1993-VIL-167-ITAT-BLR

Equivalent Citation: ITD 049, 521, TTJ 050, 158,

Income Tax Appellate Tribunal BANGALORE

Date: 17.12.1993

DEPUTY COMMISSIONER OF INCOME TAX.

Vs

KARNATAKA STATE SMALL INDUSTRIES DEVELOPMENT COPRN. LTD.

BENCH

Member(s)  : A. V. BALASUBRAMANYAM., S. BANDYOPADHYAY.

JUDGMENT

Per Bandyopadhyay, Accountant Member --- The main issue in all these three appeals filed by the department in each case, in respect of three different assessees, is one and the same although in the case of M/s. Widia (India) Ltd. another point is also involved. For the sake of convenience, therefore, the appeals are being consolidated and a combined order is being passed. The main issue relating to the appeal in the case of M/s. Widia (India) Ltd. and the only issue in the other two cases is in respect of scope of applicability of the provisions of section 115J(2), in the matter of determination of the amounts of unabsorbed loss, depreciation, etc. to be carried forward and the amounts of written down values in respect of different assets to be considered in the next year. The assessees in all the cases are companies and they have been subjected to imposition of tax on 30% of the book profits in accordance with the provisions of section 115J(1), in all these cases. The question arises as to what should be the amounts of WDVs to be taken into consideration in the next year and what amounts of unabsorbed loss, unabsorbed depreciation, unabsorbed investment allowance, etc. are also to be carried forward. The Commissioner of Income-tax (Appeals) passed a common order in all these cases basing on his another order in ITA 77/DC. SR-5/CIT(A) III/1990-91, dated 2-9-1991. He examined and discussed in detail both the issues (which are actually intimately linked up with each other) and passed his order as below:

(a) With regard to the determination of WDV to be taken for the subsequent year, the Commissioner (Appeals) directed that the opening WDV for the next year is to be taken as the closing WDV of the assets for the immediately preceding year as compared to the year in which the provisions of section 115J were applied and which years are subject-matter of the present appeal. In other words, he has been of the view that inasmuch as no depreciation was actually allowed during the years relevant to the present appeals in view of the assessments having been made under the special provisions of section 115J(1), there would not be any change in the figures of the WDVs as brought forward to this year and the same figures would be carried forward to the next year.

(b) With regard to the determination of the amounts of loss, etc. to be carried forward, the Commissioner (Appeals) held that here also the amounts of loss, unabsorbed depreciation, unabsorbed investment allowance, etc. as brought forward to the years under appeal from the preceding years, should be carried forward in exact manner to the next year and that the amounts of loss, depreciation, investment allowance, etc., if any, pertaining to the years under the present appeals should not be taken into consideration.

2. It is worthnoting, in this connection, that only the revenue has come up in appeals against the above-mentioned decision of the Commissioner (Appeals). No appeal or cross objection has been filed by any of the assessees under consideration against the direction of the Commissioner (Appeals) not to take into consideration the business loss, depreciation, etc. computed in accordance with the provisions of Income-tax Act for the current years, i.e. the years under the present appeals, although at the time of hearing of the appeals before us, some of the learned counsels put forward arguments claiming such a loss, depreciation, etc. for the current year also. We must say, at the outset, that in absence of any appeal from the side of the assessees, there is no question of allowing the losses, etc. for the current years' to be carried forward to the next year.

3. A number of counsels argued in different manners in support of the claims of the assessees and mostly defending the order of the Commissioner (Appeals), although the substance and extent of their arguments are also found to have differed greatly on some issues.

4. The learned departmental representative started his arguments by stating that in the years in which the provisions of section 115J are applied to a particular company, two different calculations of total income are required to be made, one in accordance with the regular provisions of the Income-tax Act and, the other, on the basis of the adjusted book profits. The figure, according to the first method, is thereafter compared with 30% of am figure according to the second method, and the greater of the two resultant amounts is ultimately deemed to represent the total income of the assessee under section 115J(1) and the assessee is ultimately taxed on that basis. He also drew our attention to the fact that sub-section (2) of section 115J starts with the stronger non obstante clause "Nothing contained in sub-section (1) shall affect..." as against the generally used clause "Notwithstanding anything contained in sub-section (1)". He thus argued that the language used in the said sub-section (2) of section 115J is very simple and clear enough and does not call for any case of ambiguity. According to him, for the purpose of determining the amounts to be carried forward to the subsequent year, by way of business loss, unabsorbed depreciation, etc. it will have to be presumed as if the provisions of sub-section (1) of section 115J did not exist. He also relied on the decision of the Supreme Court in the case of Keshavji Ravji & Co. v. CIT [1990] 183 ITR 1 wherein it has been laid down that when the language used in the section is clear, no consideration of equity or anything else is required. He finally argued that on a plain reading of the relevant sub-section, only one view is possible that the business loss, unabsorbed depreciation, etc. for the current year is required to be computed in the usual way by taking into consideration the brought forward losses, etc. from the earlier years and by setting them off against the income of the assessee (if any) for the current year and thereafter by carrying forward the balance amount to the next year. He thus assailed the order of the Commissioner (Appeals) in this regard.

5. Shri Vijayaraghavan, on behalf of M/s. Widia (India) Ltd., on the other hand, strongly contended that for a particular year, there cannot be more than one total income and in the years in which the provisions of section 115J have been applied, the total income for the assessee would be the deemed total income under section 115J(1). He also referred to the earlier provisions of section 80VVA, the anomalies wherein are stated to have been tried to be taken care of in introducing the present provisions of section 115J, and argued that inasmuch as no depreciation, investment allowance is actually allowed in the current year on account of the application of the provisions of section 115J(1), there should not be any reduction from the amounts of unabsorbed depreciation, etc. brought forward from the earlier year and that they should be carried forward in exact manner to the next year. He also argued that any other interpretation of the relevant sub-section would do violence to the assessees inasmuch as they will lose the benefits already vested in them by way of unabsorbed depreciation, etc. brought forward from the earlier years to the current year.

6. Shri Parthasarathy, taking the side of a number of assessees, also virtually supported the contentions of Shri Vijayaraghavan and argued that the brought forward unabsorbed depreciation, etc. are to be considered to have been set off in the current year to the extent of the income charged under section 115J(1) only and that the balance amount of unabsorbed depreciation, etc. brought forward from the earlier years are required to be carried forward to the following year without any consideration of whether any portion thereof was required to be set off against the income of the assessee computed in accordance with the regular provisions of the Act.

7. Shri Indra Kumar, also representing some of the other assessees whose cases are not being considered in the present order, submitted a detailed written argument. In the said written submission he contended that when statutory depreciation is considered for determination of WDV on the basis of interpretation of section 115J(2) only such of those amounts which are not absorbed by current profits can be treated as available to be carried forward as unabsorbed depreciation under section 32(2) in the computation of statutory profits in the subsequent assessment year. He also argued therein that there is no provision in section 155J for giving credit for tax paid on book profits against tax calculated on statutory basis in the subsequent year/years and that the tax amount calculated with reference to the depreciation becomes a dead loss. He has thus come out with the proposition that, in the circumstances, the element of double taxation creeps in which is against the cannons of taxation. He has also argued, in his written submission, that section 115J(2) does not provide that the computation of depreciation under section 32(2) will have to be done as though a normal assessment on statutory basis is made. This particular point has been underlined by the Commissioner (Appeals) also in his impugned order. Shri Indra Kumar has stated thereafter that once it is determined that book profit income is applicable, the other computation on statutory basis becomes a manner of computation only without affecting any of the provisions of the Act which is not relevant to the tax and, is therefore, required to be totally discarded. He has reiterated the point taken up by S/Shri Vijayaraghavan and Parthasarathy that in effect no depreciation is allowed under the provisions of the Act as the book depreciation is totally ignored. Shri Indra Kumar also referred to the definition of the expression "written down value" as appearing in section 43(6) to mean the cost of the asset to the assessee less all depreciation actually allowed. He furthermore referred to the decision of the Supreme Court in the case of Madeva Upendra Sinai v. Union of India [1975] 98 ITR 209 in which depreciation actually allowed has been distinguished from notional depreciation or speculative, theoretical or imaginary depreciation. He has also referred to the decisions in the cases of CIT v. Straw Products Ltd. [1966] 60 ITR 156 (SC) and CIT v. Dharampur Leather Co. Ltd. [1966] 60 ITR 165 (SC) in which it has been held that there is no scope for treating any notional allowance as actual allowance. He also has come up with the proposition that the idea that the amount of depreciation allowed as per the books in computation of income under section 115J(1) is at least required to be deducted from the WDV of the assets, is untenable inasmuch as the depreciation as per the books would not correspond to the depreciation allowable as per the Income-tax Rules on the basis of different blocks of assets. Shri Indra Kumar has also come up with the proposition that section 115J(2) prima facie ensures that the assessee does not lose the right to carry forward amounts which would have been otherwise possible merely because the income is computed under section 115J(1). He thus strongly supported the direction of the Commissioner (Appeals) to the effect that WDVs of the assets, as at the beginning of the current year, are required to be carried forward exactly and to the same extent to the next year.

As regards the question relating to carry forward of business loss, investment allowance, etc., Shri Indra Kumar states that the protection to be given to the assessees in the matter of depreciation and the issue of avoidance of double taxation should apply, equally to the question of carry forward of business loss, etc. He states that sub-section (2) of section 115J is an enabling section which permits and does not stand in the way of the carry forward. He furthermore goes on stating that In regard to prior year before the application of section 115J(1), the right of the assessee has been quantified under statutory computation and the said right is further adjusted during the year under consideration depending on the level of loss or claim of investment allowance permissible as per the provisions of the Act. He has finally come out with the proposition that on consideration of equity, the assessees should be allowed the full benefit of carry forward of losses and investment allowance, including the determined loss or investment allowance, if any, for the current year. It is required to be reiterated, in this connection, that the Commissioner (Appeals) has not supported the idea of carry forward of loss, depreciation and investment allowance, etc. for the current year also to the subsequent years. The contention of Shri Indra Kumar in this regard is, therefore, liable to be rejected, at the outset, inasmuch as his client has not come up in appeal against the said decision of the Commissioner (Appeals).

Finally, he has brought to our notice the famous decision of the Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 in which it has been stated that when two different views are possible on any matter, the view which is favourable to the assessee must be accepted while construing the provisions of a taxing statute.

8. Shri K. R. Prasad, advocate, also took up the cases of some of his clients. He also made a written submission in addition to the oral arguments. Like Shri Indra Kumar, Shri Prasad also referred to the definition of the expression "written down value" as appearing in section 43(3). He argued that sub-section (2) of section 115J does not make any mention of section 43(3) and hence the question of determination of the WDV of the assets for the next year would remain unaffected by the non obstante clause of section 115J(2). Shri Prasad also brought our attention to the distinction between the expression "actually allowed" as against the simple expression "allowed' and argued that the use of the first expression in section 43(3) debars the question of determination of WDV where depreciation has not actually been allowed in the assessment of an assessee. He also relied on the decision of the Supreme Court in the case of CIT v. J.H. Gotla [1985] 156 ITR 323 and claimed that where two interpretations are possible, the one beneficial to the assessee is required to be accepted. Shri Prasad also emphasised on use of the expression "in relation to the relevant previous year" in section 115J(2) and argued that this particular expression shows that the operation of this sub-section should remain limited to the relevant previous year only meaning in which year section 115J(1) has been applied, without touching in any way the amounts already determined to be carried forward in the assessments of the earlier years. He finally supported the view expressed by the Commissioner (Appeals) that in respect of the WDVs as well as brought forward loss, depreciation, etc., the amounts are required to be carried forward to the next year in exact manner.

9. The learned departmental representative, on the other hand, tried to give his rejoinder by saying that the expression 'in relation to the relevant previous year" is used in the context of carry forward of allowances. He furthermore stated that the object of section 115J is certainly not preponing of tax liability and that this particular measure was adopted by the department for the purpose of mobilisation of resources. He contended that if the interpretation as given by the different counsels be adopted. it must be said that the Government's intention in enacting this section would fail miserably.

10. Sub-section (2) of section 115J reads as below:

"Nothing contained in sub-section (1) shall affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year or years under the provisions of sub-section (2) of section 32 or sub-section (3) of section 32A or clause (ii) of sub-section (1) of section 72 or section 73 or section 74 or sub-section (3) of section 74A or sub-section (3) of section 80J."

A plain reading of this particular sub-section convinces us that in the matter of determination of the amounts in relation to the relevant previous year, i.e., the current year, to be carried forward to the subsequent year by way of business loss, unabsorbed depreciation, unabsorbed investment allowance and unabsorbed 80J(3), the provisions of sub-section (1) of section 115J shall be considered to be virtually non-existing. In other words, the determination of these losses and allowances will have to be done in the normal way as if no order under section 115J(1) was passed. Before the application of the provisions of section 115J(1), it is first of all necessary to compute the total income of the assessee in accordance with the provisions of the Act, which includes allowance of current depreciation and also setting off of unabsorbed depreciation, unabsorbed business loss, etc. as brought forward from the earlier year. The total income of the assessee is determined in accordance with this process and where 30% of the adjusted book profit is found to exceed the amount of total income determined in the above-mentioned process, tax is levied on the said 30% of the book profits and not on the total income as determined. The effect of not considering the provisions of section 115J(1) would be to go back to the determination of the total income by allowing the current depreciation as well as setting off the unabsorbed depreciation, etc. of the earlier years brought forward to the current year. After the set-off, the resultant figures are only required to be carried forward to the next year. This is the plain interpretation of the language used in section 115J(2) and there does not seem to be any ambiguity herein.

11. The objection raised by different counsel that depreciation which is not actually allowed should not be considered to reduce the WDVs of the assets does not hold good inasmuch as it is difficult to find out how depreciation is not actually allowed in the current year. In fact, while determining the total income in accordance with the regular provisions of the Act, current year's depreciation and also, if necessary, part or full amount out of the unabsorbed depreciation, etc. is required to be set-off against the gross income of the assessee. How can then it be said that depreciation is not allowed in computing the total income of the assessee?

Actually, total income is determined in this manner and in certain cases where section 115J(1) becomes applicable, the figure of total income is replaced by the figure representing 30% of the adjusted book profits and tax is levied on the said figure. The scheme for levying tax by considering 30% of the book profits to be the deemed total income is an artificial process superimposed on the regular process of determination of the total income of the assessee in the usual manner. By that process, the ordinary process of determination of the total-income of the assessee does not at all get obliterated. Actually, the assessee should have suffered tax on the total income as determined in accordance with the regular provisions of the Act. By virtue of the deeming provisions of section 115J(1) only, the assessee suffers a different amount of tax. When, however, it has clearly been mentioned in section 115J(2) that nothing contained in sub-section (1) shall affect the determination of amounts, etc., it would amount to actual allowance of depreciation and other allowances against the gross income of the assessee in the computation of total income according to the regular process. The assessment of the total income in this process has necessarily got to be done and is also done and the only modifying step is that instead of working out tax on the said total income, tax is worked out on a different amount. This will be clearer in a case where the gross total income of the assessee before allowing current year's and/or brought forward unabsorbed depreciation of earlier years is a positive figure and much higher than 30% of the adjusted book profits. But for adjustment and setting off of the current year's depreciation as well as the brought forward unabsorbed depreciation of earlier years, the assessee would have certainly been liable to suffer tax on this higher amount of gross income. Allowance of the current year's depreciation accompanied with absorption of the brought forward allowances of the earlier years, if required, naturally saves the assessee from that calamity and reduces his total income below the figure of 30% of the adjusted book profit. It would, therefore, not at all be correct to say that in such a case the current year's depreciation as well as allowances brought forward from earlier years have not actually been allowed or adjusted in determining the total income of the assessee. That the assessee actually suffers a higher amount of tax as compared to the tax which would have been leviable on his total income computed in the usual way, is completely a different issue and that phenomenon occurs specifically on account of the enactment of sub-section (1) of section 115J.

Shri K.R. Prasad has come with an example about an assessee having a profit of Rs. 100 lakhs prior to allowance of depreciation and the allowable depreciation for the year being Rs. 150 lakhs. The value of the assets has been stated by him to be of Rs. 5,00,00,000. He states that the amount of depreciation to be actually carried forward in accordance with section 32(2) is Rs. 50 lakhs (Rs. 150 lakhs minus Rs. 100 lakhs). He also refers to Explanation 3 of section 43(6) in accordance with which allowance in respect of any depreciation carried forward under section 32(2) shall be deemed to be depreciation "actually allowed". He thus states that the fiction under section 115J(2), even if applicable, will be limited only to the carry forward, in this case, of depreciation under section 32(2), and for no other purpose and hence the WDVs of the assets would get reduced from Rs. 500 lakhs to Rs. 450 lakhs only (Rs. 500 lakhs minus Rs. 50 lakhs) whereas, under the normal provisions, the said WDV should have been reduced to Rs. 350 lakhs (Rs. 500 lakhs minus Rs. 150 lakhs). It is not possible for us to agree with this view of Shri Prasad. Actually the gross profit of the assessee before allowance of depreciation was Rs. 100 lakhs, which has been reduced only by allowance of depreciation to the extent of Rs. 100 lakhs. If 30% of the adjusted book value of the assessee be a very low figure, say, for instance, Rs. 1 lakh or Rs. 10 lakhs, then by suffering tax on such low amount of deemed total income, the assessee would unduly get the benefit of non-reduction in the WDVs of its assets to the extent of Rs. 100 lakhs, whereas had 30% of the adjusted book value been just 'nil', the WDV would have been reduced by that amount of Rs. 100 lakhs. It cannot at all be considered that the Legislature wanted such anomalous situation to happen and such undue benefit to accrue to assessees. The main purpose of enacting section 115J is to collect some tax from zero-profit companies and not to allow further benefit of so much so of Rs. 100 lakhs by taxing on a meager income of Rs. 1 lakh or Rs. 10 lakhs, as pointed out by us.

The other emphasis laid by Shri Prasad on the expression "in relation to the relevant previous year" is also not of much consequence. There is no doubt about the fact that the amounts of losses, depreciation, etc, to be carried forward to the next year are required to be determined in the current year only. Such determination would, however, depend on two facts, viz. the amounts of losses etc. brought forward from the earlier year or years and the adjustment/set-off of the same partly or fully against the income of the current year.

Since the amounts of losses, depreciation, etc. brought forward from the earlier years vitally affect the determination of the amounts in relation to the relevant previous year to be carried forward to the subsequent year, we are unable to subscribe to the view that the said brought forward amounts of losses, unabsorbed depreciation, etc. are to be held as sacred cows and not to be touched at all even if the said brought forward losses, depreciation, etc. play a vital role in reducing the income of the current year in a substantial manner. As has been pointed out by us above, unless the losses, etc. brought forward from the earlier years are allowed/adjusted/set-off against the current year's income, in many cases, the provisions of section 115J(1) would not be applicable at all.

Shri Prasad also has come out with the theory that in making of an assessment after applying the provisions of the Act, two different stages are resorted to, viz. determination of the results of that year and then setting off of the brought forward items as per the provisions of law, and that section 115J(2) commands that we stop at the end of step one for the purposes mentioned. We are afraid that from a plain reading of provisions of section 115J(2), we do not find any support to this particular view.

12. Shri Prasad and others have also raised the point of equity. It has been tried to be emphasised by making reference to different judgments of the Supreme Court that though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. It has been tried to be argued that the proposition as put forward on behalf of the different assessees also takes into consideration the principle of equity inasmuch an assessee is subjected to payment of tax under section 115J(1) even though there is a loss and in such a case it would be totally inequitous to further deny it the benefit of what it would have been entitled to in relation to that year. We do not find any reason to consider that any inequity is done to the assessee by denying the benefit of some amounts of the WDV or out of the brought forward losses, depreciation, etc. when such amounts are actually set-off against the gross income of the assessee in the current year calculated in accordance with the regular provisions of the Act. Section 115J(1) is a special provision which demands some more tax from the assessees even if their computation of income as per the provisions of Income-tax Act be 'nil' or less than 30% of the adjusted book profit. If it be held that there is no inequity in extracting this amount of extra tax from the assessees, it cannot at all be said that the provisions of sub-section (2) of section 115J are inequitous in any way. In fact, what the different assessees want by application of the provisions of section 115J(2) is compensation for the extra tax paid under sub-section (1) of section 115J through back-door method. We are afraid this was neither the intention of the Legislature nor can the procedure be considered as an equitable one. As has been pointed by us above, if the interpretation as proposed by the assessees are accepted, in certain cases, the assessees would be entitled to much more benefit by way of non-reduction of WDVs and payment of meager amount of taxes under section 115J(1). Again, if the theory propounded on behalf of the assessees be accepted as correct, it would give much undue favour to the cases of manufacturing assessees who alone will be liable to have considerable amounts of brought forward depreciation, unabsorbed allowances, etc., in preference to the cases of trading assessees in whose cases this problem would not arise at all. According to the theory of the assessees, therefore, the trading people would be subjected to the extra tax under section 115J(1) without getting any commensurate benefit under sub-section (2) of section 115J as is being claimed by the assessees. When we speak of equity, equity to all types of assessees vis-a-vis the cause of the revenue is also required to be looked into. For the discussions as made above, we cannot at an subscribe to the view of the counsel of the assessees that their proposition would lead to a more equitable situation.

As regards the question of accepting the view about which, is more beneficial to the assessees is concerned, we find that the proposition as put forward by the assessees would not be more beneficial to them in every case. Let us take, for example, the case of an assessee who incurs a loss even before allowance of current year's depreciation in the year in which he is subjected to tax under section 115J(1). According to the assessees' view he would be denied the depreciation allowable for the current year and would get depreciation on the amount of WDV brought forward from the earlier year. According to the other view, however, to which we subscribe, the assessee will get depreciation on the different assets acquired during the year, i.e., the current year as well as depreciation on the brought forward WDV of the assets acquired in the past year and the entire amount of this depreciation will have to be carried forward to the next year which, in fact, would be much more beneficial to the assessee in his assessment for the next year.

Hence, firstly, the language as used in section 115J(2), according to us, does not call for interpretation thereof in two or more different manners and even if such interpretation be attempted all such interpretations excepting the one to which we subscribe, would be far-fetched and cumbrous interpretations. Needless to say that the said interpretation would not always be beneficial to all the assessees. The proposition as laid down by the Supreme Court in the case of Vegetable Products Ltd. would not, therefore, hold good.

13. Finally, we appreciate the candidness on the part of Shri K. R. Prasad when he differed from the view of the other counsels that WDVs of carry forward assets will have to be considered to be reduced to the extent to which the assessees suffer by way of the deeming provisions of section 115J and admitted that there is no provision anywhere in section 115J(2) in support of this proposition. We also feel in the same way and we have got no hesitation in differing from the arguments of S/Shri Vijayaraghavan and Parthasarathy in this matter.

14. We also differ with finding of the Commissioner (Appeals) that even the business losses, depreciation, etc. for the current year will also not have to be allowed to be carried forward to the next year. Theoretically we feel that in view of the plain reading of the provisions of section 115J(2) current year's business losses, unabsorbed depreciation, unabsorbed investment allowance, etc. are required to be carried forward to the subsequent year for being set-off against the income of such subsequent years. However, since no appeal has been preferred by any of the assessees on this particular finding of the Commissioner (Appeals), we do not order for allowance of such business losses, current year's depreciation, etc., even if warranted, in the present cases. So far as the two main decisions of the Commissioner (Appeals) are also concerned, we reverse them and direct that both the brought forward WDV as at the beginning of the current year as well as the brought forward business losses, unabsorbed depreciation, etc. are required to be adjusted firstly by way of allowing depreciation in the current year (unless the assessee has specifically refused to claim depreciation in the current year in the return of income filed by it) and by way of adjustments/set-off of the said business losses, depreciation, etc. against the current year's gross income computed in accordance with the regular provisions of the Act and thereafter the resultant amounts of WDVs and business losses, unabsorbed depreciation, unabsorbed investment allowance, etc. will have to be carried forward to the subsequent year in accordance with the relevant provisions of law. In determining these issues, it will have to be considered as if no assessment of 30% of the book profits of the assessees has been made under section 115J(1).

15. The departmental appeals are allowed to the above-mentioned extent.

16. Another extra point has been taken up by the department in the case of Widia (India) Ltd. It has been contended that the Commissioner (Appeals) erred in directing the Assessing Officer to allow the assessee interest on interest, relying on the Gujarat High Court decision in D.J. Works v. Dy. CIT [1992] 195 ITR 227 and the Bombay High Court decision in the case of CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589. The learned counsel for the assessee represented that although the extra amount has been stated by the department to be interest on interest, it actually represents further interest to be granted under section 244A by consideration of a portion of refund already granted as interest, to represent tax only and not as interest in the order giving effect to the appellate order. We are of the view that once the department treated some amount of tax to be refundable and allowed addition of a further amount by way of interest thereon, there was no warranty on the part of the department to treat the earlier amount considered as interest also as part of tax in a later modification order and to deny interest on that amount. The Commissioner (Appeals) has merely come up with an alternative suggestion that even if the amount be considered as interest on interest, it would still be allowable to the assessee in accordance with the abovementioned decisions of Gujarat High Court and Supreme Court.

We are fully in agreement with the decision of the Commissioner (Appeals). There is no justification on the part of the department to deny the benefit of some portion of refund already declared as interest in a later modification order and to deny interest thereon. The Gujarat High Court decision as mentioned above is also acceptable to us. We, therefore, do not find any merit in the departmental ground taken in this regard. The departmental ground on this issue is, therefore, being dismissed.

17. In the result, the departmental appeal in the case of M/s. Widia (India) Ltd. is partly allowed whereas the same in the case of other assessees are allowed.

 

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