The DCIT, Central Circle-1(1), Ahmedabad V. Nirma Industries Ltd., Ahmedabad

ITA 4070/AHD/2007

• Counselvise Citation: 407020514 RSA 2007
• Duration Of Justice: 7 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-08-2015
• Assessment Year: 1989-1990
• Appeal Filed On: 07-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Question of law
• Section: 244A; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: S H RI G. D. AGRAWAL , VICE PRESIDENT AND SHR I S. S. GODARA , JUDICIAL MEMBER DCIT, CENTRAL CIRCLE 1(1), ROOM NO. 303, 3 RD FLOOR, AAYKAR BHAVAN, ASHRAM ROAD, AHMEDABAD (APPELLANT) VS NIRMA INDUSTRIES LTD, NIRMA HOUSE, ASHRAM ROAD, AHMEDABAD PAN: AAACN5352M (RESPONDENT) REVENUE BY : S H RI DINESH SINGH , SR. D . R. ASSESSEE BY: S H RI S.N. SOPARKAR , A.R. DATE OF HEARING : 11 - 08 - 2 015 DATE OF PRONOUNCEMENT : 04 - 09 - 2 015 / OR DER P ER : S. S. GODARA , JUDICIAL MEMBER : - THI S REVENUE S APPEAL FOR A.Y. 1989 - 90 , AR ISES FROM THE ORDER OF THE CIT(A) - II, AHMEDABAD DATED 05 - 09 - 2007 IN APPEAL NO. CIT(A) - I T A NO . 4070 / A HD/2007 A SSESSMENT YEAR 1989 - 90 I.T.A NO . 4070/AHD/2007 A.Y. 1989 - 90 PAGE NO DCIT VS. NIRMA INDUSTRIES LTD 2 II /CC1 (1)/342/2006 - 07 , IN PROCEEDINGS UNDER SECTION 154 OF THE INCOME TAX ACT, 196 1; IN SHORT THE ACT . 2. THE FOLLOWING GROUNDS ARE RAISED IN THE INSTANT APPEAL: - 1 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO GRANT INTEREST U/S.244A ON THE SELF ASSESSMENT TAX PAID, WITHOUT CONSIDERING THE LEGAL POSITION THAT FROM 01.04.1989 INTEREST U/S.244A IS ALLOWABLE ONLY ON ADVANCE TAX/TD S/TCS AND TAXES PAID IN COMPLIANCE TO NOTICE OF DEMAND ISSUED U/S.156 OF THE A CT. 2 THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN IGNORING THE FINDINGS OF A.O. THAT THE DE LAY IN ISSUING REFUND WAS ON ACCOUNT OF NON - FURNISHING OF PROO F OF TAX PAYMENT BY THE ASSESSEE. 2.1 THE CI T(A) HAS ERRED IN LAW AND IN FACTS I N FOLLOWING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF SANDVIK ASIA LTD. VS. CI T (2006) [280 ITR 643 (SC)] WITHOUT CONSIDERING THE FACT THAT THE SAID DECISION PERT AINS TO THE PERIOD PRIOR TO 01 . 04. 89. 2.2 THE CIT (A) HAS ERRED IN NOT CONSIDERING THE LEGAL POSITION THAT THE INTEREST ON REFUND AFTER 01.04. 89 IS ALLOWABLE U/S.244A AND THERE IS NO PROVISION FOR CONSIDERING THE INTEREST DUE ON REFUND AS TAX PAID FOR THE PURPOSES OF ALLOWING INTEREST U/.S.244A. 2.3 THE CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE DIRECTIN G THE A.O. TO GRANT INTEREST ON INTEREST WITHOUT CONSIDERING THE FACT THAT THE HON'BLE SUPREME COURT GRANTED INTEREST AS A COMPENSATION UNDER WRIT JURISDICTION AND THE CIT(A) HAS NO SUCH POWERS. 2.4 THE CIT(A) HAS FAILED TO CONS IDER THE DECISION OF A HMEDABAD I TAT IN THE CASE OF GSFC LTD. FOR A.Y. 1995 - 96 IN ITA NOS.2348 AND 2349/AHD/2004 DATED 31.07.2006 WHEREIN AFTER CONSIDERING THE DECIS ION OF HON'BLE SUPREME COURT, IT WAS HELD THAT AFTER 01.04.1 989 THE DECISION OF HON'BLE SUPREME COURT HAS NO APPLI CATION. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CI T (A) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. I.T.A NO . 4070/AHD/2007 A.Y. 1989 - 90 PAGE NO DCIT VS. NIRMA INDUSTRIES LTD 3 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. 3. THE REVENUE S ARGUMENT RAISED IN THE CO URSE OF HEARING ARE THREE FOLD. THE FIRST ONE IS THAT THE CIT(A) HAS WRONGLY HELD THE ASSESSEE TO BE ENTITLED FOR SECTION 244A INTEREST. THE SECOND ONE IS THAT THE ASSESSING OFFICER HAD OBSERVED THAT THE ASSESSEE DID NOT FURNISH PROOF OF TAX PAYMENT CAUSING DELAY IN ISSUING REFUND. THIS FINDINGS IS STATED TO HAVE BEEN IGNORED IN THE LOWER APPELLATE ORDER. THE THIRD AND LAST ARGUMENT IS THAT THE CIT(A) HAS WRONGLY ORDERED INTEREST ON INTEREST TO BE PAID TO THE ASS ESSEE AS PER DECISION OF SANDVIK ASIA LTD (SUPRA). RELEVANT CASE LAW SUPPORTING THE ABOVE STATED PLEADING IS ALSO QUOTED . THE SAME SHALL BE DEALT WITH IN SUCCEEDING PARAGRAPHS. 4. THE ASSESSEE STRONGLY SUPPORTS THE CIT(A) S ORDER UNDER CHALLENGE. IT CL ARIFIES THAT THE SAME IS DECIDED ONLY TWO ISSUES OF INTEREST ON SELF ASSESSMENT TAX U/S. 244A AND THAT ON INTEREST ON INTEREST. THE REVENUE S OTHER PLEA NON - SUBMISSION OF PROOF CAUSING DELAY IS STATED TO BE NOT ARISING THEREFROM. 5. WE COME TO THE REVE NUE S FIRST GROUND ON THE ISSUE OF INTEREST ON SELF ASSESSMENT TAX OF RS. 27,16,377/ - ON 13 - 12 - 1989 AS PER CHALLAN FORMING PART OF THE CASE FILE. THE ASSESSEE FILED A RECTIFICATION DATED 16 - 04 - 2003 BEFORE THE ASSESSING OFFICER QUA GIVING EFFECT ORDER DATE D 24 - 01 - 2003 AND CLAIMED INTEREST U/S. 244A FROM DATE OF I.T.A NO . 4070/AHD/2007 A.Y. 1989 - 90 PAGE NO DCIT VS. NIRMA INDUSTRIES LTD 4 PAYMENT TILL RECEIPT REFUND ORDER DATED 04 - 03 - 2005 RECEIVED ON 05 - 04 - 2003. THE ASSESSING AUTHORITY PASSED ITS ORDER ON 10 - 09 - 2004 HOLDING THAT SECTION 244A IS NOT ALLOWABLE O N THE IMPUGNED SELF ASSE SSMENT TAX. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) RESTORED THIS ISSUE BACK ON 17 - 01 - 2006 TO BE DECIDED AFRESH AS PER CASE LAW OF MODI INDUSTRIES LTD VS. CIT (1995) 21 6 ITR 759 AND THAT OF THE MUMBAI BENCH OF TRIBUNAL IN JETHIBEN K. PATEL DISCRETIONA RY TRUST ITA 4364/MUM/2000 HOLDING THE ISSUE IN ASSESSEE S FAVOUR. 6. THE ASSESSING OFFICER TOOK UP CONSEQUENTIAL PROCEEDINGS. HE PASSED HIS ORDER ON 28 - 02 - 2006 REITERATING HIS EARLIER FINDINGS AND DISTINGUISHED THE ABOVE STATED CASE LAW BY OBSERVING T HAT THE SAME PERTAINED TO SECTION 214 HOLDING THE FIELD BEFORE 01 - 041989 WHEREAS SECTION 244A WAS APPLICABLE AFTER THE SAID CRUCIAL DATE. 7. THE ASSESSEE PREFERRED APPEAL IN SECOND ROUND OF LITIGATION. THE CIT(A) QUOTES CASE LAW AS WAS STA T ED IN HIS EA RLIER ORDER (SUPRA) AND HOLDS THAT THE ASSESSEE SELF ASSESSMENT IN QUESTION IS ENTITLED FOR SECTION 244A INTEREST. 8. WE HAVE HEARD BOTH THE PA R TIES AND GONE THROUGH THE CASE FILE. THE REVENUE S CASE IS THAT SELF ASSESSMENT TAX IN QUESTION IS NOT ENTI TLED FOR SECTION 244A INTEREST AND THE SAME IS FURTHER ALLOWABLE IN ADVANCE TAX/TDS/TCS AND TAXES PAID IN COMPLIANCE TO A DEMAND NOTICE U/S. 156 OF THE ACT. WE FIND THAT THIS LATTER PLEA NO - WHERE EMANATES FROM THE CASE FILE. NOR IS SECTION 156 DEMAND NOT ICE FORMS I.T.A NO . 4070/AHD/2007 A.Y. 1989 - 90 PAGE NO DCIT VS. NIRMA INDUSTRIES LTD 5 PART OF THE CASE RECORD. THE SAME IS ACCORDINGLY REJECTED FOR WANT OF COGENT EVIDENCE . WE COME TO FORMER PLEA AND FIND THAT DIFFERENT HIGH COURTS HAVE DECIDED THE ISSUE AGAINST AND IN FAVOUR OF THE REVENUE. THOSE IN ASSESSEE S FAVOUR HOLDING SELF ASSESSMENT TAX TO BE ENTITLED FOR SECTION 244A INTEREST ARE (2007) 214 ITR 438 ( MADRAS ) CIT VS. CHOLAMANDALUM INVESTMENT AND FINANCE AND BOMBAY HIGH COURT IN STOCK HOLDING CORPORATION VS. CIT IN CIVIL WRIT PETITION NO. 823 OF 2000 DECIDED ON 17 - 11 - 201 4 RELATING TO ASSESSMENT YEAR 1994 - 95. THE REVENUE S SPECIAL LEAVE PETITION AGAINST THE FORMER JUDGMENT STANDS DISMISSED IN THE HON BLE APEX COURT. ON OTHER HAND, HON BLE DELHI HIGH COURT IN CIT VS. ENGINEERS INDIA LTD ITA NO. 300 OF 2012 DECIDED ON 26 - 02 - 2015 CONSIDERS THAT ABOVE SAID JUDGMENT AND TAKES A CONTRARY VIEW IN REVENUE S FA V OUR ON THE VERY ISSUE. THE PARTIES INFORM US THAT THE HON BLE JURISDICTIONAL HIGH COURT HAS NOT DECIDED THIS QUESTION. WE ARE OF THE OPINION THAT THE VIEW FAVOURING THE ASSESSEE HOLDING SELF ASSESSMENT TAX TO BE ENTITLED FOR SECTION 244A INTEREST HAS TO BE ADOPTED IN THIS BACKDROP OF CONFLICTING JUDICIAL PRECEDENTS. WE ORDER ACCORDINGLY AND UPHOLD THE CIT(A) S ORDER. THE REVENUE S FIRST SUBSTANTIVE GROUND IS REJECTED. 9. NOW WE COME TO REVENUE S SECOND ARGUMENT THAT THE CIT(A) HAS IGNORED THE ASSESSING OFFICER S FINDINGS ALLEGING THE ASSESSEE TO HAVE CAUSED DELAY IN REFUND ON ACCOUNT OF NON - FURNISHING OF PROOF OF TAX PAYMENT. WE FIND THAT THIS GROUND NOWHERE FORMS P ART OF ADJUDICATION IN THE LOWER APPELLATE ORDER. IT IS EVIDENT THAT THE ASSESSING OFFICER S RELEVANT FINDINGS ARE ONLY IN THE CONTEXT OF SECTION I.T.A NO . 4070/AHD/2007 A.Y. 1989 - 90 PAGE NO DCIT VS. NIRMA INDUSTRIES LTD 6 244A INTEREST ON TDS PAYMENT OF RS. 15,401/ - NOWHERE GERMANE TO THE ISSUES RAISED IN THE INSTANT APPEAL. THE SAME IS ACCORDINGLY REJECTED. 10. THIS LEAVE S US WITH THE REVENUE S LAST ARGUMENT ON THE ISSUE OF INTEREST ON INTEREST. THE REVENUE QUOTES CASE LAW OF HON BLE APEX COURT IN (2014) 42 TAXMANN.COM 1 IN CIT, GUJARAT VS. GUJARAT FLUORO CHEMICALS DECIDED O N 18 TH SEPTEMBER, 2013 INTERPRETING THE EARLIER DECISION OF SANDVIK ASIA (SUPRA) AS UNDER: - 1. DOUBTING THE CORRECTNESS OR OTHERWISE OF THE DECISION OF THIS COURT IN THE CASE OF SANDVIK ASIA LTD. V. CIT [2006] 280 ITR 643/150 TAXMAN 591, A BENCH OF TWO LEARNED JUDGES HAS REFERRED THE FOLLOWING QUESTION OF LAW FOR OUR CONSIDERATION AND AUTHORITATIVE PRONOUNCEMENT BY ORDER DATED 28.08.2012: 'THE QUESTION WHICH ARIS ES IN THIS CASE IS, WHETHER INTE REST IS PAYABLE BY THE REVENUE TO THE ASSESSEE IF THE AGGREG ATE OF INSTALLMENTS OF ADVANCE TAX OF TDS PAIDEXCEEDS THE ASSESSED TAX?' 2. IN THE AFORESAID ORDER OF REFERENCE, THIS COURT HAS BRIEFLY NOTICED THE FACTS AND THE DISCUSSION IN SANDVIK ASIA LTD. 'S CASE (SUPRA) WHEREIN, THE MAIN ISSUE FOR CONSIDERATION AND DETERMINATION BY THIS COURT WAS, WHETHER THE ASSESSEE IS ENTITLED TO BE COMPENSATED BY THE REVENUE FOR DELAY IN PAYMENT OF THE AMOUNT ADMITTEDLY DUE TO THE ASSESSEE. THIS COURT HAS NOTICED INTER ALIA THE PROVISIONS OF SECTION 214 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT 1 ) AND IN LIGHT OF THE SAME HAS D OUBTED THE CORRECTNESS OF THE DECISION IN SANDVIK ASIA LTD. 'S CASE (SUPRA). 3. IN ORDER TO ANSWER THE AFORESAID ISSUE BEFORE US, WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF THIS COURT IN SANDVIK ASIA LTD. 'S CASE (SUPRA} AND THE ORDER OF REFERENCE. WE HAVE ALSO CONSIDERED THE SUBMISSIONS MADE BY THE PARTIES TO THE LI S. I.T.A NO . 4070/AHD/2007 A.Y. 1989 - 90 PAGE NO DCIT VS. NIRMA INDUSTRIES LTD 7 4. WE WOULD FIRST THROW LIGHT ON THE REASONING AND THE DECISION OF THIS COURT ON THE CORE ISSUE IN SANDVIK ASIA LTD. 'S CASE (SU PRA). THE ONLY ISSUE FORMULATED BY THIS COURT FOR ITS CONSIDERATION AND DECISION WAS WHETHER AN ASSESSEE IS ENTITLED TO BE COMPENSATED BY THE INCOME TAX DEPARTMENT FOR THE DELAY IN PAYING INTEREST ON THE REFUNDED AMOUNT ADMITTEDLY DUE TO THE ASSESSEE. THIS COURT IN THE FACTS OF THE SAID CASE HAD NOTICED THAT THERE WAS DELAY OF VARIOUS PERIODS, RANGING FROM 12 TO 17 YEARS, IN SUCH PAYMENT BY THE REVENUE. THIS COURT HAD FURTHER REFERRED TO THE SEVERAL DECISIONS WHICH WERE BROUGHT TO ITS NOTICE AND ALSO REFERR ED TO THE RELEVANT PROVISIONS OF THE ACT WHICH PROVIDE FOR REFUNDS TO BE MADE BY THE REVENUE WHEN A SUPERIOR FORUM DIRECTS REFUND OF CERTAIN AMOUNTS TO AN ASSESSEE WHILE DISPOSING OF AN APPEAL, REVISION ETC. 5. SINCE, THERE WAS AN INORDINATE DELAY ON THE PART OF THE REVENUE IN REFUNDING THE AMOUNT DUE TO THE ASSESSEE THIS COURT HAD THOUGHT IT FIT THAT THE ASSESSEE SHOULD BE PROPERLY AND ADEQUATELY COMPENSATED AND THEREFORE IN PARAGRAPH 51 OF THE JUDGMENT, THE COURT WHILE COMPENSATING THE ASSESSEE HAD DIREC TED THE REVENUE TO PAY A COMPENSATION BY WAY OF INTEREST FOR TWO PERIODS, NAMELY; F OR THE ASSESSMENT YEARS 1977 - 78, 1978 - 79. 1981 - 82, 1982 - 83 IN A SUM OF RS.40,84, 906/ - AND INTEREST @ 9% FROM 31.03.1986 TO 27.03.1998 AND IN DEFAULT, TO PAY THE PENAL INTER EST @ 15% PER ANNUM FOR THE AFORESAID PERIOD. 6. IN OUR CONSIDERED VIEW, THE AFORESAID JUDGMENT HAS BEEN MISQUOTED AND MISINTERPRETED BY THE ASSESSEES AND ALSO BY THE REVENUE. THEY ARE OF THE VIEW THAT IN SANDVIK ASIA LTD.'S CASE (SUPRA), THIS COURT HAD D IRECTED THE REVENUE TO PAY INTEREST ON THE STATUTORY INTEREST IN CASE OF DELAY IN THE PAYMENT. IN OTHER WORDS, THE INTERPRETATION PLACED IS THAT THE REVENUE IS OBLIGED TO PA Y AN INTEREST ON INTEREST IN TH E EVENT OF ITS FAILURE TO REFUND THE INTEREST PAYABL E WITHIN THE STATUTORY PERIOD. 7. AS WE HAVE ALREADY NOTICED, IN SANDVIK ASIA LTD. 'S CASE (SUPRA) THIS COURT WAS CONSIDERING THE ISSUE WHETHER AN ASSESSEE WHO IS MADE TO WAIT FOR REFUND OF INTEREST FOR DECADES BE COMPENSATED FOR THE GREAT PREJUDICE CAUSE D TO IT DUE TO THE DELAY IN ITS PAYMENT AFTER THE LAPSE OF STATUTORY PERIOD. IN THE FACTS OF THAT CASE, THIS COURT HAD COME TO THE CONCLUSION THAT THERE WAS AN INORDINATE DELAY ON THE PART OF THE REVENUE IN REFUNDING CERTAIN AMOUNT WHICH INCLUDED THE I.T.A NO . 4070/AHD/2007 A.Y. 1989 - 90 PAGE NO DCIT VS. NIRMA INDUSTRIES LTD 8 STATU TORY INTEREST AND THEREFORE, DIRECTED THE REVENUE TO PAY COMPENSATION FOR THE SAME NOT AN INTEREST ON INTEREST. 8. FURTHER IT IS BROUGHT TO OUR NOTICE THAT THE LEGISLATURE BY THE ACT NO. 4 OF 1988 (W.E.F. 01.04.1989) HAS INSERTED SECTION 244A TO THE ACT W HICH PROVIDES FOR INTEREST ON REFUNDS UNDER VARIOUS CONTINGENCIES. WE CLARIFY THAT IT IS ONLY THAT INTEREST PROVIDED FOR UNDER THE STATUTE WHICH MAY BE CLAIMED BY AN ASSESSEE FROM THE REVENUE AND NO OTHER INTEREST ON SUCH STATUTORY INTEREST. 9. WITH THE A FORESAID CLARIFICATION WE NOW REFER BACK ALL THE MATTERS BEFORE A TWO JUDGE BENCH OF THIS COURT TO CONSIDER EACH CASE INDEPENDENTLY AND TAKE AN APPROPRIATE DECISION ONE WAY OR THE OTHER. 11. WE CONFRONTED THE ASSESSEE THE ABOVE STATED REPRODUCED EXT RACT OF THE HON BLE APEX COURT DECISION. IT PLEADS THAT THERE HAS BEEN AN INORDINATE DELAY IN FINALIZING REFUND OF ALMOST THREE DECADES. THEREFORE, IT CLAIMS TO BE ENTITLED FOR INTEREST IN THE NATURE OF COMPENSATION AS PER THE ABOVE STATED DECISION. WE D O NOT FIND ANY REASON TO AGREE WITH THIS COMPENSATION PLEA. IT HAS COME ON RECORD THAT THEIR LORDSHIPS IN AWARDING COMPENSATION IN CASE OF SANDVIK ASIA HAD CONSIDERED THE RELEVANT PERIOD OF INORDINATE DELAY. WE MAKE IT CLEAR THAT NO SUCH PARTICULAR ARE F ORTHCOMING FROM THE CASE FILE SO AS TO COMPENSATE THE ASSESSEE BY WAY OF AWARDING INTEREST IN QUESTION. THIS CASE FILE ONLY COMPRISE OF ITS 154 PETITION DATED 16 - 04 - 2003, RELEVANT ORDER DATED 10 - 09 - 2004 AND CONSEQUENTIAL PROCEEDINGS. THEREFORE, WE REJECT THE ASSESSEE S ARGUMENT BEING NOT SUPPORTED BY SUFFICIENT EVIDENCE. WE FOLLOW THE HON BLE APEX COURT S DECISION AND HOLD THAT THE CIT(A) HAS ERRED IN AWARDING INTEREST ON INTEREST IN ASSESSEE S FAVOUR. THE REVENUE S LAST ARGUMENT SUCCEEDS. I.T.A NO . 4070/AHD/2007 A.Y. 1989 - 90 PAGE NO DCIT VS. NIRMA INDUSTRIES LTD 9 12 . THIS R EVENUE S APPEAL IS PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 04 - 0 9 - 2015 SD/ - SD/ - ( G.D. AGRAWAL ) ( S. S. GODARA ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD : DATED 04 /0 9 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,