IN THE ITAT AHMEDABAD BENCHE ‘C’
Assistant Commissioner of Income-tax, Circle 1(1),
v.
Alembic Glass Industries Ltd.
R.P.GARG, VICE PRESIDENT
And R.P.TOLANI, JUDICIAL MEMBER
IT APPEAL NO. 1666 (AHD.) OF 2006
ASSESSMENT YEAR 1999-2000
NOVEMBER 10, 2006
Section 244A, read with sections 234B and 234C of the Income-tax Act, 1961 - Refunds - Interest on - Assessment year 1999-2000 - Whether in context of section 244A(1)(b), expression ‘tax’ would include interest also and definition of tax in section 2(43) meaning ‘income-tax’ would not be applicable in context of section 244A(1) - Held, yes - Whether assessee is entitled to interest on refund of interest charged under section 234B which was paid by assessee and, on appeal that interest was found not chargeable and, thus, became refundable to assessee - Held, yes
‘Refund’ occurring in the Income-tax Act, 1961
‘Tax’ in the context of section 244A(1)(b) of the Income-tax Act, 1961
The Assessing Officer observed that the assessee claimed interest under section 244A of Rs.15,85,352 instead of Rs. 9,35,807 and the difference was because of the interest claimed on refund out of interest payment under sections 234B and 234C. He held that under section 244A, interest was payable only on the excess payment of tax and penalty, and therefore, rejected the claim of the assessee, regarding interest claimed on refund of interest payment under sections 234B and 234C. On appeal, the Commissioner (Appeals) held that the assessee was entitled to interest on refund of interest payment under sections 234B.
On revenue’s appeal :
Section 244A grants interest only on that amount of refund that is out of
the payments of tax or penalty, made by the assessee or collected from
him. It is granted from the date of
payment of tax or penalty paid in excess of amount demanded. In the instant case, the assessee had made
the payment of interest under section 234B, which was refunded as the same was
found to be not chargeable. Therefore,
the condition that refund was out of amount paid or collected from the
assessee, was satisfied for granting the interest. [
Considering the dictionary meanings of the word ‘refund’, it could be
said that it is an act of repayment or reimbursement of what one has paid
earlier. This test was satisfied in this
case. [
As regards the question as to whether interest paid by assessee under
section 234B has to be taken a payment of tax or penalty for granting interest
under section 244(1)(b), the expression ‘tax or penalty’ found in the clause (b)
in later part of the section 244A(1) would not qualify or restrict the scope of
the expression ‘amount’ found in the opening part of the section to mean only
‘tax or penalty’. The function of the
clause (b) of later part of section 244(1A) is to find out the date and payment
of the excess amount which the assessee paid by way of tax or penalty to start
the running of interest and that is the reason the expression “from the date
or, as the case may be, dates of payment tax or penalty has been employed. To determined the date (s) of the payment of
the amount under section 244(1) gives emphasis on the amount paid by the
assessee in pursuance of an order and that amount cannot be limited to the
amount of tax or penalty, but would encompass the amount of interest paid by
the assessee. It seems to be the
intention of Legislature that the right to interest is to compensate the
assessee for the excess payment during the intervening period when the assessee
did not have the benefit of use of such money paid in whatsoever
character. A literal meaning given to
the expression ‘tax or penalty’ found in clause (b) of the later part of
section 244A(1), would create an anomalous situation resulting in exclusion of
the concept of the interest. Therefore,
in the context of section 244A(1)(b), the expression ‘tax’ would include
interest also and the definition of tax in section 2(43) meaning
‘income-tax’ may not be applicable in the context of section 244A(1). Consequently, the interest paid in pursuance
of an order under section 234B has to be regarded as forming part of tax or an
adjunct to income tax. The result would
be that the assessee is entitled to interest on the refund of interest paid under
section 234B also. [
In view of the above, the order of Commissioner (Appeals) was to be
upheld, though for different reasons. [
Case Review
ACIT v. Gujarat State Fertilizers & Chemicals Ltd [IT Appeal Nos.
1736, 1737 & 1890 (Ahd.) of 2005 dated 31-7-2006] Distinguished [