HONGKONG & SHANGHAI BANKING CORPORATIN LT, MUMBAI V. ADIT (IT)-3(1), MUMBAI

ITA 2866/MUM/2009

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5388 (ITAT-MUMBAI)
• Duration Of Justice: 13 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2002-2003
• Appeal Filed On: 04-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MADHAV KANHERE
• Section: 143(3); 244A; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI OM PRAKASH KANT, AM आयकर अपील सं/ I.T.A. No.2866/Mum/2009 (निर्धारण वर्ा / Assessment Years: 2002-03) Hongkong & Shanghai Banking Corporation Ltd India Area Management, 5 th Floor, Hongkong Bank Building, 52/60 MG Road, Fort, Mumbai-400001. बिधम/ Vs. ADIT (International Taxation)-3(1) Scindia House, 1 st Floor, N. M. Marg, Mumbai- 400038. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAACT2786P (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 15/06/2022 घोषणा की तारीख /Date of Pronouncement: 20/07/2022 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee bank against the order of the Ld. Commissioner of Income Tax (Appeals)- XXXIII, Mumbai dated 28.02.2009 for the assessment year 2002-03. 2. Ground Nos. 1 & 2 of appeal taken by the assessee relate to the charging of interest u/s 234D of the Act on the interest u/s 244A received along with excess income-tax refund issued vide intimation u/s 143(1) of the Act. 3. The facts of the case brought to our notice is that, the appellant bank filed its income tax return on 01.10.2002 wherein it claimed an income tax refund of Rs.21,41,66,422/-. Later, the appellant received income tax refund of Rs.23,15,13,902/- including interest of Rs.1,73,47,400/- under Section 244A of the Income Tax Act, 1961, (hereinafter “the Act”) on 31.03.2003, vide intimation issued u/s Assessee by: Shri Madhav Kanhere Revenue by: Smt. Neelam Shukla (DR) ITA No.2866/Mum/2009 A.Y. 2002-03 HSBC Bank 2 143(1) of the Act dated 18.02.2003. Later, the case of the assessee was subjected to scrutiny and assessment order was passed raising the demand vide order dated 31.03.2005. Thereafter, on 29.08.2005, AO adjusted income tax refund of Rs.31,59,98,076/- due to the appellant bank for AY 2004-05 against the aforesaid demand raised by the AO pursuant to the assessment order. 4. The assessee being aggrieved by the assessment order u/s 143(3) of the Act dated 31.03.2005 preferred an appeal before the Ld. CIT(A) which was partly allowed. Pursuant thereto, on 24.05.2007, the AO passed the order giving effect to the Ld. CIT(A)’s order dated 31.03.2006, wherein he determined interest u/s 234D of the Act of Rs.1,16,95,164/- on the basis that, the assessee had been granted excess income tax refund of Rs.8,99,62,795/- on 31.03.2003 viz., the difference between the income tax refund (incl. interest u/s 244A) received by the appellant on 31.03.2003 minus the income tax refund determined as due to the appellant pursuant to the order giving effect to the CIT(A)’s order. The AO acknowledged the balance income tax refund of Rs.21,43,40,117/- which was due to the assessee, upon giving effect to the Ld. CIT(A)’s order, as increased by interest u/s 244A of the Act of Rs.2,35,77,413/-, which was received by the assessee on 18.09.2007. 5. According to the assessee, the AO had wrongly computed the interest u/s 234D of the Act on the excess income tax refund of Rs.8,99,62,795/-. It was the case of the assessee that the AO ought to have computed the interest u/s 234D of the Act only on the principal ITA No.2866/Mum/2009 A.Y. 2002-03 HSBC Bank 3 amount of tax refund of Rs.7,26,15,315/- viz., difference between the principal income tax refund of Rs.21,41,66,422/- granted minus the principal income tax refund of Rs.14,15,51,107/- determined as due to the appellant pursuant to the order giving effect to the CIT(A)’s order. According to the Ld. AR, the interest u/s 234D of the Act cannot be charged on the interest component which was earlier received u/s 244A of the Act. In support of this contention, the Ld. AR filed written submissions wherein he contended that the term ‘refund’ used in Section 234D of the Act denotes the principal income-tax refund which was granted in excess to the assessee and therefore the interest ought to be calculated only on the principal sum. Per contra, the Ld. DR appearing on behalf of the Revenue supported the action of lower authorities. 6. We have heard both the parties. It is noted that this exact same issue came up for consideration before the Chennai Bench of this Tribunal in the case of Sundaram Fasteners Ltd Vs ACIT (82 taxmann.co 436) wherein this question was answered against the assessee, by holding as under: 14. The eighth and the last ground of appeal relates to the computation of interest chargeable u/s. 234D of the Act. The assessee, on the processing of it's return u/s. 143(1), was granted a refund of Rs.. 1069 lacs, including interest u/s. 244A at Rs.. 126.35 lacs. The completion of the assessment resulted in a demand, so that the refund to that extent stands withdrawn, including proportionate interest allowed u/s. 244A. The assessee's contention is that the interest u/s. 234D should not be with reference to the said interest withdrawn, and should be confined only to the tax component of the demand raised (or the excess refund). 15. We have heard both the parties, and perused the material on record. ITA No.2866/Mum/2009 A.Y. 2002-03 HSBC Bank 4 Section 234D, in its relevant part, reads as under: '234D. Interest on excess refund. — (1) Subject to the other provisions of this Act, where any refund is granted to the assessee under sub- section (1) of section 143, and— (a) no refund is due on regular assessment; or (b) the amount refunded under sub-section (1) of section 143 exceeds the amount refundable on regular assessment, the assessee shall be liable to pay simple interest at the rate of one-half per cent on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment.' The language of the section is unambiguously clear. The same refers to the amount of refund without breaking it into or defining it in terms of its' elements. The interest chargeable there-under is compensatory in character, as in fact is the interest granted u/s. 244A. The Apex Court in CIT v. H.E.G. Ltd. [2010] 324 ITR 331/189 Taxman 335 (SC) directed for grant of interest u/s. 244A for the period of delay in grant of interest u/s. 244A itself; having been not granted along with the grant of refund of tax, so that it had assumed the character of the principal. Further, the tribunal in Dy. CIT v. Tube Investment of India Ltd. [IT Appeal Nos. 2221 & 2222 (Mad.) of 2016, dated 31-1-2017] upheld the grant of interest u/s. 244A on the interest component of the demand, i.e., u/ss. 234A, 234B, etc., on its withdrawal; again, on the premise of the interest being compensatory. We, accordingly, find no merit in the assessee's claim of the interest u/s. 234D being restricted only to the tax component of the demand raised or the excess refund. We decide accordingly. 7. In view of the above decision (supra), we dismiss the Ground Nos. 1 & 2 of the assessee. ITA No.2866/Mum/2009 A.Y. 2002-03 HSBC Bank 5 8. The third and additional ground taken by the assessee relates to claim of interest on interest u/s 244A of the act on the delayed issuance of refund. For this, the assessee has relied on the Hon’ble Supreme Court in the cases of Sandvik Asia Ltd Vs CIT (280 ITR 643) and CIT Vs H.E.G. Ltd (324 ITR 331). Per contra, the Ld. DR has relied on the judgment of the Hon’ble Supreme Court in the case of CIT Vs Gujarat Fluoro Chemicals (358 ITR 291). 9. Heard both the parties. It is noted that the Hon’ble Supreme Court in the case of Sandvik Asia Ltd (supra) dealt with a case where the taxpayer received certain refunds from the Income-tax Department without interest. The interest was later released to the assessee after a substantial delay of 12-17 years. The Hon’ble Apex Court accordingly allowed interest for inordinate delay in payment of interest on refund to the assessee. This judgment, which was rendered by the Division Bench of the Hon’ble Supreme Court, is noted to been later re- considered by the 3-judge Bench of the Hon’ble Supreme Court in CIT v. Gujarat Fluoro Chemicals (supra) wherein the Hon’ble Court observed that the decision of Sandvik Asia Ltd (supra) involved peculiar set of facts where refunds (including statutory interest) was released after an inordinate period of delay, thus causing great prejudice to the assessee. The Hon’ble Court thus held that, what was granted in Sandvik Asia Ltd (supra) was a mere compensation in the form of interest and the same cannot be construed as interest on interest. Based on this distinction, the Hon’ble Supreme Court in ITA No.2866/Mum/2009 A.Y. 2002-03 HSBC Bank 6 Gujarat Fluoro Chemicals (supra) held that Section 244A envisages only statutory interest and not interest on such statutory interest. 10. Following the decision of the Hon’ble Supreme Court in Gujarat Fluoro Chemicals (supra), these grounds of the assessee are also dismissed. 11. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on this 20/07/2022. Sd/- Sd/- (OM PRAKASH KANT) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 20/07/2022. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai