ACIT 1(3), MUMBAI V. SYNGENTA INDIA LTD, MUMBAI

ITA 3366/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48600 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 25-04-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 21-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: V A M ITTAL; KAMDIN BAHROZE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SHRI VIJAY PAL RA O, JM I.T.A.NO. 3366/MUM/2009 ASSESSMENT YEARS: 2001-02 THE ASST. COMMISSIONER OF INCOME- TAX-1(3), ROOM NO.540/564, 5 TH FLOOR, AAAYAKAR BHAVAN, M.K. ROAD, MARINE LINES, MUMBAI 400 020. VS. M/S. SYNGENTA INDIA LTD., 14, ROYAL INSURANCE BUILDING, 3 RD FLOOR,J. TATA ROAD, CHURCHGATE, MUMBAI 400 020. PAN: AAECS 9424 P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D. SONGATE RESPONDENT BY : SHRI KAMDIN BAHROZE AND SHRI V.A. M ITTAL O R D E R PER P.M. JAGTAP, AM: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XXI, MUMBAI, DATED 16.02.2009 FOR THE ASSESSMENT YEAR 2001-02, WHEREBY HE DIRECTED THE AS SESSING OFFICER TO ALLOW INTEREST ON INTEREST TO THE ASSESSEE. 2. IN THIS CASE, REFUND BECAME DUE TO THE ASSESSEE AS A RESULT OF APPELLATE ORDER PASSED BY THE LEARNED CIT(A)-XXI, MUMBAI, ON 06.08.2007. PART OF THE SAID REFUND WAS ON ACCOUNT OF INTEREST. ALTHOUGH, THE A SSESSING OFFICER BY AN ORDER DATED 06.09.2007 GAVE EFFECT TO THE SAID ORDER OF T HE LEARNED CIT(A), HE DID NOT GRANT ANY REFUND TO THE ASSESSEE. AN APPEAL, THEREF ORE, WAS FILED BY THE ASSESSEE AGAINST THE SAID ORDER OF THE ASSESSING OFFICER GIV ING EFFECT TO THE APPELLATE ORDER OF THE LEARNED CIT(A) DATED 6.8.2007, CLAIMING THEREIN , INTER ALIA, INTEREST ON THAT PART OF REFUND ON ACCOUNT OF INTEREST WHICH HAD BECOME D UE AS A RESULT THE APPELLATE ORDER DATED 6.8.2007. IN SUPPORT OF THE SAID CLAIM FOR INTEREST ON INTEREST, RELIANCE WAS PLACED ON BEHALF OF THE ASSESSEE ON THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF SANDVIK ASIA LTD. (280 ITR 643)(SC), WHEREIN IT WAS HELD THAT THE GOVERNMENT IS LIABLE TO PAY INTEREST, AT THE RATE A PPLICABLE TO THE EXCESS AMOUNT REFUNDED TO THE ASSESSEE, ON THE INTEREST AMOUNT W HICH BECOMES DUE UNDER SECTION ITA NO.3366/MUM/2009 SYNGENTA INDIA LTD.. 2 214(1). IT WAS ALSO HELD THAT ONCE THE INTEREST BE COMES DUE, IT TAKES THE SAME COLOUR AS THE EXCESS AMOUNT OF TAX WHICH IS REFUNDA BLE ON REGULAR ASSESSMENT. FOLLOWING THE SAID DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SANDVIK ASIA LTD. (SUPRA), THE LEARNED CIT(A) DIRECTED THE ASSES SING OFFICER TO ALLOW INTEREST ON DELAYED PAYMENT OF THAT PART OF REFUND WHICH WAS O N ACCOUNT OF INTEREST AND WHICH HAD BECOME DUE TO THE ASSESSEE. AGGRIEVED BY THE O RDER OF THE LEARNED CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUN AL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE ONLY CONTENTION RA ISED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BEFORE US IS THAT THERE IS NO PROVIS ION IN THE INCOME-TAX ACT 1961 FOR PAYMENT OF INTEREST ON INTEREST. IT IS OBSERVED TH AT A SIMILAR STAND WAS SOUGHT TO BE TAKEN ON BEHALF OF THE REVENUE BEFORE THE HONBLE S UPREME COURT IN THE CASE OF SANDVIK ASIA LTD. (SUPRA), BUT THE SAME WAS REJECTE D BY THE HONBLE APEX COURT OBSERVING THAT EVEN ASSUMING THAT THERE IS NO PROV ISION FOR PAYMENT OF COMPENSATION IN THE FORM OF INTEREST ON INTEREST, C OMPENSATION FOR DELAY IS REQUIRED TO BE PAID AS THE ACT ITSELF RECOGNIZES IN PRINCIPL E THE LIABILITY OF THE DEPARTMENT TO PAY INTEREST WHEN EXCESS TAX WAS RETAINED AND THE SAME PRINCIPLE SHOULD BE EXTENDED TO CASES WHERE INTEREST WAS RETAINED. IT W AS HELD THAT ONCE THE INTEREST BECOMES DUE, IT TAKES THE SAME COLOUR AS THE EXCESS AMOUNT OF TAX WHICH IS REFUNDABLE ON REGULAR ASSESSMENT. IT WAS ALSO HELD THAT INTEREST IS PAYABLE ON THE AMOUNT TO BE REFUNDED UNDER SECTION 244(1) WITHIN T HREE MONTHS FROM THE DECISION OF THE APPELLATE OR OTHER AUTHORITY SPECIFIED IN SE CTION 240 AND THE EXPRESSION AMOUNT IN THE EARLIER PART OF SECTION 244(1A) REF ERS NOT ONLY TO THE TAX BUT ALSO TO THE INTEREST. THE HONBLE APEX COURT DISCUSSED ALL THE RELEVANT FACTS OF THE CASE AND THE LAW ON THIS POINT ELABORATELY IN THE JUDGMENT A ND ULTIMATELY CAME TO THE FOLLOWING CONCLUSION : ITA NO.3366/MUM/2009 SYNGENTA INDIA LTD.. 3 THE FACTS AND THE LAW REFERRED TO IN PARAGRAPH (SU PRA) WOULD CLEARLY GO TO SHOW THAT THE APPELLANT WAS UNDISPUTABLY ENTITLED T O INTEREST UNDER SECTIONS 214 AND 244 OF THE ACT AS HELD BY THE VARI OUS HIGH COURTS AND ALSO THIS COURT. IN THE INSTANT CASE, THE APPELLA NT S MONEY HAD BEEN UNJUSTIFIABLY WITHHELD BY THE DEPARTMENT FOR 17 YE ARS WITHOUT ANY RHYME OR REASON. THE INTEREST WAS PAID ONLY AT THE INSTA NCE AND THE INTERVENTION OF THIS COURT IN CIVIL APPEAL NO. 1887 OF 1992 DAT ED APRIL 30, 1997. INTEREST ON DELAYED PAYMENT OF REFUND WAS NOT PAID TO THE A PPELLANT ON MARCH 27, 1981, AND APRIL 30, 1986, DUE TO THE ERRONEOUS VIE W THAT HAD BEEN TAKEN BY THE OFFICIALS OF THE RESPONDENTS. INTEREST ON RE FUND WAS GRANTED TO THE APPELLANT AFTER A SUBSTANTIAL LAPSE OF TIME AND HE NCE IT SHOULD BE ENTITLED TO COMPENSATION FOR THIS PERIOD OF DELAY. THE HIGH COURT HAS FAILED TO APPRECIATE THAT WHILE CHARGING INTEREST FROM THE A SSESSEES, THE DEPARTMENT FIRST ADJUSTS THE AMOUNT PAID TOWARDS I NTEREST SO THAT THE PRINCIPAL AMOUNT OF TAX PAYABLE REMAINS OUTSTANDIN G AND THEY ARE ENTITLED TO CHARGE INTEREST TILL THE ENTIRE OUTSTANDING IS PAID. BUT WHEN IT COMES TO GRANTING OF INTEREST ON REFUND OF TAXES, THE REFUN DS ARE FIRST ADJUSTED TOWARDS THE TAXES AND THEN THE BALANCE TOWARDS INT EREST. HENCE AS PER THE STAND THAT THE DEPARTMENT TAKES THEY ARE LIABLE TO PAY INTEREST ONLY UP TO THE DATE OF REFUND OF TAX WHILE THEY TAKE THE BENE FIT OF THE ASSESSEES FUNDS BY DELAYING THE PAYMENT OF INTEREST ON REFUN DS WITHOUT INCURRING ANY FURTHER LIABILITY TO PAY INTEREST. THIS STAND TAKEN BY THE RESPONDENTS IS DISCRIMINATORY IN NATURE AND THEREBY CAUSING GREAT PREJUDICE TO LAKHS AND LAKHS OF ASSESSEES. VERY LARGE NUMBER OF ASSESSEES ARE ADVERSELY AFFECTED INASMUCH AS THE INCOME-TAX DEPARTMENT CAN NOW SIMP LY REFUSE TO PAY TO THE ASSESSEES AMOUNTS OF INTEREST LAWFULLY AND ADM ITTEDLY DUE TO THEM AS HAS HAPPENED IN THE INSTANT CASE. IT IS A CASE OF THE APPELLANT AS SET OUT ABOVE IN THE INSTANT CASE FOR THE ASSESSMENT YEAR 1978-79, IT HAS BEEN DEPRIVED OF AN AMOUNT OF RS.40 LAKHS FOR NO FAULT OF ITS OWN AND EXCLUSIVELY BECAUSE OF THE ADMITTEDLY UNLAWFUL ACTI ONS OF THE INCOME-TAX DEPARTMENT FOR PERIODS RANGING UP TO 17 YEARS WITH OUT ANY COMPENSATION WHATSOEVER FROM THE DEPARTMENT. SUCH ACTIONS AND C ONSEQUENCES, IN OUR OPINION, SERIOUSLY AFFECT THE ADMINISTRATION OF JU STICE AND THE RULE OF LAW. 4. IN THE PRESENT CASE, PART OF THE REFUND ON ACCO UNT OF INTEREST BECAME DUE TO THE ASSESSEE VIDE AN ORDER DATED 6.9.2007 PASSED BY THE ASSESSING OFFICER GIVING EFFECT TO THE ORDER OF THE LEARNED CIT(A) DATED 6.8 .2007 AND SINCE THERE HAD BEEN INORDINATE DELAY IN GRANTING THE SAID REFUND, WE AR E OF THE VIEW THAT THE DEPARTMENT IS LIABLE TO PAY COMPENSATION TO THE ASSESSEE IN TH E FORM OF INTEREST ON THE AMOUNT OF INTEREST WHICH HAD BECOME DUE TO THE ASSESSEE, A S HELD BY THE HONBLE SUPREME COURT IN THE CASE OF SANDVIK ASIA LTD. (SUPRA). IN THAT VIEW OF THE MATTER, WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED C IT(A) DIRECTING THE ASSESSING OFFICER TO ALLOW INTEREST ON INTEREST TO THE ASSESS EE RELYING ON THE SAID DECISION OF THE HONBLE SUPREME COURT (SUPRA) AND UPHOLDING THE SAME ON THIS ISSUE, WE DISMISS THE APPEAL FILED BY THE REVENUE. ITA NO.3366/MUM/2009 SYNGENTA INDIA LTD.. 4 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF APRIL, 2011. SD. SD. (VIJAY PAL RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED THE 29 TH APRIL, 2011. KN COPY TO: 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT, CIT -1, MUMBAI. 4. THE CIT(A)-XXI, MUMBAI 5. THE DR E BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, ITAT, MUMBAI