Bombay High Court
Jay Bros. Investment & Trading Co. (P) ... vs Dy. Cit on 6 November, 2000
Equivalent citations: (2002)74TTJ(MUMBAI)748
ORDER
D. Manmohan, J.M. This appeal filed by the assessee is directed against the order of the Commissioner (Appeals)XXII, Mumbai, and it pertains to assessment year 1993-94.
2. Facts, concerning the only issue in dispute before us, revolve in a narrow compass. The assessee is an investment company having income from dividend and interest. In respect of the assessment year 1993-94, the assessee declared income of Rs. 3,53,190. Tax payable on the declared income works out to Rs. 2,03,084. However, tax collected by the department in the form of TDS was Rs. 5,45,555. Assessee-company filed its return on 29-12-1993, i.e., before the due date to file return under section 139(1) to claim refund of tax. The return was processed under section 143(1)(a) of the Act wherein the income returned by the assessee was accepted. The intimation is dated 29-3-1994, wherein the interest payable on the refund was calculated @ 12 per cent on Rs. 3,42,471 for 12 months only i.e., from 1-4-1993, to 29-3-1994. The intimation under section 143(1)(a) and the refund order dated 13-1-1995, were, however, served on the assessee only on 31-1-1995.
3. The case of the assessee is that interest under section 244A has to be calculated upto the date of refund voucher i.e., 13-1-1995. Since the assessing officer has not calculated interest upto that date, assessee challenged his order before the Commissioner (Appeals). As Commissioner (Appeals) affirmed the order of the assessing officer on this issue, assessee filed further appeal before the Tribunal, contending inter alia that under section 244A of the Income Tax Act, 1961, interest has to be calculated upto the date of refund voucher.
4. Learned counsel Shri Sivram adverted our attention to section 244A of the Income Tax Act and in particular the words "........ to the date on which the refund is granted" in sub-clause 1(a) to submit that the date of cheque/refund voucher/refund order should be taken as the date of refund and not the date of assessment order or intimation wherein a formal quantification of amount refundable takes place. It may be noted that upto 1-4-1989, interest on the refund is permissible as prescribed under section 243 of the Act wherein similar expression is used by legislature. Section 244A comes into effect from 1-4-1989, whereas section 243 is available upto or prior to l-4-1989. The words "to the date of the order granting the refund" in section 243 of the Act appear to have been misinterpreted by some assessing officers which lead to clarification by CBDT by a Circular No. 20-D(XXII-22) of 1968, dated 20-8-1968, which is extracted below for immediate reference :
"Under the terms of section 243, interest is payable by the Government where the refund is not granted within three months from the date on which the total income is determined and the interest where payable is to be calculated at the specified rate, from the date immediately following the expiry of the three months aforesaid to the date of the order granting the refund. From this, it is clear that the date of the order granting the refund is the date of the refund voucher itself. The view stated to have been taken by some Income Tax Officers, that the date of the assessment order is to be taken as the date of order the granting the refund is not correct. Thus, in cases where interest is payable by the Central Government to assessee under section 243 of the Act, such interest is to be calculated up to the date of issue of the refund voucher. "
5. The learned counsel submitted that the assessee was deprived of the legitimate refund due to it for no fault on its part. He further submitted that the interpretation placed by the tax authorities leads to absurd result in some cases and may negate the very purpose of introduction of section 244A. Explaining further he submitted that excess tax paid letigimately belongs to the assessee and for the period for which the assessee is deprived of such amount the legislature in its wisdom thought that the assessee should be compensated in the form of interest. If the expression "the refund is granted" is interpreted to mean the date of assessment order, there may be a situation where refund may be determined in an assessment order but cheque is not issued for considerable period of time in which event Government enjoys the benefit of possessing assessees money without paying interest whereas assessee is deprived of its money and also compensatory interest for the period of delay i.e., between date of assessment order and date of cheque which may be caused on account of usual bureaucratic red-tapism and other reasons. He submitted that in the instant case the refund voucher was signed ten months after the date of intimation for which interest has to be granted. He also submitted that in spite of clarification by Central Board of Direct Taxes the Tax authorities rejected the claim of the assessee and hence this is a fit case for awarding costs under section 255(2B) of the Act inasmuch as the assessee had to incur expenditure on the cost of litigation upto the date of Tribunal. In this regard, he relied upon the judgment in Bagri Foundation v. Chief CIT & Ors. (1999) 235 ITR 99 (Del).
6. On the other hand, the learned Departmental Representative strongly relied upon the orders of the tax authorities.
7. We have carefully considered the rival submissions and perused the record. In our view, the plea of the assessee deserves favourable consideration. In several cases, where a refund has to be granted to the assessee, the revenue officials used to take longer time in clearing such refunds resulting in considerable hardship to the assessee and with a view to expedite grant of refund, a uniform period of three months has been specified in sections 243 and 244 by Taxation Laws (Amendment) Act, 1970. If there is delay beyond the period of three months, Income Tax Act provided for payment of interest to the assessee by the Central Government. While implementing the provisions of section 243 of the Act, it was again found that the assessing officer gave a different interpretation of the said section which is not intended by the Government. With a view to clarify the issue, the Central Board of Direct Taxes issued a circular (extracted above). It may also be noted that section 243 is operative upto assessment year 1988-89 only whereas section 244A comes into effect from 1-4-1989 in lieu of sections 214, 243 and 244 as clarified by the Central Board of Direct Taxes in its Circular No. 549 dated 31-10-1989. Therefore, it is clear that the circular issued in connection with section 243 of the Income Tax Act equally applies to section 244A. It also appeals to logic that interest has to be paid till the date of preparation of cheque as otherwise the purpose of granting interest would be defeated because in the Government Departments there may be long gap between the formal order and the date of preparation of cheques. The Central Board of Direct Taxes categorically stated that interest has to be granted upto the date of refund voucher, In fact, the cheque issued by the Government is known as "Income Tax Refund Order". Therefore, it is proper to assume that the words "on which the refund is granted" in section 244A mean the date of signing the Income Tax Refund order i.e., the refund voucher. We, therefore, direct the assessing officer to calculate interest payable to the assessee from first day of April of the assessment year to the date on which the refund voucher is signed. Considering the circumstances of the case, we are also of the view that it is a fit case for awarding costs to the assessee under section 255(2B) of the Act. In our view, awarding cost of Rs. 3,000 would meet the ends of justice and we hereby direct the respondent to deposit the cost with the Deputy Registrar, Tribunal (Mumbai Zone) within one month from the date of receipt of the order and the Registry is further directed to collect the cost and pay the same to the assessee upon presenting an application to that effect.
8. In the result, the appeal filed by the assessee is allowed.