SANDOZ P. LTD, MUMBAI V. DCIT RG 7(1), MUMBAI

ITA 3935/MUM/2010

• Counselvise Citation: 393519914 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2004-2005
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G P TRIVEDI
• Section: 244A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI R.K.PANDA (A .M) ITA NO.3935/MUM/2010(A.Y. 2004-05) SANDOZ PRIVATE LTD., SANDOZ HOUSE, DR.ANNIE BESANT ROAD, WORLI, MUMBAI -18. PAN:AAAAC S 9267J (APPELLANT) VS. THE DCIT, CIR. 7(1), AAYKAR BHAVAN, MK MARG, MUMBAI 20. (RESPONDENT) APPELLANT BY : SHRI NIRAJ SETH RESPONDENT BY : SHRI G.P.TRIVEDI DATE OF HEARING : 08/09/2011 DATE OF PRONOUNCEMENT : ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 30/1/2010 OF CIT(A) 13 MUMBAI RELATING TO ASSESSMENT YEAR 200 4-05. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READS AS FOLLOWS: THE COMMISSIONER OF INCOME-TAX (APPEALS)-13, MUMBA I [ CIT(A)] OUGHT TO HAVE HELD THAT THE APPELLANTS HAD SUFFERED LOSS OF REVENUE ON ACCOUNT OF INTEREST UNDER SECTION 244A ON THE REFUN D THAT WAS RIGHTLY DUE AS WELL AS POTENTIAL INCOME IT WOULD HAVE EARNE D ON INTEREST IF IT WOULD HAVE RECEIVED IT ON TIME. 2. THE GRIEVANCE OF THE ASSESSEE AS CAN BE SEEN FRO M THE AFORESAID GROUND IS THAT INTEREST UNDER SECTION 244A OF THE A CT OUGHT TO BE GRANTED ON THE DELAYED PAYMENT OF INTEREST DUE ON REFUND. IN THIS REGARD THE ASSESSEE HAS RELIED ON THE DECISION OF THE HONBLE SUPREME C OURT IN THE CASE OF SANDVIK ASIA LTD. VS. CIT, 280 ITR 643(SC). FACTUA LLY THERE IS NO DISPUTE ITA NO.3935/MUM/2010(A.Y. 2004-05) 2 THAT THE INTEREST PAYABLE ON REFUND HAD BEEN PAID B ELATEDLY TO THE ASSESSEE AND THAT THE ASSESSEE IS DEMANDING INTEREST UNDER S ECTION 244A OF THE ACT ON THE INTEREST PAYABLE ON REFUND OF INTEREST WHICH WAS PAID BELATEDLY. IN OTHER WORDS, THE ASSESSEE IS DEMANDING INTEREST ON INTEREST. THE ASSESSEE RELIED ON SEVERAL ORDERS OF THE ITAT IN ASSESSEES OWN CASE BUT THE CIT(A) HELD THAT THERE WAS NO PROVISION ON THE ACT TO AWA RD INTEREST ON INTEREST. 3. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSE E HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 4. WE FIND THAT IN ASSESSEES OWN CASE FOR A.Y 1998 -99 AND 99-00 IN ITA NO.1994&1995/M/05 THIS TRIBUNAL ALLOWED INTEREST UN DER SECTION 244A ON THE DELAYED PAYMENT OF INTEREST DUE ON REFUND. IN DOING SO THE TRIBUNAL FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SANDVIK ASIA LTD. (SUPRA), WHICH WAS REFERRED TO AND FOLLOW ED BY THE ITAT MUMBAI IN THE CASE OF NOVARTIS INDIA LTD. VS. DCIT, WTA NO.74 /M/04 FOR A.Y 1993-94, WHEREIN IT WAS HELD AS FOLLOWS: 4.HAVING HEARD BOTH THE PARTIES AND CONSIDERED THE IR RIVAL CONTENTIONS, IT IS SEEN THAT THE AO AS WELL AS THE CWT(A) HAVE DISALLOWED THE INTEREST ON REFUND ON THE GROUND THA T UNDER THE EXTANT SECTION 244A THERE IS NO PROVISION FOR PAYMENT OF I NTEREST OTHER THAN ON TDS, ADVANCE TAX, REGULAR TAX OR PENALTY. ON PE RUSAL OF THE DECISIONS OF THE APEX COURT IN THE CASES CITED SUPR A, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. THE AP PEX COURT IN THE AFORESAID DECISION HAD HELD AS UNDER :- IN VIEW OF EXPRESS PROVISIONS OF THE INCOME-TAX AC T, 191, AN ASSESSEE IS ENTITLED TO COMPENSATION BY WAY OF INT EREST FOR THE DELAY IN THE PAYMENT OF AMOUNTS LAWFULLY DUE TO THE ASSESSEE WHICH ARE WITHHELD WRONGLY AND CONTRARY TO LAW. THE GOVERNMENT IS LIABLE TO PAY INTEREST, AT THE RA TE APPLICABLE TO THE EXCESS AMOUNT REFUNDED TO THE ASSESSEE, ON T HE INTEREST AMOUNT WHICH BECOMES DUE UNDER SECTION 214(1). SE CTION 214(1) ITSELF RECOGNIZES IN PRINCIPLE THE LIABILITY TO PAY INTEREST ON ITA NO.3935/MUM/2010(A.Y. 2004-05) 3 THE AMOUNT OF TAX PAID IN EXCESS OF THE AMOUNT OF A SSESSED TAX WHICH IS RETAINED BY THE GOVERNMENT. INTEREST ON T HE EXCESS AMOUNT IS PAYABLE AT THE RATE SPECIFIED THEREIN FRO M THE FIRST DAY OF THE YEAR OF ASSESSMENT TO THE DATE OF REGULAR AS SESSMENT. ONCE THE INTEREST BECOMES DUE, IT TAKES THE SAME CO LOUR THE EXCESS AMOUNT OF TAX WHICH IS REFUNDABLE ON REGULAR ASSESSMENT. THE SUPREME COURT IN MODI INDUSTRIES ( 1995) 216 ITR 759 HAS CLARIFIED THAT ADVANCE TAX HAS TO BE TR EATED AS PAID PURSUANT TO AN ORDER OF ASSESSMENT AND HENCE INTERE ST IS PAYABLE THEREON BUT UNDER SECTION 244. INTEREST IS PAYABLE ON THE AMOUNT TO BE REFUNDED UN DER SECTION 244(1) WITHIN THREE MONTHS FROM THE DECISION OF THE APPELLATE OR OTHER AUTHORITY SPECIFIED IN SECTION 240. THE EXP RESSION AMOUNT IN THE EARLIER PART OF SECTION 244(1A) REF ERS NOT ONLY TO THE TAX BUT ALSO TO THE INTEREST, IT IS A NEUTRAL E XPRESSION AND IT CANNOT BE LIMITED TO THE TAX PAID IN PURSUANCE OF T HE ORDER OF ASSESSMENT. EVEN ASSUMING THAT THERE IS NO PROVISION FOR PAYMEN T OF COMPENSATION, COMPENSATION FOR DELAY IS REQUIRED TO P BE PAID AS THE ACT ITSELF RECOGNIZES IN PRINCIPLE THE LIABILIT Y OF THE DEPARTMENT TO PAY INTEREST WHEN EXCESS TAX WAS RETA INED AND THE SAME PRINCIPLE SHOULD BE EXTENDED TO CASES WHER E INTEREST WAS RETAINED. NARENDRA DOSHIS CASE (2002) 254 ITR 606 WAS CLEARL Y A DECISION ON THE MERITS ALBEIT PROCEEDING ON THE ASSUMPTION THAT THERE WAS NO PROVISION IN THE ACT GRANTING INTEREST ON UN PAID INTEREST. THERE IS NO QUESTION OF THE DELAY BEING JUSTIFIABL E, AND EVEN IF THE REVENUE TAKES AN ERRONEOUS VIEW OF THE LAW, THA T CANNOT MEAN THAT THE AUTHORITY ARE FOUND TO BE UNSUSTAINAB LE OR ERRONEOUS BY THE COURTS IT FOLLOWS THAT THE AUTHORI TY HAS ACTED WRONGLY IN THE SENSE OF NOT IN ACCORDANCE WITH LAW AND COMPENSATION TO THE PARTY DEPRIVED MUST FOLLOW. 5. IN VIEW OF THE MATTER, ASSESSEES APPEAL IS ALL OWED AND THE AO IS DIRECTED TO COMPUTE THE INTEREST ON THE REFUND DUE TO THE ASSESSEE IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME CO URT CITED SUPRA. ITA NO.3935/MUM/2010(A.Y. 2004-05) 4 5. SIMILAR ORDERS HAVE BEEN PASSED IN ASSESSEES OW N CASE IN ITA NO.1992/M/04 FOR A.Y 1996-97. IN VIEW OF THE ABOV E WE DIRECT THAT THE ASSESSEE BE PAID INTEREST ON ACCOUNT OF DELAYED PAY MENT OF INTEREST DUE ON REFUND. THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON TH E 14 TH DAY OF SEPT., 2011. SD/- SD/- (R.K.PANDA ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 14 TH SEPT.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RE BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.3935/MUM/2010(A.Y. 2004-05) 5 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 8/9/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 12/9/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER