THE issues before the Bench are - Whether when the assesse pays
excess tax, the refund and the interest thereof arise automatically and no claim
is to be filed; Whether interest is to be calculated from the date of an order
passed u/s 244 and Whether the assessee is entitled to interest on refund from
the date of payment of excess tax till the date of grant of refund. And the
answers go against the Revenue.
For the assessment year 1982-1983,
assessment was completed with substantial additions raising a huge demand. The
assessee paid the demanded tax and thereafter availed the appellate remedies and
in that process the Appellate Tribunal had finally passed an order granting
substantial relief to the assessee on 16.06.1989. Thereafter, Assessing Officer
gave effect to the order of the Tribunal by Orders dated 18.09.1989, thereby
refunding the excess amount paid along with interest worked out upto 31.10.1995.
In that process, the assessee received interest of Rs.79,950/- for the period
30.10.1985 to 31.08.1989. The Assessing Officer brought to the tax the amount in
the assessment year 1990-1991 ignoring the claim of the assessee to spread over
the said amount for the assessment years starting with assessment orders
1985-1986 to 1988-1989. The Appellate Commissioner had allowed the claim of the
assessee and had directed the balance of interest be brought to tax for the
earlier periods. The Tribunal, on further appeal by the Revenue, reversed the
order of the Appellate Commissioner and restored the assessment order passed by
the I.T.O.
The
counsel for the assessee submitted that the assessee was entitled to the refund
from the date of payment of the tax till the date of granting of the refund.
Further, interest would accrue on day to day basis on the excess amount paid on
account of the order of the assessment which was ultimately corrected, which had
resulted in excess demand and which order was ultimately corrected by the
Appellate Tribunal. Inasmuch as, the entitlement of the interest was a right
conferred by the statute and it did not depend on the order for the refund being
made. An order for the refund was only consequential order which in law was
required to be made more in the nature of complying with the procedural
requirement, but the right to claim interest of the assessee was statutory right
conferred by the Act. In that view of the matter, he submitted that the order of
the appellate commissioner was unexceptionable and he further submitted that it
was but fair to spread the interest amount in the respective years in issue.
On
the other hand, the Senior Standing Counsel for Income Tax would submitted that
the right to claim interest by the assessee was dependent on an order being
passed under Section 240 and 244 of the Income Tax and in that view of the
matter, the right to claim interest would accrue to the assessee only on the
date of consequential order passed pursuant to the order of the Appellate
Authority. In that view of the matter, the interest income assessable was
received by the assessee for the accounting year 1989-1990 in the assessment
year 1990-1991.
Having heard the parties,
the HC held that,
++
for the purpose of answering the questions referred, it is necessary for us to
notice the statutory provisions with respect to refund of taxes paid in excess
and the interest that is required to be paid. Section 237 Chapter XIX of the
Income Tax Act, deals with refund;
++ a
close scrutiny of the Sections 237 and 240 of the Act would reveal that the
statutory right is conferred on the assessee to get refund of the excess tax
paid and such refund shall be made to the asssessee even without his having to
make any claim in that behalf. Section 244(A) of the Act entitles the assessee
to get interest on the refund amount and such interest is payable from the date
of payment of tax or payment of penalty from the date till refund is granted. It
is clear from the statutory provisions as applicable to the relevant assessment
years there is no requirement of assessee making a claim either for refund or
for interest. As a matter of fact, we may notice Section 243 and section 244,
which were made inapplicable in respect of any assessment for the assessment
year commencing on the first day of April, 1989 or any subsequent assessment
years;
++ at
this juncture a reference may be made to the judgment of the Supreme Court
reported in the case of Rama Bai. In the said case, the issue is with regard to
taxability of interest received on account of enhanced compensation, the
assessee's lands were acquired and not being satisfied with the compensation
awarded by the Land Acquisition Officer, Assessee appealed to the higher courts
and finally they received enhanced compensation along with interest payable
under Sections 28 and 34 of the Land Acquisition Act. The said amounts were
received in the year 1967 and were sought to be assessed in the year 1968-1969.
Assessee's claim was interest allocable and assessable in different assessment
years as it accrued from year to year and only that portion of the interest
relating to the period April, 1967 to March, 1968 were assessable for the
assessment year 1968-1969. The Tribunal dismissed the appeal of the assessee.
The Tribunal was conflicted with the judgment of the High Court in the case
of Mrs. Khorshed Shapoor Chennai Vs. Assistant Controller of Estate
Duty. On account of the conflict of decisions, the Tribunal in exercise of
its power under Section 257 of the Act, referred the question to the opinion of
the Supreme Court;
++
the Supreme Court had answered the question in the affirmative in favour of
assessee and against the revenue by following its earlier judgment.
When we peruse the judgment of T.N.K. Govindarajulu Chetty, the same is a short
judgment, which simply approved the judgment of the Madras High Court reported
in T.N.K. Govindarajulu Chetty Vs. Commissioner of
Income-tax;
++
firstly, the statutory provisions which were discussed therein were with respect
to the provisions contained in Indian Income Tax Act, 1922, and there is a
difference in the statutory scheme with the Indian Income Tax Act, 1961.
Further, in the process of interpreting the provisions in 1922 Act, the Court
had taken into consideration that interest became payable to the assessee only
when the assessments for the years in dispute were made which were in fact made
in 1956, though the assessments were 1951-1952 and 1952-1953. As a matter of
fact, the Court while agreeing with the law laid down in Sapangai Ramayya's case
had recorded "it is the date of accrual and not the receipt which is material in
cases where mercantile system of accounting is followed. The date of accrual in
the Mysore case was the date of possession while the date of accrual in the
present case is the date of assessment. In another judgment of the Orissa High
Court reported in Sri Popsingh Rice Mill case, the question considered by the
Orissa High Court is "Whether, on the facts and in the circumstances of the
case, the income received by the assessee by way of interest under Section 244
of the Income-tax Act, 1961, on refund determined and quantified under Section
240 of the said Act was not assessable in the year of receipt?"
++ we
may notice that the question which fell for consideration is in relation to
Section 244 of the Act and not in relation to Section 244(A) of the Act. Though
the Orissa High Court had answered the question in favour of the assessee, the
Orissa High Court failed to notice the judgments of the Supreme Court. Orissa
High Court relied on three judgments which were not dealing with
interest;
++ in
the light of the discussion above we are unable to agree with the reasoning of
the judgment of the Orissa High Court while holding the judgment of Allahabad
High Court is distinguishable and not applicable in view of the variance in the
very statutory scheme;
++ we are inclined to answer the
questions referred in favour of the assessee and against the revenue.
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