Income Tax Appellate Tribunal - Mumbai
Taj Tv Ltd , Mumbai vs Department Of Income Tax on 17 October, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES, 'L', MUMBAI
BEFORE SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER
AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER
ITA No. 413/Mum/2008
(Assessment years : 2003-04 and 2004-05)
ADIT(IT)
Circl e 2(2),
Room No.116, Scindia house,
Ballard estate, N M Road,
Mumbai-400038 ...Appellant
Vs
M/s Taj T V Ltd.,
C/o Surech Surana and associ ates,
4 t h fl, Dalam al chambers,
29, New Marine Lines,
Mumbai-400020.
PAN: AABCT6542J Respondent
Appellant by : Shri Narender Singh
Respondent by : Shri Madhur Agarwal
O R D E R
PER VIJAY P AL RAO,JM This appeal by the revenue is directed against the order dated 17.10.2007 of CIT(A) -XXXI, Mumbai arising from the giving effect order passed by the AO u/s 250 for the assessm ent year 2003-04 only.
2. Only ground raised by the revenue in this appeal is that the CIT(A) erred in holding that the assessee is entitled to interest under section 244A of the Act in respect of excess 2( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) paym ent of tax in response to the order of the AO under section 201 r.w.s 195, 201(1A) and 250 of the Act and directing to grant interest u/s 244A.
3.1 Facts recorded by the lower authorities are that the assessee is a company registered in Mauritius and engaged in the business of telecasti ng sports channel known as "Ten Sports". The assessee is a tax resident of Mauritius in terms of Article 4 of the India-Mauritius tax Treaty (treaty) 3.2 The assessee had entered into agreements with various non-resi dents for acquiring programming rights for telecasting sports events taking place outside India on Ten Sports channel. For some events, the rights acquired were for live tel ecasting while for som e events the same were for delayed tel ecasting in India. The assessee contended that both, the events and parties with whom assessee has entered into agreem ents for tel ecasting sports events were outside India. The assessee considered the resi dential status in India of the parties with whom the assessee ent ered into agreement under the Act as "non-resident"
3.3 The AO held that the payments made by the assessee to the non-residents were in the nature of "Royalt y" and attracts 3( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) the provisions of explanation 2 to section 9(1)(vi) of the Act, which were deemed to arise in India and hence taxable in India. Therefore, the AO was of the view that the assessee failed to deduct the tax u/s 195 and was thus deem ed to be a assessee in default u/s 201(1). The AO initiated the proceedings u/s 201 against the assessee for non-deduction of tax at source from the payments made to the non-resi dents and passed an order u/s 201(1)/(201(1A) of the Act dated 17.3.2004. Accordingly, the AO issued notice of dem and on the assessee u/s 156 of the Act for Rs.37,464,215 u/s 201(1) and interest of Rs.1,766, 064/- u/s u/s 201(1A) of the Act total amounting to Rs.39,230,279/- for non-deduction of tax at source from the paym ents m ade to the non-residents. 3.4 Aggrieved by the order of the AO, the assessee filed an appeal before the CIT(A) and also paid the entire demand raised b y the AO which are as under :
S. N o . P ar t ic u la r s Da t e o f p a ym e nt A mo u n t
( Rs . )
1 P a ym e nt s f o r t h e ye a r e n d e d 27 Ma r c h 2 0 0 4 5 , 4 4, 1 5 0
31 Mar c h 2 0 03 .
2 I nt e r e st u n d er se c t io n 27 Ma r c h 2 0 0 4 1, 7 6 6, 0 6 4
20 1( 1 A)
3 P a ym e nt s f o r t h e ye a r e n d e d 27 Ma r c h 2 0 0 4 5, 0 0 0, 0 0 0
31 Mar c h 2 0 03 .
4 P a ym e nt s f o r t h e ye a r e n d e d 31 Ma r c h 2 0 0 4 2 7, 02 0, 0 65
31 Mar c h 2 0 03 .
To t a l 3 9, 23 0, 2 79
4( A s s e s s m e n t IT A No . 413 /Mum /2008
years : 2003-04 and 2004-05)
3.5 The ld. CIT(A) held that the provisions of the section
195 are not applicable to the assessee, therefore the
assessee was not a defaulter u/s 201(1) of the Act. The ld.
CIT(A) also hel d that the am ount paid to various non-resident content providers will not be taxed in India if the same is being pai d for acquiring rights for live telecast. He further held that for programming rights for delayed telecast is not liable to tax in the hands of non-resident content provider unless they have permanent establishment in India. Accordi ngly he directed the AO to verif y the tax residenc y certificate (TRC) of those non-resident content providers in respect of whom the assessee has not submitted Tax residency certificate. and to allow the benefit of Double Tax Avoidance Agreem ent between India and the countries of non-resi dents content providers.
3.6 The assessee submitted the TRC certificates to the AO except for few cases where the aggregate tax instances comes to Rs.220,433. The assessee has recovered the tax amount from some of the non-resident content providers and issued them withholding tax certificates for Rs.5,425,177/-
5( A s s e s s m e n t IT A No . 413 /Mum /2008
years : 2003-04 and 2004-05)
3.7 The AO has passed giving effect order dated 27.5.2005
to the order passed u/s 250/- and determined the ref und due to the assessee as under :
P a r t ic u lar s A mo u n t in
Rs .
To t a l t a x e s c o ll ec t e d u n d e r s ec t io n 39 , 2 3 0 , 2 7 9
20 1
Le s s: wit h ho ld in g t a x c e r t if ica t e s 4, 8 5 0, 1 6 6
is s u e d W or ld wr e s t lin g f ed er a t io n 57 5, 0 1 1 5, 4 2 5, 1 7 7
en t e r t a in m e nt in c . Br it is h Sk y
Br o a d c a s t in g lt d
Le s s : t ax u n d e r s ec t io n 2 01 ( 1 ) i n
r es p ec t o f c o nt e n t pr o vi d e r s i n
r es p ec t of wh o m T R C; 's h a v e n ot
be e n s u b m it t e d '
Fo r t h e ye ar e n d e d 3 1 . 3 . 2 0 0 3 21 3, 0 2 8
7, 4 0 4 22 0, 4 3 3
Re f u n d d u e 33 , 5 8 4 , 6 6 9
3.8 The AO has issued refund order dated 22.8.2005 with
income tax computation form. However the DDIT did not grant interest u/s 244A while computing the amount of final refund to be issued to the assessee and granted only the refund of Rs.33,584,669/- after giving effect to the order of the CIT(A). 3.9 Aggrieved by the order of the AO for non-granting the interest u/s 244A, the assessee filed an appeal before the CIT(A), who allowed the claim of the assessee by following the decision of the Hon. Suprem e Court in the case of ITO V/s 6( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) Delhi Development Authority reported in 252 ITR 772 and the order of this Tribunal in the case of TATA Chemicals ltd V/s DCIT reported in 16 SOT 481 (Mum) and held that the assessee is entitled for interest u/s 244A in respect of the excess paym ent of tax in response to the order passed under section 201 r.w.s. section 195, 201(1A) and 250 of the Act. 3.10 Before us, the learned DR has submitted that the assessee is not the payer of the tax and theref ore, the provisions of section 244A are not applicabl e for grant of interest to the assessee. The assessee has paid the tax on behalf of the recipient of the payments. Thus, there is no provisions under the statute for refund of the tax as well as interest and the refund is made t o the deductor as per th e circular of CBDT. Therefore, the provisions of section 244A are not applicable when the refund is not payable under the provisions of the Act. He has referred to the provisions of section 244A and submitted that as per Explanation to Clause (b) of Sub-section (1) of section 244A, the interest is payable on the amount which is excess of the demand issued u/s 156. In the case in hand, the assessee paid taxes in pursuance to the order passed under section 201(1), 201(1A) r.w.s.195 and therefore, the paym ent of tax was as per the demand raised under section 156 not excess of the demand.
7( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) The learned DR has forcefully contended that when there was no payment of tax in excess of the demand raised under section 156 then no interest is liable to be paid to the assessee f or refund of the sai d tax. The next line of argument of the learned DR is that the interest u/s 244A is payable only in respect of the assessment for the assessment year commencing on 1.4.1989 and subsequent years. He has ref erred the provisions of sub-section (4) of the section 244A and submitted that when there is no assessment on the assessee in respect of the tax paid in pursuance to the order passed under sections 201 and 201(1A), then no interest shall be payable under section 244A. The Ld. learned DR has thus submitted that the expl anation to clause (b) of sub-section (1) has not been considered in t he decision relied upon by the Assessee as well as by the CIT(A). Thus, the learned DR has submitted that in view of the l anguage of the Explanation to Clause (b) of sub-section (1), the interest on the refund is payable only on the amount which is excess of the demand u/s 156. He has attem pted to distinguish the decision in the case of Del hi Developm ent Authority (supra) and Tata Chemicals (supra) and submitted that in those decisions the aspect of excess of demand u/s 156 as well as sub-section (4) of Section 244A have not been considered and therefore, these decisions are not applicable in the case of the assessee 8( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) when t he assessee is not a pa yee of the money but only the deemed assessee under section 201, 201(1A) and the paym ent of tax was not in excess of demand issued under section 156. Moreover, there was no assessment on the assessee resulting the demand u/s 156 and payment of tax.
The learned DR has forcef ully contended that the legislature their wisdom has provided under the explanation that the interest is payable on the refund of the amount which is excess of the demand u/s 156 and only in respect of the assessm ent for the assessment commending on 1.4.1989 and subsequent years.
3.11 On the other hand, the learned AR has submitted that the explanation to clause (b) to sub-section (1) of Section 244A is not for determining the amount on which the interest is payable but clarifies the date from which the interest is payable. Further, the term used in the explanation as excess of such demand refers to the amount which becomes excess in pursuance to the subsequent orders. The learned AR has referred the clause (b) as well as explanation and submitted that clause (b) and explanation is only regarding the period for which the interest is pa yable on refund.
9( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) 3.12 The learned AR has tried to explain that if the assessee paid the demand in installments then only that part of the paym ent of the tax which is found as excess will be considered and t he date on which such part of dem and i s paid is relevant f or the calculation of interest and not from the any other date on which the assessee has paid the tax but which was not in excess. He has relied upon the decision of the Hon. Suprem e Court in the case of ITO V/s Delhi Development Authority (supra) and submitted that the order u/s 201(1A) is an order of assessment. He has further contended that section 2(7) of the Income Tax Act defines the term assessee which i ncludes actual assessee as well as the deemed assessee. Therefore, the assessee was treated as deem ed assessee while passing the order under section 201, 201(1A) and demand was raised under section 156. Thus, there was an assessment on the assessee as per sub- section (4) of section 244A of Act. He has also relied upon the decision of this Tribunal in the case of TATA Chemicals (supra) and subm itted that the case of the assessee is covered by the decisions of the Hon. Supreme Court in the case of Delhi Development Authority and Tata Chemicals (supra).
10( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) 3.13 W e have considered the rival contentions and rel evant record. W e have also given our thought to the various case laws relied upon by either parties as well as the relevant provisions of the Act. W e find that the assessee company made paym ents during the financial years relevant to the assessm ent years under consideration. At the threshold we note that in the earlier year i.e. for the AY 2003-04, the assessee was treated as assessee in default for deduction of TDS by an order 19.02.2004 passed under section 201(1) and 201(1A) of the Act and the said issue for the assessment years 2003-04, 2006-07 and 2008-09 was subsequentl y decided by this Tribunal in favour of the assessee vide order dated 25.06.2010 reported in 43 DTR 311. Therefore, in the mean time, the assessee moved an application u/s 195(2) before the AO for certificate in respect of pa ym ent to be made to the GCC is not taxable in India. The Asstt. Directors of Income Tax (International Taxation) vide its order dated 27.04.2007 passed under section 195 of the IT Act directed the assessee to withhold tax at the rate of 10.96% on th e paym ent to GCC. Accordingl y, the assessee withheld the paym ent not voluntarily but in pursuance to the order of the ADIT of Incom e Tax (International Taxati on) u/s 195. So f ar as the circul ars referred by the learned DR are concerned the Board has clarified the refund to be made to the person 11( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) responsible f or deducting the tax at source in the cases where
(a) after the deposit of tax deducted at source under section 195, the contract is cancelled and no remittance is required to be made to the foreign collaborator, (b) the remittance is duly made to the foreign collaborator, but the contract is canceled and the foreign collaborator returns the remitted amount to the person responsible for deduction tax at sources, (c) the tax deducted at source is found to be in excess of tax deductible for any other reason; and (d) in the cases where the tax is deducted at sources u/s 195 and paid in one assessm ent year and remittance to the forei gn collaborator is made and/or refunded to the Indian company followi ng cancellation of the contract in another assessm ent year. Thus, in the cases where the income does not accrued to the non-resident the am ount deducted as tax under section 195 and paid to the credit of the government belongs to the deductor. Under these circumstances, the Board has found that since the refund was to be given onl y on a claim being made by the non-residence whereas the income were not income as accrued to the non- residence due to the cancellation of the contract, the amount deposited to the credit of the government account u/s 195 cannot be sai d t o be taxed and accordingly decided that this am ount can be refunded to the deductor of the tax with the prior approval of the Chief Commissioner of Incom e Tax 12( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) concerned. Thus, the circular referred and relied upon by the learned DR deals with the situation where the tax deducted on the remittance made to the non-resident but finally no incom e has accrued to the non-residence due to the cancellation of the contract.
3.14 In this case, the assessee paid the taxes in pursuance to the orders u/s 201, 201(1A) whereby the assessee was treated as the assessee is in default. The assessee challenged the said order before the CIT(A), who held vide order dated 25.01.2005 that the provisions of section 195 of the Act were not applicabl e t o the assessee, therefore, the assessee was not in default under section 201, 201(1A) of the Act. The said order of the CIT(A) has been accepted by the revenue and was not challenged. Thus, the ref und becam e due to the assessee as a result of the order passed by the CIT(A) dated 25.1.2005. The dispute arises regarding th e paym ent of interest under section 244A. The learned DR has assailed the impugned order of the CIT(A) on three counts (i) that the assessee has not paid any tax and the tax has been paid on behalf of the payee, (ii) he has stressed the term used in the expl anation to clause (b) of sub-section (1) of section 244A as " tax paid in excess of such (demand)" and submitted that the assessee paid the tax only as per the dem and u/s 13( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) 156, therefore no interest is pa yable u/s 244A and (iii) the learned DR contended that there was no assessm ent in th e case of the present assessee resulting the payment of tax ;and consequently the refund.
3.15 As far as the first contention of the l earned DR that the appellant before us is not an assessee in respect of the tax paid and he has paid tax on behalf of the other assessee is concerned. The Hon Suprem e Court in the case of ITO V/s Delhi Development Authority (supra) has considered this contention of the department at pages 775 and then pages 776 of the report :
"It is submitted that sub-section (1A) of section 244 will not be applicable since the payment of tax was not made in pursuance of any order or assessment. This contention in our view has no force. It would not be necessary that in all cases, before payment is made, there must always be an actual order of assessment. Tax is payable in advance as well"
"In the case in hand, as indicated earlier, the direction to refund the amount has been made in appellate proceedings before the Tribunal. The amount is to be refunded to the assessee. It cannot be said that the "refundee" will not be an assessee only for the reason that actually no assessment proceeding had taken place. It would be pertinent to refer to the provision contained under section 201 of the Income-tax Act which clearly provides that if the principal officer or the company liable to deduct the income-tax at source fails to do so, he shall be deemed to be assessee in default in respect of the tax. The definition of the word "assessee" as contained under clause (7) of section 2 of the Act reads as under:
"2(7) 'assessee' means a person by whom any tax or any other sum of money is payable under this Act, and includes--
14( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05)
(a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount refund due to him or to such other person;
(b) every person who is deemed to be an assessee under any provision of this Act;
(c) every person who is deemed to be an assessee in default under any provision of this Act."
From the above provision, it is clear that term "assessee" includes actual assessees as well as deemed assessees under the provision of the Act. It is therefore not correct to contend that unless there are actual assessment proceedings pertaining to any person, he cannot be considered to be an assessee. In the present case the D.D.A. was considered to be liable to deduct the tax at source. It failed to do so. Hence, the order under sections 201(1) and 201(1A) was passed raising the demand and the amount of tax was paid. The order of refund was passed in appellate proceedings under the Act attracting section 240 of the Act. Certain decisions were cited at the Bar to show the meaning of the words "assessee" and "assessment" and different stages of the assessment proceedings, need not be dealt with in view of the clear definition of the word "assessee" under the Act as quoted above."
Thus it is clear from the decision of the Hon'ble Supreme Court (supra) that the term assessee includes deemed assessee. Therefore, "deemed assessee in default" held under section 201(1) of the Act falls under the definition of assessee and provisions of section 244A are applicable. As per section 240 the refund of any amount due to the assessee as a result of any order passed in an appeal or other proceedings under this Act, the refund of the said amount is the amount which becom es due to the aseseee under this Act. Therefore, the 15( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) refund resulted by the order passed by the CIT(A) is very much covered under the provisions of section 244A. 3.16 As regards the explanation to clause (b) of sub-section (1) is concern we deem fit and proper to quote clause (b) an d Explanation as under:
"244A. (1) 47[Where refund of any amount becomes due to the assessee under this 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 following manner, namely :--
(a) ......
(b) in any other case, such interest shall be calculated at the rate of 53 [one-half per cent] for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.
Explanation.--For the purposes of this clause, "date of payment of tax or penalty" means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.
Clause (b) provides that the interest on the excess payment of tax in the case which are not covered under (a). In other words clause (b) deals with the cases where refund does not becom es due out of any collected under section 206C or paid by wa y of Advance Tax u/s 199 but the cases where the tax is paid as per the order of the revenue authority and demand raised accordingly. Thus, if the contention of the learned DR is accepted and interpretati on to explanation to clause (b) i s given in the manner as contended by the learned DR then no 16( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) interest shall be payable in any of the cases falling under clause (b) sub-section (1) because in the cases where the tax is paid as per the original dem and raised u/s 156 then even the said demand is reduced by subsequent order(s) as prescribed under sub-section 3 of section 244A and consequently refund becomes due as the demand was not found as per law, no interest shall be payabl e. Thus if the contention of the learned DR is accepted then despite the refund of the am ount in pursuance to the subsequent orders no interest shall be payable under section 244A which in our view is not the intention of the legislature u/s 244A. The expression "excess of such demand" as contained in explanation to clause (b) means and includes the demand as reduced or increased as a result of subsequent order under this Act. Therefore, the pa ym ent tax or penalty becomes excess or short as a result of any order passed in an appeal or other proceedings under this Act as referred in section 240 of the Act or an order inter-alia sections 250 or 254 as per sub-section 3 of secti on 244A, the interest shall be increased or reduced accordingly. In a case, whe re the interest is reduced, the AO shall serve a notice of demand on the assessee in a prescribed form specif ying the am ount of excess interest paid and requiring him to pay such amount.
17( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) Such notice of demand shall be deem ed to be a notice u/s
156. W e quote Sub-section (3) of section 244A as under:
"Interest on refunds.
244A. (1) ................(2)
(3) Where, as a result of an order under [sub-section (3) of section 115WE or section 115WF or section 115WG or] [sub-section (3) of section 143 or section 144 or] section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly"
Therefore, if the interpretation sought by the l earned DR if given to clause (b) and explanation thereto, it will lead to absurdity.
3.17 As regards the assessment referred in sub-secti on 4 of section 244A is concerned, the hon'ble Supreme Court in the case of ITO Vs. DDA (supra) held that It cannot be said that the "refundee" will not be an assessee only for the reason that actually no assessment proceeding had taken place. It would be pertinent to refer to the provision contained under section 201 of the Income-tax Act which clearly provides that if the principal officer or the company liable to deduct the income-tax at source fails to do so, he shall be deemed to be 18( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) assessee in default in respect of the tax. The term "assessee" includes actual assessees as well as deemed assessees under the provision of the Act. It is therefore not correct to contend that unless there are actual assessment proceedings pertaining to any person, he cannot be considered to be an assessee. Thus once the order section 201 has been passed against the assessee, the departm ent cannot take the plea of no assessment. Accordingly, we do not find any m erit in the contention of Ld. D.R. 3.18 In the case of TATA Chemicals ltd V/s DCIT reported in (2007) 16 SOT 481 (Mum) in paragraphs from 20 to 26 the Mumbai Benches of this Tribunal has held as under :
"20. In the facts and circumstances of the present case; the refund becomes due to the assessee pursuant to the order of CIT(A) wherein it was held that ' assessee was not to deduct tax at source on the amounts remitted to the recipient outside India. The refund of money paid by the assessee becomes due to it on the passing of the appellate order in appeal as per the provisions of s. 240 of the IT Act. The assessee is not to make any claim in this regard for the issue of refund as per the provisions of s. 240 of the Act, which provides that refund is automatically due to the assessee after the order is passed in appeal or any other proceedings under the Act. Sec. 244A(1) of the Act further provides that in addition to refund of any amount becoming due to the assessee under the Act, the assessee is also entitled to receive interest on such refunds which have become due to the assessee under the Act. The refund in the present case was determined on account of the order giving effect to the appeal order passed by the CIT(A).
21. Clause (a) to s. 244A(1) covers the instances of payment of sums of money by way of advance tax or TDS. Clause (b) to s. 244A(1) of the Act covers all other cases wherein refund has become due to the assessee. The phrase used in cl. (b) to s. 244A(1) of the Act is in any other case ' . The Explanation to cl.
(b) to s. 244A(1) further provides that ' date of payment of tax or 19( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) penalty ' means the date on which the amount of tax or penalty specified in the Notice of Demand issued under s. 156 is paid.
The Explanation attached to the main section does not in any way obliterate the meaning of the section. A reference was made to the decision of Hon'ble Supreme Court in S. Sundaram Pillai vs. V.R. Pattabiraman AIR 1985 SC 582 in Grindwell Norton Ltd. ' s case (supra), which in turn had held that "the word ' itself shows that it is". Applying the principles of Hon ' ble Supreme Court in S. Sundaram Pillai ' s case (supra) it was held in Grindwell Norton Ltd. ' s case (supra), that ' where the assessee had claimed interest on excess payment of self- assessment tax under s. 140A of the IT Act, the interest on such refunds due to the assessee was payable ' .
22. In the facts of the present case, the payment of tax is made pursuant to order under s. 195(2) of the Act passed by the AO. Sec. 156 of the Act talks of service of a notice of demand in the prescribed form, where any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act. The order in the present case has been passed under s. 195(2) of the Act for which notice of demand is to be issued under s. 156 of the Act, which very categorically provides that where any tax, interest, penalty or any other sum is payable, because of ' any order passed under the Act ' . The order under s. 195(2) of the Act has been passed under the provisions of the Act and any notice of demand for the said amount due pursuant to order passed under s. 195(2) is bound to be issued under s. 156 of the IT Act.
23. The provisions of cl. (b) of s. 244A(1) of the Act very categorically provides that interest on any refund arising because of payment of tax ' in any other case ' , which shall include the payment made i by the assessee pursuant to order under s. 195(2) of the IT Act by which the AO requisitioned the assessee to deduct the tax and deposit the same in treasury before remitting the amounts due to the recipients outside India. Accordingly, the assessee is entitled to receive interest under s. 244A(1)(b) of the IT Act deposited pursuant to order passed under s. 195(2) of the Act) which in turn have become due to the assessee because of the order passed in appeal against the said order under s. 195(2) of the IT Act.
24. Reference was made to the Circulars issued by the Board wherein approval was sought for grant of refund of excess deduction or erroneous deduction of tax at source under s. 195 of the Act. The cases under consideration related to circumstances where : "
20( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05)
(i) after the deposit of TDS under s. 195,
(a) the contract is cancelled and no remittance is required to be made to the foreign collaborator;
(b) the remittance is duly made to the foreign collaborator, but the contract is cancelled and the foreign collaborator returns the remitted amount to the person responsible for deducting tax at source;
(c) the TDS is found to be in excess of tax deductible for any other reason;
(ii) the tax is deducted at source under s. 195 and paid in one assessment year and remittance to the foreign collaborator is made and/or returned to the Indian company following cancellation of the contract in another assessment year.
25. The Board by way of Circular No. 769, dt. 6th Aug., 1998 and Circular No. 790, dt. 20th April, 2000 provided that the assessee shall be entitled to refund of such payments made under s. 195 of the Act, but, ' the amount paid into the Government account in such cases, is no longer ' tax ' . In view of this, no interest under s. 244A is admissible on refunds to be granted in accordance with this circular or earlier circular.
26. The circumstances mentioned in the circular are different from the facts and circumstances of the case before us. In the circumstances referred to in the Circular, the tax was deposited by the persons on their own and voluntarily, without any demand being made by the AO or any other authority under the Act. But, in the facts of the present case, the amount was paid pursuant to an order passed by AO under the provisions of s. 195(2) of the IT Act, against which the assessee filed an appeal before the CIT(A). In the order giving appeal effect to the order of CIT(A), refund became due to the assessee which in fact arises because of the provisions of s. 240 of the IT Act. The provisions of the Act prevail over the instructions issued by the Board by way of CBDT circulars, which in any case are not applicable to the facts of the present case. Their Lordships of Hon ' ble Supreme Court in Sandvik Asia Ltd. ' s case (supra) had held that where excess amount of tax is collected from assessee, the Revenue must compensate assessee and the compensation in this case is by way of interest under s. 244A of the Act for the period when the amount was withheld. Accordingly, we direct the AO to allow the interest under s. 244A(1)(b) of the IT Act on the amount due to the assessee pursuant to the order passed giving effect to CIT(A) ' s order 21( A s s e s s m e n t IT A No . 413 /Mum /2008 years : 2003-04 and 2004-05) appeal. Thus, the ground Nos. 1, 2 and 3 raised by the assessee are allowed".
3.19 In view of the decisions of the Hon.Supreme Court in the case of ITO V/s Delhi Devel opment Authority (supra) and th e decision of a co-ordinate Bench of this Tribunal in the case of Tata Chemicals (supra), we hold that once the ref und becomes due as per the provisions of this Act, the interest is payable as per the provisions of section 244A and accordingl y, the assessee is entitled f or the interest. Hence, we do not find an y error or illegality in the order of the learned CIT(A). W e confirm the same.
4. The appeal of the revenue is dismissed.
Order pronounced in the open court on 28. 01.2011 Sd sd (J.SUDHAKAR REDDY) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, on this 28 th da y of Jan 2011 SRL:19111 copy to:
1. Appellant
2. Respondent
3. CIT Concerned
4. CIT(A) concerned
5. DR concerned Bench BY ORDER True cop y ASSTT. REGISTRAR, ITAT, MUMBAI