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INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ SMC Bench, Hyderabad

ITA No.34/Hyd/2015

Assessment year: 1991-92

Bharat Rice & Oil Mills  (Appellant)  Vs. Asstt. Commissioner of Income Tax (Respondent)

Date of Hearing: 10.07.2015

Date of Pronouncement: 15.07.2015

Coram: Shri P.M. Jagtap, Accountant Member

ORDER

Shri P.M. Jagtap, A.M

This appeal filed by the assessee is directed against the order of the ld CIT (A)-III Hyderabad, dated 13.11.2014. The grounds raised by the assessee therein read as under:

“1. The Learned CIT(Appeals) erred in confirming the Order of Assessing Officer not allowing interest under section 244A on the refund of interest already accrued under section 244A.

2. That the learned CIT(Appeals) erred in relying on the observation of Hon'ble Supreme Court Judgement reported in 358 ITR page 291, (made with reference to its earlier decision in   Sandvik Asia Limited ) but this observation is not applicable in case of the assessee. Further the Hon'ble Supreme Court has upheld the grant of interest on interest in case of CIT Vs. Narendra Doshi (254 ITR Page 606).

3. That the Hon'ble Tribunal has allowed the assessee's Appeal in assessment year 1990-91 on identical issue.

4. That the Hon'ble Supreme Court has consistently held that in case of any debatable issue or double interpretation or any ambiguity the interpretation which favours the assessee should be adopted.

5. The reasons assigned by CIT(Appeals) are wrong, insufficient and illegal”.

2. The relevant facts of the case giving rise to this appeal are as follows. In the case of the assessee, an order dated 23.02.2007 was passed by the Tribunal giving some relief. While giving effect to the said order of the Tribunal, a consequential order dated 6.6.2007 was passed by the AO determining the refund payable to the assessee at Rs.27,660/- which was duly paid to the assessee on 20.06.2007. Since the refund so determined by the AO vide consequential order dated 6.6.2007 was not correct, an application for rectification u/s 154 was filed by the assessee giving the working of exact amount refundable to it. On verification of the said working, AO found that the amount actually refundable to the assessee was Rs.5,32,604 as against the refund of Rs.27,660 only determined as per the consequential order passed on 6.6.2007. He, therefore, rectified the said order by passing an order u/s 154 dated 28.10.2010 granting the balance refund of Rs.5,04,944. He, however, did not allow any interest on the amount so refunded as claimed by the assessee in the application u/s 154 on the ground that the balance refund of Rs.5,04,944 was entirely on account of interest payable u/s 244A and therefore, no further interest on such interest was allowable.

3. Against the order passed by the AO u/s 154, an appeal was filed by the assessee before the ld CIT (A) and after considering the submissions made by the assessee as well as material available on record, the ld CIT (A) upheld the order passed by the AO u/s 154 relying on the decision of the Hon'ble Supreme Court in the case of   CIT vs. Gujarat Fluoro Chemicals   (358 ITR 291). The relevant observations of the ld CIT (A) recorded in this regard as contained in pra No.5.1 are extracted below:

“5.1 The facts and issues of the case and order of the AO passed u/s 154, the submissions of the appellant were duly considered. It would be pertinent to mention here that 'interest on interest' claim was the claim of the appellant. In this context, it is pertinent to bring to note that the Hon'ble Supreme Court in a Division Bench judgement in the case of CIT vs. Gujarat Fluoro Chemicals [358 ITR 0291 ][2013] held that:

"In our considered view, the aforesaid judgment has been misquoted and misinterpreted by the assesses and also by the Revenue. They are of the view that in Sandvik case (supra) this court had directed the Revenue to pay interest on the statutory interest in case of delay inthe payment. In other words, the interpretation placed is that the Revenue is obliged to pay an interest on interest in the event of its failure to refund the interest payable within the statutory period.

As we have already noticed, in Sandvik 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 caused 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 statutory interest and therefore, directed the Revenue to pay compensation for the same not an interest on interest.

Further, it is brought to our notice that the Legislature by the Act No.4 of 1988 (With effect from April 1, 1989) has inserted Section 244A to the Act which 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”.

Aggrieved by the order of the ld CIT (A), assessee has preferred this appeal before the Tribunal.

4. I have heard the arguments of both the sides and also perused the relevant material on record. As held by the AO in the order passed u/s 154, the balance refund determined by him as payable to the assessee comprised of interest u/s 244A of the Act and this position which is clearly evident from the working given by the AO in his order is not disputed even by the ld Counsel for the assessee. He, however, has relied on the decision of the Hon'ble Supreme Court in the case of CIT vs. HEG Ltd (324 ITR 331) to contend that the interest component par took the character of “amount due” u/s 244A and the assessee therefore, was entitled to interest on such amount due. A perusal of the judgment passed in the said case, however, shows that it was specifically noted by the Hon'ble Apex Court that it was not a case where the assessee was claiming compounding interest or interest on interest as was sought to be made out in the civil appeal filed by the Department. As further noted by the Hon'ble Apex Court, the amount of Rs.45,73,528 was due to the assessee as principal amount on account of refund of tax and the assessee was therefore, held to be entitled for the interest thereon u/s 244A for a delay of 57 months. In any case, the Hon'ble Supreme Court in its subsequent judgment in the case of CIT vs. Gujarat Fluoro Chemicals (Supra) has clarified that it is only that interest provided for u/s 244A of the Act, which may be claimed by an assessee from the Revenue and no further interest on such statutory interest. In the present case, the amount of Rs.5,04,944 refundable to the assessee was on account of interest u/s 244A and this being the undisputed position, I find no infirmity in the impugned order of the ld CIT (A) holding that no further interest on such interest was payable to the assessee relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. Gujarat Fluoro Chemicals (Supra). Even otherwise, the case law cited by the ld Counsel for the assessee and the case law relied upon by the CIT (A) clearly shows that the claim of the assessee for interest on interest is highly debatable which is beyond the scope of section 154. I, therefore, uphold the impugned order of the ld CIT (A) confirming the order passed by the AO u/s 154 and dismiss the appeal filed by the assessee.

5. In the result, appeal of the assessee is dismissed.

Order pronounced in the Open Court on 15th July, 2015.

Sd/-

(P. M. Jagtap)

Accountant Member

ITAT-No Interest on Interest under Section 244A on Income tax Refunds is Payable to the Assessee in view of the Supreme Court Judgment |19-07-2015 |