE EARLIER YEARS. IT IS FURTHER NOTED BY US THAT ASSESSEE IS NOT ASKING FOR PAYMENT FOR INTE REST ON INTEREST. IT IS SIMPLY REQUESTING FOR PROPER METHOD OF ADJUSTMENT OF REFUND AND FOR FOLLOWING THE SAME METHOD WHICH WAS FOLLOWED BY THE DEPARTMENT WHILE MAKING COLLECTION OF TAXES. UNDER THESE CIRCUMSTANCES, WE FIND THAT JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF GUJARAT FLUORO CHEMICALS (SUPRA) IS NOT APPLICABLE ON THE FACTS OF THE CASE BEFORE US AND THUS LD. CIT (A) COMMITTED AN ERROR IN NOT FOLLOWING THE DECISIONS OF THE TRIBUNAL OF EARLIER YEARS IN ASSESSEE'S OWN CASE AS WELL AS JUDGMENT O F HON'BLE HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION ORGANISATION (SUPRA). 3.9 BEFORE PARTING WITH, WE ARE REMINDED OF A RECENT JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA V. TATA CHEMICALS LTD. [2014] 363 ITR 658/822 TAXMAN 225/43 TAXMANN.COM 240 WHEREIN HON'BLE SUPREME COURT HAS DISCUSSED AT LENGTH ABOUT MORAL AND LEGAL OBLIGATION OF THE DEPARTMENT TO REFUND THE A MOUNT OF TAX COLLECTED FROM THE TAX PAYERS WHICH WAS MORE THAN THE AMOUNT ACTUALLY DUE AS PER LAW, ALONG WITH INTEREST. SOME OF THE USEFUL OBSERVATIONS ARE REPRODUCED HEREUNDER FOR THE SAKE OF BETTER CLARITY IN DECIDING THE ISSUE BEFORE US: '37. A 'TAX R EFUND' IS A REFUND OF TAXES WHEN THE TAX LIABILITY IS LESS THAN THE TAX PAID. AS PER THE OLD SECTION AN ASSESSEE WAS ENTITLED FOR PAYMENT OF INTEREST ON THE AMOUNT OF TAXES REFUNDED PURSUANT TO AN ORDER PASSED UNDER THE ACT, INCLUDING THE ORDER PASSED IN A N APPEAL. IN THE PRESENT FACT SCENARIO, THE DEDUCTOR/ASSESSEE HAD PAID TAXES PURSUANT TO A SPECIAL ORDER PASSED BY THE ASSESSING OFFICER/INCOME TAX OFFICER. IN THE I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 11 APPEAL FILED AGAINST THE SAID ORDER THE ASSESSEE HAS SUCCEEDED AND A DIRECTION IS ISSUED BY THE APPELLATE AUTHORITY TO REFUND THE TAX PAID. THE AMOUNT PAID BY THE RESIDENT/DEDUCTOR WAS RETAINED BY THE GOVERNMENT TILL A DIRECTION WAS ISSUED BY THE APPELLATE AUTHORITY TO 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 REMAINI NG 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 PAYAB LE 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 H AS 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 STAT UTORY 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 MONIE S. 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 THA T 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 I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 12 PHRASE WHICH MEANS 'WHAT IS JUST AND FAIR' OR 'ACCORDING TO EQUITY AND GOOD CONSCIENCE'. SOMETHING TO BE DECIDED EX AEQU O 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 BEFOR E 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 PROPRIETARY 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 INTER EST 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. 7.2 WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE, BY FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT V. HEG LTD. [2010] 189 TAXMAN 335, THE LD. CIT(A) HAS HELD THAT THE INTEREST COMPONENT WILL PARTAKE THE CHARACTER OF THE AMOUNT DUE UNDER SECTION 244A OF THE ACT AND THEREFORE NEEDS TO BE PAID ON IT TOO. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION. I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 13 8. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 1997 - 98 IS THAT THE LD. CIT(A) HAS ERRED IN ALLOWING A RELIEF OF .30,05,41,932/ - . 8.1 DURING THE COURSE OF ORDER GIVING EFFECT TO THE ORDER OF THE LD. CIT(A) DATED 20.03.2008, THE ASSESSING OFFICER WAS DIRECTED TO DECIDE THE ISSUE WITH REGARD TO DEDUCTION IN RESPECT OF TRANSLATION DIFFERENCE OF .30,05,41,932/ - AS PER LAW. ACCORDINGLY, THE ASSESSEE WAS ASKED TO PRODUCE RELEVANT DETAILS. IN RESPONSE THERETO, THE ASSESSEE HAS FILED A DETAILED SUBMISSIONS, WHEREIN THE ASSESSEE HAS STATED THAT D URING THE ASSESSMENT YEAR 1995 - 96 THE ASSESSEE HAD CREDITED ITS PROFIT AND LOSS ACCOUNT WITH A SUM OF .47,05,41,932/ - REPRESENTING THE TRANSLATION DIFFERENCE ARISING OUT OF RESTATEMENT OF ASSETS AND LIABILITIES OF ITS FOREIGN BRANCHES. THE SAID SUM THOUGH CLAIMED AS A DEDUCTION BY THE ASSESSEE IN THE ASSESSMENT YEAR 1995 - 96 WAS TAXED BY THE DEPARTMENT AND THE SAID ADDITION WAS CONFIRMED BY CIT (A). OUT OF THE ABOVE AMOUNT, THE ASSESSEE, BASED ON D IRECTIONS OF RESERVE BANK OF INDIA REVERSED .17,00,000/ - DURING ASSESSMENT YEAR 1996 - 97 AND .30,05,41,932 DURING ASSESSMENT YEAR 1997 - 98. THE SAID REVERSAL DURING 1997 - 98 WAS NOT ALLOWED BY THE ASSESSING OFFICER. ON APPEAL THE LD. CIT (A) DIRECTED THE ASSESSING OFFICER TO CONSIDER TAKING UP THIS I SSUE IF THE CLAIM IS MADE BY THE ASSESSEE. THE ASSESSING OFFICER, WHILE GIVING EFFECT TO THE DIRECTIONS OF THE CIT (A), HAD NOT I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 14 DECIDED ON THE ISSUE. ON AN APPEAL FILED BY THE ASSESSEE TO THE LD. CIT (A), THE LD. CIT(A) ONCE AGAIN HAD DIRECTED THE ASSESSIN G OFFICER TO EXAMINE THE ISSUE. HOWEVER SUBSEQUENTLY, THE CIT(A) VIDE ORDER IN ITA NO. 79/09 - 10/LTU(A) DATED 28.08.2010 CLEARLY HELD THAT IF THE AMOUNT HAS BEEN TAXED IN THE EARLIER ASSESSMENT YEAR, THE REVERSAL HAS TO BE ALLOWED AS DEDUCTION. HOWEVER, WHI LE PASSING ORDER GIVING EFFECT TO THE ORDER OF THE LD. CIT(A) DATED 07.02.2013, THE ASSESSING OFFICER HAS NOT ALLOWED THE DEDUCTION DESPITE SPECIFIC DIRECTIONS OF THE LD. CIT(A) VIDE HIS ORDER DATED 28.08.2010. 8.2 THE ASSESSEE CARRIED THE MATTER IN APPE AL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS HELD AS UNDER: NOW COMING TO THE GROUND OF REVERSAL OF TRANSLATION DIFFERENCE FOR THE AY 1997 - 98, THE AR SUBMITTED THAT THE AO HAD DISALLOWED THE CLAIM ON THE BASIS THAT THE APPELLANT HAD NOT DEBITED THE LOSS TO P&L A/C., AND THAT SINCE THE APPELLANT WHILE MAKING PROVISION HAD DEBITED THE SAME TO P&L A/C. AND WHEN WRITING OFF THE SAME, IT COULD NOT AGAIN BE DEBITED TO P&L A/C., BUT ONLY TO THE PROVISION ACCOUNT. I HAVE CONSIDERED THE SUBMISSIONS OF THE AR AND AM IN AGREEMENT WITH HIS CONTENTIONS. THE AO IS THEREFORE DIRECTED TO ASCERTAIN AS TO WHETHER THE AFORESAID AMOUNT HAD BEEN TAXED IN THE EARLIER YEAR AND GIVE CREDIT FOR THE SAME IN CASE IT WAS TAXED IN THE EARLIER YEAR AFTER VERIFICATION AND RECONCILIATION OF THE SAME. HENCE THIS GROUND IS ALSO ALLOWED FOR STATISTICAL PURPOSES. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8.3 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECOR D AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. AFTER CONSIDERING THE I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 15 DETAILED SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AS DETAILED IN PARA 8.1, THE ASSESSING OFFICER HAS OBSERVED THAT T HE ASSESSEE BANK HAD OFFERED A SUM OF .47,05,41,973/ - AS A PROFIT ON EXCHANGE CREDITED TO THE PROVISIONS AND CONTINGENCIES FOR THE ASST. YEAR 95 - 96. HOWEVER, DURING THE SUBSEQUENT TWO ASST. YEARS THE AMOUNT HAS BEEN REVERSED AND INCOME OFFER ED HAS BEEN REDUCED FOR THE ASSESSMENT YEARS 96 - 97 & 97 - 98 AS UNDER: - ASST. YEAR AMOUNT 1996 - 97 .17,00,00,000 1997 - 98 .30,05,41,932 TOTAL .47,05,41,932 THE ASSESSEE BANK HAS CONTENDED BEFORE THE ASSESSING OFFICER THAT THOUGH A SUM OF .47,05,41,973/ - WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT FOR THE ASST. YEAR 95 - 96 AND OFFERED TO TAXATION, BUT A NOTE WAS APPENDED TO THE RETURN OF INCOME TO THE EFFECT THAT THE SAME SHOULD NOT BE TAXED. HOWEVER, THE A SSESSING O FFICER HAS BROUGHT TO TAX THE SAID AMOUNT. IN THIS CONTEXT IT WAS BE STATED THAT IT IS T HE ASSESSEE WHICH HAD OFFERED A SUM OF .47,05,41,973/ - TO THE TOTAL INCOME FOR THE ASSESSMENT YEAR 95 - 96. THE A SSESSING O FFICER AGREED WITH THE ACTION OF THE ASSESSEE BANK IN SO FAR AS THE OFFER OF INCOME FOR TAXATION WAS CONCERNED BY CREDIT TO THE PROFIT AND LOSS ACCOUNT, BUT DID NOT AGREE WI TH THE NOTE APPENDED TO THE RETURN WHEREBY THE DEDUCTION WAS CLAIMED ON THE GROUND THAT E VEN IF THERE WA S A DISPUTE IN REGARD TO THE TAXABILITY OF .47,05,41,973/ - , THIS CONTROVERSY IS CONFINED TO THE ASSESSMENT YEAR 95 - 96 ONLY. THE REFORE, THE ASSESSING I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 16 OF FICER HAS HELD THAT THE TAXABILITY OR OTHERWISE OF THIS AMOUNT WILL HAVE NO BEARING IN DETERMINING THE TAXABLE AMOUNT FOR THE ASS ESSMENT YEARS 96 - 97 & 97 - 98. THEREFORE, THE CLAIM OF DEDUCTION IN THE ASS ESSMENT YEAR UNDER CONSIDERATION I . E. , 1997 - 98 CAN NOT BE MADE JUST BECAUSE THERE IS A DISPUTE IN REGARD TO THE TAXABILITY OF THE SUM OF .47,05,41 ,973/ - FOR THE ASSESSMENT YEAR 95 - 96. ACCORDINGLY , THE ASSESSING OFFICER HAS HELD THAT DEDUCTION OR ALLOWANCE CLAIMED IN THE RETURN IS PRIMA FACIE INADMISSIBLE. IN VIEW OF THE ABOVE OBSERVATIONS, THE AR OF THE ASSESSEE HAS SUBMITTED BEFORE THE L D. CIT(A) THAT THE ASSESSEE HAD NOT DEBITED THE LOSS TO PROFIT AND LOSS ACCOUNT AND THAT SINCE THE ASSESSEE WHILE MAKING PROVISION HAD DEBITED THE SAME TO THE PROFIT AND LOSS ACCOUNT AND WHEN WRITING OFF THE SAME, IT COULD NOT AGAIN BE DEBITED TO PROFIT AN D LOSS ACCOUNT, BUT ONLY TO THE PROVISION ACCOUNT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) WAS OF THE OPINION THAT THE ACTUAL FACT IS REQUIRED TO BE ASCERTAINED AS TO WHETHER THE AFORESAID AMOUNT HAD BEEN TAXED IN THE EARLIER YEAR AND GIVEN CREDIT FOR THE SAME IN CASE IT WAS TAXED IN THE EARLIER YEAR AFTER VERIFICATION AND RECONCILIATION OF THE SAME. THE OUTCOME OF THE DIRECTIONS OF THE LD. CIT(A) IS STILL PENDING BEFORE THE ASSESSING OFFICER AND THE LD. DR HAS NOT BROUGHT ON RECOR D ABOUT THE FINAL OUTCOME OF THE STATUS. THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 17 9. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE FOR THE ASSESS MENT YEAR 2000 - 01 IS THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO GRANT INTEREST UNDER SECTION 244A OF THE ACT ON TDS CERTIFICATES WHICH WERE FOUND TO BE DEFICIENT. WHILE PASSING THE ORDER UNDER SECTION 154 OF THE ACT DATED 19.04.201 3, THE ASSESSING OFFICER HAS NOT GRANTED INTEREST UNDER SECTION 244A ON THE GROUND THAT THE DELAY WAS ATTRIBUTABLE TO THE ASSESSEE. 9.1 BEFORE THE LD. CIT(A), THE AR OF THE ASSESSEE HAS STATED THAT NO PROCEEDINGS R ESULTING IN THE REFUND WERE DELAYED BY T HE APPELLANT AND THEREFORE THE P ROVISIONS OF S EC TION 244A(2) WAS NOT APPLICABLE IN ITS CASE, IN SUPPORT OF WHICH THE AR PLACED RELIANCE ON THE FOLLOWING CASE LAWS: CIT V. PUNJAB STATE CO - OP BANK [2009 TIOL 21 HC - P & H - IT] CIT V. L & T LTD. [330 ITR 34 0] ACIT V. TATA POWER CO. LTD. [2012 - TIOL - 464 - ITAT - MUM] DIT V. MITSUBISHI CORPORATION [155 TAXMAN 581 DEL] FURTHER, IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE HON BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT V. LARSEN & TOUBRO LTD. [330 ITR 340] CATEGORICALLY HELD THAT WHERE TAX WAS DEDUCTED AND DEPOSITED IN THE EXCHEQUER IN TIME, AS IT WAS IN THE CASE OF THE INSTANT ASSESSEE THAT THE SECTION 244(2) WAS NOT ATTRACTED AND INTEREST UNDER SECTION 244A COULD NOT BE DENIED TO ASSESSEE ONLY ON GRO UND THAT TDS CERTIFICATES WERE NOT FURNISHED WITH THE RETURN OF INCOME BUT DURING ASSESSMENTS, AS ERRONEOUSLY I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 18 DONE BY THE A SSESSING O FFICER . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED AS UNDER: ONGOING THROUGH THE IMPUG NED ORDER U/S.154 FOR AY 2000 - 01 AS ALSO THE SUBMISSIONS OF THE AR, AS ALSO THE RECORDS, IT WAS SEEN CLEARLY THAT THE AO HAS HIMSELF ACKNOWLEDGED THAT THE TDS CERTIFICATES WERE ENCLOSED WITH THE RETURN OF INCOME THEREFORE NOT WARRANTING ANY SUSPICION ON TH E GENUINENESS OF THE CERTIFICATES AS ALSO THEIR ISSUE BY BANKING INSTITUTIONS, INSURANCE COMPANIES AND VARIOUS UNDERTAKINGS AND FURTHER ON RANDOM CHECKS, THE RECEIPTS WERE FOUND TO BE PROPERLY ACCOUNTED IN THE BOOKS OF ACCOUNT ALSO. THEREFORE IT IS QUITE S URPRISING THAT THE AO HAS HELD IN A BALD MANNER THAT INTEREST U/S.244A WAS NOT GIVEN SINCE THE DELAY WAS ATTRIBUTABLE TO THE APPELLANT, WITHOUT STATING IN ANY COGENT MANNER AS TO WHY AND ON WHAT ACCOUNT, THE DELAY WAS ATTRIBUTABLE TO THE APPELLANT, WITHOUT . FURTHER, IT IS ONLY THE CCIT OR CIT WHO HAS THE POWER TO DECIDE THE PERIOD OF DELAY, IF ANY, AT ALL, AND THE AO ON HIS OWN VOLITION COULD NOT DECIDE THE ISSUE AS PER SEC.244A(2). THEREFORE THE AO'S ACTION IN ATTRIBUTING SUCH DELAY TO THE ASSESSEE WITHOU T SPECIFYING ANY CREDIBLE REASON FOR THE SAME, IS CLEARLY IN CONTRAVENTION OF THE PROVISIONS OF THE ACT AND HIS RESTRICTING INTEREST 244A ON THE 'AMOUNT DUE' IN TERMS OF SECTION 244A(1) ON 'THE AFORESAID SPECIOUS GROUND WAS ARBITRARY, WHIMSICAL AND THER EFORE LEGALLY UNTENABLE AND IS HEREBY DIRECTED TO BE DELETED. THIS GROUND IS ALSO THEREFORE ALLOWED. 9.2 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE PERUSED THE ORDER OF TH E ASSESSING OFFICER PASSED UNDER SECTION 154 OF THE ACT, WHEREIN, THE ASSESSING OFFICER HAS MENTIONED THAT NOTE: INTEREST U/S. 244A IS NOT GIVEN SINCE THE DELAY IS ATTRIBUTABLE TO ASSESSEE . WHEN THE ASSESSING OFFICER HAS ADMITTED IN THE RECTIFICATION ORD ER THAT THE RECEIPTS WERE FOUND TO BE PROPERLY ACCOUNTED IN THE BOOKS OF ACCOUNT, IT IS QUITE CONTRADICTORY TO GIVE A FINDING IN THE FORM OF NOTE IN THE SAID ORDER OF RECTIFICATION. MOREOVER, AS RIGHTLY POINTED OUT BY THE LD. CIT(A), THE ASSESSING OFFICE R HAS I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 19 NOT SPECIFIED ANY CREDIBLE REASON ON WHAT ACCOUNT THE DELAY WA S ATTRIBUTABLE TO THE ASSESSEE, WHICH IS CLEARLY IN CONTRAVENTION OF THE PROVISIONS OF THE ACT AND RESTRICTING THE INTEREST UNDER SECTION 244A ON THE AMOUNT DUE IN TERMS OF SECTION 244A(1) OF THE ACT CANNOT BE LEGALLY SUSTAINED. THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 10. THE NEXT GROUND RAISED IN THE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 20 11 - 12 IS THAT THE LD. CIT(A) HAS ERRED IN ALLOWING THE ENTIRE BAD DEBT CLAIMED BY THE ASSESSEE. 11. DURING THE COURSE OF HEARING, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A) HAD UPHELD THE CLAIM THAT BAD DEBTS WRITTEN OFF IN RESPECT O F NON - RURAL ADVANCES SHOULD BE ALLOWED WHICH IS IN ACCORDANCE WITH THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. (343 ITR 270) AND HENCE THE DEPARTMENT S GROUND IS NOT VALID. 1 1 .1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS CLAIMED BAD DEBT WRITTEN AT .923,36,41,783/ - . HOWEVER, THE ASSESSING OFFICER HAS ALLOWED BAD DEBTS AT .738,94,37,121/ - AND DISALLOWED .184,42,04,662/ - RELATING TO NON - RURAL ADVANCES UNDER SECTION 36(1)(VIIA) OF THE ACT. ON APPEAL, THE LD. CI T(A) HAS OBSERVED AND HELD AS UNDER: NOW COMING TO THE GROUND RELATING TO SHORT ALLOWANCE OF BAD DEBTS WRITTEN OFF OF .184,42,04,662/ - , I AM IN AGREEMENT WITH THE AR S BASIC I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 20 CONTENTION THAT THE AO HAVING DISALLOWED THE PROVISION RELATING TO NON - RURAL ADV ANCES U/S. 36(1)(VIIA) SHOULD HAVE ALLOWED THE ENTIRE BAD DEBTS WRITTEN OFF RELATING TO NON - RURAL ADVANCES KEEPING IN MIND THE RATIO OF THE JUDGEMENT IN THE CASE OF TRF LIMITED V. CIT[323 ITR 397] SC, WHICH ESSENTIALLY RULED THAT AFTER 1.4.1989 TO CLAIM DE DUCTION OF BAD DEBTS, IT WAS ENOUGH IF THE BAD DEBT WAS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE APPELLANT AS IT WAS THE CASE WITH THE INSTANT APPELLANT. THEREFORE, THIS GROUND IS ALSO ALLOWED. 1 1 . 2 WE HAVE HEARD RIVAL CONTENTIONS. ADMITTEDLY, THE ASSESSEE IS ENGAGED IN BANKING SECTOR. THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF BAD DEBTS OF NON - RURAL ADVANCES UNDER SECTION 36(1)(VIIA) OF THE ACT. BY FOLLOWING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF TRF LIMITED V. CIT (SU PRA), THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE. FROM THE ORDER OF THE LD. CIT(A), IT IS NOT CLEAR AS TO WHETHER THE ASSESSEE IS ELIGIBLE TO CLAIM BAD DEBTS OF NON - RURAL ADVANCES UNDER SECTION 36(1)(VIIA) OF THE ACT OR NOT. WITH REGARD TO THE PR OVISIONS FOR BAD AND DOUBTFUL DEBTS, THE PROVISIONS OF SECTION 36(1)(VIIA) OF THE ACT DOES NOT SPEAK ANYTHING ABOUT NON - RURAL BRANCHES. BY AND LARGE, THE INTENTION OF LEGISLATURE FOR INSERTION OF CLAUSE (VIIA) TO SECTION 36(1) OF THE ACT WAS TO ENCOURAGE R URAL ADVANCES AND TO PROVIDE FOR DEDUCTION IN THE COMPUTATION OF THE TAXABLE PROFITS OF ALL SCHEDULED COMMERCIAL BANKS IN RESPECT OF PROVISIONS MADE BY THEM FOR BAD AND DOUBTFUL DEBTS RELATING TO ADVANCES MADE BY THEIR RURAL BRANCHES. THEREFORE, THE PROVIS O IS LIMITED IN ITS APPLICATION TO BAD DEBTS ARISING OUT OF RURAL ADVANCES OF A BANK AND NOT FOR NON - RURAL ADVANCES. OVER AND ABOVE THE STATUTE, SINCE THE PROVISIONS OF SECTIONS 36(1)(VII) AND (VIIA) OF THE ACT ARE I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 21 DISTINCT AND INDEPENDENT ITEMS OF DEDUCTI ON AND OPERATE IN THEIR RESPECTIVE FIELDS, THE LD. CIT(A) DID NOT CLARIFY AS TO HOW THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION OF NON - RURAL ADVANCES. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A) HAD UPHE LD THE CLAIM THAT BAD DEBTS WRITTEN OFF IN RESPECT OF NON - RURAL ADVANCES SHOULD BE ALLOWED WHICH IS IN ACCORDANCE WITH THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK LTD. (343 ITR 270) AND HENCE THE DEPARTMENT S GROUND IS NOT VAL ID. WE HAVE PERUSED THE JUDGEMENT OF THE HON BLE SUPREME COURT AND THE CONCURRENT FINDINGS OF THE HON BLE CHIEF JUSTICE OF INDIA IN THE CASE OF CATHOLIC SYRIAN BANK V. CIT (343 ITR 270) ARE REPRODUCED AS UNDER: PER S. H. KAPADIA C. J. I . (CONCURRING) : TH E PROVISIONS OF CLAUSE (VIIA) OF SECTION 36(1) RELATING TO THE DEDUCTION ON ACCOUNT OF THE PROVISION FOR BAD AND DOUBTFUL DEBIT ( S) ARE DISTINCT AND INDEPENDENT OF THE PROVISIONS OF SECTION 36(1)(VII) RELATING TO ALLOWANCE OF THE BAD DEBT(S), IN OTHER WORDS , SCHEDULED COMMERCIAL BANKS WOULD CONTINUE TO GET THE FULL BENEFIT OF THE WRITE OFF OF THE IRRECOVERABLE DEBITS) UNDER SECTION 36(1)(VII) IN ADDITION TO THE BENEFIT OF DEDUCTION FOR THE PROVISION MADE FOR BAD AND DOUBTFUL DEBT(S) UNDER SECTION 36(1)(VIIA) . NORMALLY, A DEDUCTION FOR BAD DEBIT(S) CAN BE ALLOWED ONLY IF THE DEBT IS WRITTEN OFF IN THE BOOKS AS BAD DEBT(S), BUT IN THE CASE OF RURAL ADVANCES, A DEDUCTION WOULD BE ALLOWED EVEN IN RESPECT OF A MERE PROVISION WITHOUT INSISTING ON AN ACTUAL WRITE OF F. HOWEVER, THIS MAY RESULT IN DOUBLE ALLOWANCE IN THE SENSE THAT IN RESPECT OF THE SAME RURAL ADVANCE THE BANK MAY GET ALLOWANCE ON THE BASIS OF CLAUSE (VIIA) AND ALSO ON THE BASIS OF ACTUAL WRITE OFF UNDER CLAUSE (VII). THIS SITUATION IS TAKEN CARE OF BY THE PROVISO TO CLAUSE (VII) WHICH LIMITS THE ALLOWANCE ON THE BASIS OF THE ACTUAL WRITE OFF TO THE EXCESS, IF ANY, OF THE WRITE OFF OVER THE AMOUNT STANDING TO THE CREDIT OF THE ACCOUNT CREATED UNDER CLAUSE (VIIA). THE CBDT ITSELF HAS RECOGNIZED THE POSIT ION THAT A BANK WOULD BE ENTITLED TO BOTH THE DEDUCTIONS, ONE UNDER CLAUSE (VII) ON THE BASIS OF ACTUAL WRITE OFF AND ANOTHER, ON THE BASIS OF CLAUSE (VIIA) IN I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 22 RESPECT OF A MERE PROVISION. IT WOULD BE MEANINGLESS TO INVOKE THE PROVISO WHERE THERE IS NO THR EAT OF DOUBLE DEDUCTION. IN CASE OF RURAL ADVANCE, WHICH ARE COVERED BY THE PROVISIONS OF CLAUSE (VIIA), THERE WOULD BE NO SUCH DOUBLE DEDUCTION. THE PROVISO LIMITS ITS APPLICATION TO THE CASE OF A BANK TO WHICH CLAUSE (VIIA) APPLIES. CLAUSE (VIIA) APPLIES ONLY TO RURAL ADVANCES. THIS HAS BEEN EXPLAINED BY CIRCULARS ISSUED BY THE CBDT. THUS, THE PROVISO LIMITED IN ITS APPLICATION TO BAD DEBIT(S) ARISING OUT OF RURAL ADVANCES OF A BANK. IT FOLLOWS THAT IF THE AMOUNT OF BAD DEBIT(S) ACTUALLY WRITTEN OFF IN TH E ACCOUNT OF THE BANK REPRESENTS ONLY DEBT(S) ARISING OUT OF URBAN ADVANCES, THE ALLOWANCE THEREOF IN THE ASSESSMENT IS NOT AFFECTED, CONTROLLED OR LIMITED IN ANY WAY BY THE PROVISO TO CLAUSE (VII). 11.3 RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY TH E HON BLE SUPREME COURT IN THE CASE OF CATHOLIC SYRIAN BANK V. CIT (SUPRA), WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE CANNOT CLAIM DEDUCTION OF BAD DEBTS OF NON - RURAL BRANCHES UNDER SECTION 36(1)(VIIA) OF THE ACT. THUS, WE REVERSE THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IN I.T.A. NO. 2414/MDS/2016 FOR THE ASSESSMENT YEAR 2011 - 12 IS PARTLY ALLOWED, WHEREAS, THE APPEALS IN I.T.A. NOS. 2408 TO 2413 AND 2415 TO 2418/MDS/2016 ARE DISMISSED. ORDER PRONOUNCED ON THE 28 TH FEBRUARY , 201 7 AT CHENNAI. SD/ - SD/ - ( M. BALAGANESH ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 28 . 0 2 .201 7 VM/ - I.T.A . NO S . 2408 TO 241 8 /M/ 1 6 23 / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.