ITAT AHMEDABAD BENCH ‘D’

Assistant Commissioner of Income- tax

v.

Alembic Ltd.

R.P. GARG, VICE PRESIDENT

AND I.P. BANSAL, JUDICIAL MEMBER

IT APPEAL NO. 1823 (AHD.) OF 2006

[Assessment year 2002-03]

October 4, 2006

Section 234D of the Income-tax Act, 1961 - Advance tax - Interest on excess refund - Assessment year 2002-03 - Whether interest under section 234D can be charged only on such portion of refund which exceeds amount refundable on regular assessment - Held, yes - Assessee filed its original return of income for relevant assessment year on 30-10-2002 and had also paid advance tax and TDS amounting to Rs. 9,39,63,517 against which tax ultimately found to be leviable was Rs. 7,28,43,945 - Subsequently, assessee had filed three revised returns on 20-11-2003, 11-2-2004 and 11-3-2004, respectively - Assessing Officer processed original return of income under section 143(1)(a)and granted refunds of Rs. 29,21,604 and Rs. 6,33,807 (aggregating to 35,55,411) on 25-3-2003 and 30-7-2003, respectively - Assessing officer also processed revised return under section 143(1)(a) and granted a refund of Rs. 3,26,37,466 on 19-3-2004 - Thereafter, Assessing Officer made regular assessment of assessee under section 143(3) on 29-3-2004 and taking into consideration advance tax and TDS paid in original return worked out refund at Rs. 2,01,22,225 - Thereafter, Assessing officer levied interest under section 234D on refunds, so granted - Whether refund payable to assessee on regular assessment being in excess of first two refund but less than third refund granted on 19-3-2004, interest under section 234D could not be charged on first two refunds but could be charged only on excess of third refund from date of third refund to date of regular assessment - Held, yes

FACTS

For the assessment year 2002-03 the assessee filed its original return of income on 30-10-2002. Subsequently, the assessee had filed three revised returns on 20-11-2003, 10-2-2004 and 11-3-2004, respectively. During the previous year, the assessee had also paid advance tax and TDS amounting to Rs.9,39,63,517.

The Assessing Officer processed the original return of income under section 143(1)(a) and granted the refunds of Rs. 29,21,604 and Rs.6,33,807 on 25-3-2003 and 30-7-2003, respectively. The Assessing Officer also processed the revised return under section 143(1)(a) and granted a refund of Rs. 3,26,37,466 on 19-3-2004. Thereafter, the Assessing Officer made regular assessment of the assessee under section 143(3) on 29-3-2004 and taking into consideration advance tax and TDS paid in original return worked out refund at Rs. 2,01,22,225. The Assessing Officer also levied interest under section 234D as follows : (a) on refund of Rs. 29,21,604 issued on 25-3-2003 (from 1-3-2003 to 29-3-2004), (b) on refund of Rs. 6,33,807 issued on 30-7-2003 (from 30-7-2003 to 29-3-2004) and (c) on refund of Rs. 3,26,37,466 issued on 19-3-2004 (from 19-3-2004 to 29-3-2004).

On appeal, the Commissioner (Appeals) held that interest under section 234D could not be charged in respect of first two refunds aggregating to sum of Rs. 35,55,411 (Rs. 29,21,604 + Rs.6,33,807) and that the same could be charged only in respect of the third refund given to the assessee amounting to Rs. 3,26,37,466. He, therefore, directed the Assessing Officer to compute the interest under section 234D in respect of third refund for the period for which the excess refund had been granted to the assessee i.e., from 19-3-2004 till the date of regular assessment.

On revenue’s appeal:

HELD

Section 234D makes provision for charging interest on excess refund granted under section 143(1). According to section 234D(1) subject to the other provisions of the Act, where any refund is granted to the assessee under section 143(1) and (a) no refund is due on regular assessment; or (b) the amount refunded under section 143(1) exceeds the amount refundable on regular assessment. the assessee shall be liable to pay simple interest, at the specified rate on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment.

As ultimately refund had been found due on the regular assessment, the case of the assessee would not fall within the condition as described in situation (a) and it would fall under situation (b). Word used in situation (b) is ‘exceeds’ so interest is leviable on such portion of refund which exceeds the amount refundable on regular assessment. There is no ambiguity in the language of section 234D, so interest could not be charged on the amount of refund which did not exceed the amount refundable on regular assessment. The advance tax and TDS paid by the assessee for the year under consideration was Rs. 9,39,63,517 against which the tax ultimately found to be leviable was Rs. 7,28,43,945 (excluding interest leviable under section 234C Rs. 7,09,112). Even after levy of interest under sections 234C and 234D the refund, according to the advance tax and TDS paid by the assessee worked out at Rs. 2,01,22,225. Thus, in any case, it was in excess of first two refunds aggregating to sum of Rs. 35,55,411. Thereefore, no interest could be charged in respect of first two refunds aggregating to Rs. 35,55,411 and interest could be charged only in respect of third refund given to the assessee amounting to Rs.3,26,37,466. The Commissioner (Appeals) had directed the Assessing Officer to compute interest under section 234D in respect of third refund for the period for which the cross refund had been granted to the assessee from 19-3-2004 till the date of regular assessment. The direction of the Commissioner (Appeals) was in accordance with law and was to be upheld.