The Commissioner of Income Tax - III V. Smt. Phoola Rani Gupta

ITTA/211/2012

AI Insights

The case involves an appeal by the Commissioner of Income Tax-III, Hyderabad against Smt Phoola Rani Gupta concerning the refund of self-assessment tax and the associated interest under Section 244A of the Income Tax Act, 1961. Initially, the assessee was assessed a tax liability based on a computed income, which was later contested and found to be nil upon appeal. The primary legal contention revolved around whether interest on the refunded tax was payable under Section 244A, despite the tax being initially paid under self-assessment. The Tribunal and the appellate authority had ruled in favor of the assessee, leading to the Revenue's appeal which was dismissed by the High Court.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 681514 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 13-07-2012
• Assessment Year: misc
• Other Referred Cases: Sandvik Asia Ltd. V. CIT, Commissioner of Income Tax v. Cholamandalam Investment and Finance Co. Ltd, Commissioner of Income Tax v. Ashok Leyland Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Commissioner of Income Tax; Income tax appellate tribunal; Interest under section 244A; Refund; Self-assessment tax
• Section: 244A

Judgement Text

"THE HONOURABLE SRI JUSTICE GODA RAGHURAM AND THE HONOURABLE SRI JUSTICE N. RAVI SHANKAR ITTA No. 211 of 2012 Dated: 13-07-2012 Between The Commissioner of Income Tax-III, Hyderabad …Appellant And Smt Phoola Rani Gupta …Respondent Judgment: (Per Hon’ble Sri Justice Goda Raghuram) No substantial question of law arises for consideration in this appeal by the Revenue directed against the order of the Income Tax Appellate Tribunal (for short ‘the Tribunal”, Hyderabad Bench, dated 23-2-2010 in ITA No. 1048/Hyd/09. To the extent relevant and material for the purpose of this appeal suffice it to record that the Assessment order dated 20-09-2007 computed the total income at Rs.31,19,670/- and determined the tax thereon at Rs. 6,23,934/- and additional surcharge of Rs.93,590/-. The assessee had paid self-assessment tax ofRs.6,25,000/-. Against the order of assessment, the assessee preferred an appeal to the Commissioner (Appeals). The appellate authority, by the order dated 29-1-2008 modified the order of assessment and deleted in toto the computation of income by the Assessing authority. Consequently, the Assessing authority by the order dated 6-3-2008 computed the taxable income as nil and recorded a refund to the assessee of Rs.6,25,000/-, paid by the assessee as self- assessment tax. Aggrieved by the failure of the Assessing authority’s order dated 6-3-2008 in directing payment of interest under Section 244A of the Income Tax Act, 1961, the assessee preferred an appeal to the Commissioner (Appeals). By the order dated 11-8-2009 the Appellate authority allowed the appeal directing refund of the self-assessment tax of Rs.6,25,000/- and directed that interest is payable. Thereagainst, the Revenue preferred an appeal in respect of the respondent-assessee and another appeal in respect of another assessee Lekhraj Gupta (since deceased). The Tribunal confirmed the order of appellate authority, in view of the clear and unambiguous phraseology of Section 244A and dismissed the appeal by the Revenue. Sub-section (1) of Section 244 of the Act enjoins that where refund of any amount becomes due to the assessee under the Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the manner specified in clauses (1) and (b). On a true and fair construction and on a grammatical interpretation of the phrase ‘any amount due to the assessee under the Act’, the assessee shall be entitled to interest at the rate and the manner specified in the provision. Sri B.Narsimha Sharma, learned Senior Standing counsel for the Income Tax however contends that on a purposive construction of Section 244A, it requires to be held that no interest liability arises where the tax is paid by an assessee on self-assessment and unless it is wrongfully withheld by the Revenue. The factual substratum of the above contention, urged by Sri Sharma is on the syllogism is that the order of assessment dated 20-9-2007 determined the liability of the assessee on a computed total income of Rs.31,19,670/- whereon a tax and surcharge liability of Rs.7,17,523/- was determined. That order cannot be considered as wrongful until it was modified by the Commissioner of Appeals, by the order dated 29-1-2008. Only after the appeal was allowed on 29-1- 2008 was the assessee’s liability to tax scaled down to nil and the question of refund arose. Support to the contention that interest liability arises only where refund becomes due to the assessee and such refund is “wrongfully” withheld by the Revenue is placed on the decision of the Supreme Court in Sandvik Asia Ltd. V. CIT[1]. In Sandvik Asia the Supreme Court did not restrictively interpret the amplitude of Section 244A. It merely observed: “In view of the express provisions of the Income Tax Act, 1961, an assessee is entitled to compensation by way of interest for the delay in the payment of amounts lawfully due to the assessee which are withheld wrongly and contrary to law”. The same issue again fell for consideration in Commissioner of Income Tax v. Cholamandalam Investment and Finance Co. Ltd.[2]. The Madras High Court following its earlier decision in Commissioner of Income Tax v. Ashok Leyland Ltd[3] and the decision in Sandvik Asia held that wherever the assessee is entitled to refund, there is a statutory liability on the Revenue to pay the interest on such refund; even where the tax is paid under Section 140A on self- assessment. In the case on hand, the assessee was initially assessed liable to tax on the assumption that the income of Rs.31,19,670/- was exigable to tax. However the assessee preferred an appeal successful whereat the computation of the income by the Assessing authority was reversed and the taxable income was declared as nil and consequently refund was ordered. Even in these circumstances, the obligation under Section 244A of the Act renders the Revenue liable to pay interest. The judgment of the Supreme Court in Sandvik Asia does not enunciate any contrary principle. We are also in respectful agreement with the interpretation of Section 244A by the Madras High Court in Cholamandalam Investment and Finance Co. Ltd (2 supra). On the above premises there is no question of law let alone substantial question of law that arises for consideration in this appeal. It is therefore dismissed at the stage of admission. But in the circumstances, without costs. __________________________ GODA RAGHURAM, J 13th July, 2012 _________________________ N. RAVI SHANKAR, J GRR [1] (2006) 280 ITR 643 (SC) [2] (2007) 294 ITR 438 (Mad.) [3] (2002) 254 ITR 641 (Mad.) "