Karnataka High Court
The Commissioner Of Income Tax vs M/S Fanuc India Ltd on 7 February, 2011
Bench: N.Kumar, Ravi Malimath
W 3 ,..
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATES THIS THE 7*" DAY OF FEBRUARY 2011
WQESENT
THE Momme MR. JUSTICE N,KuMAR_.--¥'. " "'
AND
THE HCDNBLE MRJUSTICE %1Av::"M§?aLIM.'A.:*H
.1 2s:%%_ ~ :
BETWEEN:
1,. The Corr.missioiie§r Qf"lnc-ovm<~3_--tax_'
C,R.Bui§di~ng; '
Queens; Roam" _
Eangaiore.
2,.---.T_he ¥§;'S'fI.CAQmm§SS$E"GE"T%$_§T_'{}f: Incame Tax
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Baiagamre.' .,.APPELLA§*~3"?S
M:'§;'3.S"esii駣haEa, Advocate)
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4';~.,;~4,s*1s;Fé;:u§<iAEmma Ltd;
T 'Tfaéo.4_:A',, E§€£'§':%*Qf"E§C City,
A88';-*§gaE0:*€ - Efifi 159. .e.RE§P$§'\§SEE\ET
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3. when Section 2349 was int;~:;c:§'_t.§_ié<:i'iCiifiio
Income Tax Act, 196:: (for si'iortV ifiereina_f'te:r..:}gfé2'ifed_too_'4a's.
the 'Act"), the assessment was CD§Tii;1{l::-'2f1?2E'§' ~ufiaféi7fE§_e':i:i_ai'i
143(3) for the assessmeniiiiysahar
20.12.2€)O«<ii determining .. tax at Rs.5,41,4Z7,331/'~ who_::é'inA Section 2340 was calculated not from the date of i$$i._ivei":é3;'f:.'__fe.fiQii"ici, March 2002. The Asgessiné mistake apparent from the Lfiiacovrioi _isHsHued a notice under Section 154 ofothe' assessee contested the said proceedingus'-»i3j;"fioriieriding that since Section 2340 was _i r'i'séri:i.éjii i'i~--.i,p thegfatute with effect: from o:i_.o6.2oo3, no i«,ii"i_'CiZ-f3iAi'é,"f4§:'1Za§il1{ii't~33"'the said Section is leviable from any eariier d23._te.V___v' i2.o.§A/ever, the saié contention was rejected hy the x »%SS'E;S'§i:iig Officer on the grouriiti that if the order reducing ii igfaiiié is gagged after G:ix36i2G§3!, the gaid orovision is
--I§atti'acteo amt} iriteiegt is payaoia from the date of iefiiiid ario not from 'aha date of isitroéiistioii of Sofitioii 234$. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income "Tax (Appeevle}.-.._4l_liThe appellate Aethority held that since the retrespective effect from' is censpieetgeeesiy e'b'Sen:t .v§iE1eb.Vtr':t.e "
said Section was intrpducee by the Fih'e.n'ce'A_lct ji;\;itlil:'effei.,:;; from 01.06.2003, the interest ';«-ex netiexriableirfrewiffithpeidate ef refund and it is {3'3Yabl€V.fl%)VVlfi'§${" anti therefare, he set asldeA"t_h;~3_oa'tties:f»'p.asaee>"u.;'3der Section 154 at the Act. Aggrieved el*a_rhe,:xthe;fievexeeeue preferred an appeal to be dismissed.
Thereafter! before the tribunal, which laiisce it is thereafter that the revenue hag "preferred this appeal. 42$: fT«h_e substantial question of law that arises for it *r:.lo'n';:Ede~ra"«:iVeh.Tin-this appeal is; whether the interest payable :"i:heL refund is; anterior to 15612003 in the event of the uhe'e:* S_'ettie'n 2349 is payable frem the date of refund if E assessment order being passed after Sectien 2340 came iste force.
5. War to intrsejuctésn of Se<:'i:i.%:>'vr"1_j~-w..V2:<'A».§1':.L$<_, interest was payabie on refund én1;»t%':e_:si,rg#2ri«: of refund és sea'; aside and the.s'assessee"%s madé...tc zpajr i:'E=1e'*a amount sf refund, from the of ré'ct.ifE'catio.§:;E ordar or the arders passed by'fi:i§"e..A§.i§Vei§_sti-2;._§as§Vvi:'i~1.Qréties'.'A
6. ba:skgr'<iLi1ndffiectéhoia' §.34D came ta be inserted 2003 with effect from O1 ,O£~;, 20_03f.x '?51.tVr§eéds' ;;_r:rje_';': « 'A { the other provisions of ' V' ~....:"his. 'Act, where any refund is ~._g:.ra:':tsd to the assesses under sub~ section (1) of Section 143, and -
A no refurm' is due on rsgufar s assessment; or
(b) the amount refunded under sub sectioxu (1) of section 143 exceeds «flit 6 #100» the amount refundable an regular 3SS€i'5Sl?'?«'E?f'if.
the asseesee shall be liable ffl simple interest at the rate percent on the whole or the exee..<§§felfi--e:unt ' Se refunded, for ever;'2lA}%ée'r7:h'~«.Qr~:
month comprised in 'i'.he7..,:berlold'" freer.' date of grant': of"?_ef-end ta. fine a¢é,;éév..1;;:<._5;;r:3h regular assessmenf;'~~.._'l' _ A_ i 2, Where,' asée' -result of ale-.c>rder under':-iectlen °0fj'lsee.€ion 155 or __sec:tiOne:;f "é'eCtlb;e"' .254 or A, 26_0.leVr section 26.2 or V' "or section 264 or an the ,, 'Commission under sLIb-sec:I':lon (4) x"();'9tler of Settlement efeectlon 2450, the amomnt of refund granted under sub-ser:tr'on (1) of 5er:t:'on :43 is held to be Correctly allowed, eltfzer in whole C?!" in part, as the eeee may be, then, the interest ehargeebie, if any, under st.rb~ser:tien ('1) Sinai} be reduced accereingly. "
'E'. Therefore, it is dear that the aforesaid previsien in the Act wheize tearytfiiiiintetest'en___an§;f refund is; granted to the assessee urétter"sub~S'e'et%,n_n (ii) (if 143 when subsequentiy no refe'i'riwti_V'%'i:"~.tietermiéined be due er the amount of refu'n::d"'-graaétettVLrnVder"«S_ectioe 143(1) ts found to exceed the en regular assessment, t_he"jA;e:?5'ses:tsee:_ to pay simpie Entereet at er the excess amount so part of the month compriseistfi the date of grant of refund to the date at reg'uie':= aesessment.
" _ :::e"i.efui teading of the aforesaid provisien mai«;.e.é cieat that there is no indication in the T'-..«,_"i..at3geagje 7-empioyed in the entire Section that the "'i5;i:ii»e%§_1ent intended it: maize this levy ef tax en exceee ,.._1jreft:r:::i retteepectiveiy. 0:: the eeetrary efter irteerting this 3/ prmzésien in tha Act; it is spectificaiiy gtatéd that it games inta effect fmm 91.06.2003' Though the aznendmmtaf-4i. S'-E}Vy inseritian, the paréiamerzf: has exgressiy amendment games irate effect_;fr9m '.T°?"i";V;r:; Parfiamertt has made its Entemtianl'-aclegfr ~.>:ind'».:,sr13§*'r:§§g'i:::;>iJ§.<_.: In other words, it is; mt retré:~;'s_;'3e§:tixs'e';v- cQr:§§SV.i._i':1«tQVVééffett from oreiy §1.06.2DQ3.;__ The $0" $333?' i"--rzt:e :feV§;Vi;€ on such a refund arises frem :vL'.s*"é§fiiV'.ra;;i'a_§1~:£ not from the date of the ass4essgfnei1t"'<3:;h;,t}¢3::r.V %s"1%5'€'=3E';:«..i:_*:zV;e§A".éiséessmem: order quantifies ij;e.:t':" 1:;'$..;':l:'§S a time, it is Found that the réfund, which he is not entitléd to 1:0 refund the said ameunta Th@r@fofé;L4_'_;fneVréi';x .'4bVe§fcz§€;";:"§éJthe erder 0f agsessment was passégfii ss.zbsafiu@f1§ tcythe insertion of the said provigéon in »if:e_VA:£,'«w~QVQ'i~-d__ not: make the said pmvision retrosgaectivek '*:7ijie.,'g::§9Q'a.?i'::E_c':'i§"providing far impogitiera of interest és a sub4§star'§jt'iv'e".provision. In the abaefice 0? a contract or a u§a.gj.e fircviding for a gaymerzt of interest, interest can be '"i-g%.éééé wig iififlfi? 3%: and it came: 53 magazerefi $3: 2»'~1a.'g* i;
<3?
\ a wreng deéuctiort of the amaunt. Therefare, the iiabiiity to say' interest emanates from the statutery provisicm,---.__It is aiso equaiiy well settleé that miess a 3ubs'f.§srx-t'ELjv_ea'~v., pravision is made retrospeativeiy either by expzfésaAa:§{oLf9'd%sT:.'_"'_4'T M or by impfiication, if: has to be consi'd'ered _gfG'$:;e§:tia?e oniy. A liabiiity, which was not in 3->a':u1(':1 be foisted on a tax payer. In the Courts were Caliad u,p§>n tQVAV-i--:3i'.;éf*pE*ei:.th§>é§é'~p.r0x;%sionS, it is mot epen to :hé them as retrospectiveiy avnd;'fs>_ist §a>;&.x-fiayer which he is not liabie qr:"L:f:_eV
9. "1::__'éS §nVVVLhiRS'.'cGr§:t§.=xt, it is usefufi to refer to the '§.w.C0nst,it§y'ifVi<§'ur1 Befichipf Aihe Apex Caurt: in the case 0:' vs, Commercial "fax Gfficer reported in {i1'99Vé§{}V+9%:"':fi3"f{f whare it has been hefié as :.mder:~ V ".23 is Wei! knawn that when a statute x _fev:'%:;*«;:;'. 3 tax it does so by inseriing a charging V' x __§g%;:'c€i$n by which a !!aE:2;'i;'ty M2: cregatea' 9;" fixefi' aria' Eben §f'QC."8€d§ fa prowfie five machinery' ix: W13- make the liability effective. it, therefore, provides the machinery for the assessment o-5'-.T the /ieoiiity eireaofy fixed by the Chergiog.5":-,_'"~. section, and then provides the mode i"
recovery and {:oi!eCti'on of tax, inc:iud.F:-'3_f,7'.:beo'ari . ,orovisior2s meant to dea:f'J'AAL%r'iti;~ d_ei"3oLi§erg.:.._:"V' ' Provision is also made for i'n:t'eres'ton"
deiayed payments, "'Oroiearii'i§;' lg?-.»'2gV Charging section which'V'Vi'ii'Ti;}i:3s_ the'-.Viijebiiity'g is strictiy construe"Ci..V_ butifltfiei "r.;.i_/'e of"s"t'riz:t construction is not 'ex~te'ra_;:ie{J 'ma<:hi'r2ery pro visions .w/vich . goostrzieo' ;ii'/;<.e:: érzy other statute. '}'§§i:e roechinery'"pro{ri's:'oos must, no dooot';"b'e"--so" "o.::_r2s'i"riij;.=eA&§f« iiauia effectuate the 'H of statute and not defeet 'rhéfj.._sémf2'e=,_:' (See Whitney v. Com"i7?_issioo'e_r4V'o'f" lfifanoi Revenue (1926) AC ';3'}",._ Commissioner of fnCome~£*ax v. Maheliram '7C°Ra:wjiz_es (1940; 8 [TR 442 (PC), India United Comrnissioner of Excess Profits (1955) 2,7 ITR 25} {Supreme CZ"o__;krf.;)A,:"" (1 9515') 1 SCR 810 and Gursehei Saigei L?..§?omroissioner of .Ir2come~te;<, Punjab (2963) AA «.48 [TR 1 (Supreme Court); (1953) 3 see 893), ' Bo: ii: :"??é.!§{" eiso be reeiiseo' that ,orow's:'on oy= id]/M ,,,, it eeerrié,
-- Net fax.
.._'_'L}_.__ wf::'c:h the authority is empowered to fevy and eoilect irztereet, ever: if construed as forming; part of the machinery provisions, substantive few fer the sfmpfe reasen 'V' the absence of contract or usage .
be levied wider few and it cennet' f}.'x'E,'."1'<E,'{'.'€)'«¢/V<:";.3I'-'.'3:4Vff "V by W3)' of damages for wre'}79ft.;l/3!}\§?etefli%?eI?, Cf' the amount. (See 8enf}a£._V.Nag'p-Ur .'%aii*»£%a}<i."{3e,VV Ltd. v. Ruttanji Ramj! 2113" .:193et'*r>r;fe::7 and Union of India v.*"»'1,«L.RatlIia" 954)}? 'see 164 and .285 toHflZ'£.3?tZ')";,_fff)ur--'rrafter:£ion was, however, drawn 'Mr}'Se;7éAte Even in those vi' Sekhar [2 985'} Court); 44 CTR f§ie_'yinceéVVVManganese Ore Co.
Ltd. 1' y. ' .::I;r=.'jf: 9s.5}._f;;.50 rm 961 (supreme Cou}*£;)_,*A% 5,8 ail that the court pointed 4;'c:i'z:t was" that provision for charging interest introduced in order to for the fess occasioned to the A"-.tt'Réve;:t;e}efue to defay. But then Interest was ch_arge€:i on the strength of a statutory ;§zfé?iiris1'on, may be its ebjective wee be A 'tt""~«r:om;3ensate the Qevenue fer delay Jr; payment Eu? regardiese of the reeeerz wfzfcrz Wigs impelled the Legislature ta provide for cl7arging __ interest, the Court must give that meaning ta as is mnveyed by the language used purpose ft) be achieved, Therefere;
provision made in e sterute....f_0_{ csliéfgjifig» levying interest on deleyetl pev}jm}::':
must be construed ase sulfistek-2.tive V' "id not adjective! /aw. Se C;.%n~s:rue€:' the normal rule __of inteifilletaeign bf"steAtqZ'es, we find, es poiriitefd obit us'».e3rl_ier and by Bhagwati, J. in the'~ CoJs case [1 V48 Court) that if the 's {',':"(C'f'?1fC'.?.l"1t'f1lx,'_I"7l:'::"::vS?. aeeepted it leads to Viijieffain anomalies intended by the Lvegislatiiifé. "3 'Z V V.
10. L'Theref¢.reA;--._irflfhe absence of any express words the firov--%si'on making the levy of interest _'rei:§ossg3'ec{E=Je,.VT_itsis oniy prospeetéve ie. from the day it %ntQ"v'fétgr€e we 8150642803, In fact, this View aise "finds su"p';30rt from the fiudgment of the Delhi High Court, ease <3? Qirecfer ef fi3eome~?"ex vg Jecebs Cm'! 3%//I T'-.--,_'-.3§a§::n:y__§s Qniy fmm omstzass when Semen 2343 came m»134m Incorporated and Mitsubishi Corgoration reparteci irj IT}? 2011 \/O1_.33O Page 5?8,
11. Yet another Bench of the Apex Court in the case of Téat t Estate Ltd. vs. State of Kerala repgtfirtefiiga ';~'fR*'_;r: sss Page 262 where it has heid as _L4JF1dE'.AT"i t t "it is wel/--settlecl'V"t'stti'at _ thé" ~;Iri"CL3Ené'¥tax Act, as it stands"avmenVdédl'V:j;nVV't'h¢ l'ir'st'"c'la}"?4 of April of any finah'c'la--l. :9 the assessments of tl3V3Vt:.y:§3al';. _ in the Act; wfglfifh came lhtci' fo'.?Ce...a}'ter me first £3fay__of f.f_l_iém_;,'laI year, would not apply t0'*th'e%assV¢s'srr3ent_:"2'o2' that year, even if the _asses'sm'e.r:tV is-t_ 'attual/y made after the é3I7f§€f7C2'fTlV£§i7?'TSV_COl3'l€ lrzm farce. "
'11; '=§_r2_ that "" "view of the matter, the agpeléaie justified in fielding that the assesses is nc5ti_wiiEai:;ie':t't§3'tV'pay tax from the date of refund and the judgment of the ".14..
into farce. AcCo:dingiy,awe answer this gointia favaur ef tfle assesgee and agafifii the revenue. Cféered accordingly. No Costs.
Prs*