2000-VIL-308-ITAT-MUM

Equivalent Citation: [2002] 74 TTJ 748

Income Tax Appellate Tribunal MUMBAI

ITA No. 6542/Mum/1997

Date: 06.11.2000

JAY BROS. INVESTMENT & TRADING CO. (P) LTD.

Vs

DEPUTY COMMISSIONER OF INCOME TAX

For the Appellant : K. Shivram
For the Respondent : Pradip Mehrotra

BENCH

Pradeep Parikh (Accountant Member) And D. Manmohan (Judicial Member)

JUDGMENT

This appeal filed by the assessee is directed against the order of the CIT(A)-XXII, Mumbai, and it pertains to asst. yr. 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 asst. yr. 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 29th Dec., 1993, i.e., before the due date to file return under s. 139(1) to claim refund of tax. The return was processed under s. 143(1)(a) of the Act wherein the income returned by the assessee was accepted. The intimation is dt. 29th March, 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 1st April, 1993, to 29th March, 1994. The intimation under s. 143(1)(a) and the refund order dt. 13th Jan., 1995, were however served on the assessee only on 31st Jan., 1995.

3. The case of the assessee is that interest under s. 244A has to be calculated upto the date of refund voucher i.e., 13th Jan., 1995. Since the AO has not calculated interest upto that date, assessee challenged his order before the CIT(A). As CIT(A) affirmed the order of the AO on this issue, assessee filed further appeal before the Tribunal, contending inter alia that under s. 244A of the IT Act, 1961, interest has to be calculated upto the date of refund voucher.

4. Learned counsel Shri Sivram adverted our attention to s. 244A of the IT Act and in particular the words ".....to the date on which the refund is granted" in sub-cl. 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 1st April, 1989, interest on the refund is permissible as prescribed under s. 243 of the Act wherein similar expression is used by legislature. Sec. 244A comes into effect from 1st April, 1989, whereas s. 243 is available upto or prior to 1st April, 1989. The words "to the date of the order granting the refund" in s. 243 of the Act appear to have been misinterpreted by some AOs which lead to clarification by CBDT by a Circular No. 20-D(XXII-22) of 1968, dt. 20th Aug., 1968, which is extracted below for immediate reference :

"Under the terms of s. 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 ITOs, 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 s. 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 s. 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 assessee's 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 CBDT the Tax authorities rejected the claim of the assessee and hence this is a fit case for awarding costs under s. 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 vs. Chief CIT & Ors. (2000) 158 CTR (Del) 679: (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 ss. 243 and 244 by Taxation Laws (Amendment) Act, 1970. If there is delay beyond the period of three months, IT Act provided for payment of interest to the assessee by the Central Government. While implementing the provisions of s. 243 of the Act, it was again found that the AO gave a different interpretation of the said section which is not intended by the Government. With a view to clarify the issue, the CBDT issued a circular (extracted above). It may also be noted that s. 243 is operative upto asst. yr. 1988-89 only whereas s. 244A comes into effect from 1st April, 1989 in lieu of ss. 214, 243 and 244 as clarified by the CBDT in its Circular No. 549 dt. 31st Oct., 1989, [published at (1990) 82 CTR (St) 1]. Therefore, it is clear that the circular issued in connection with s. 243 of the IT Act equally applies to s. 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 CBDT 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 s. 244A mean the date of signing the Income-tax Refund Order i.e., the refund voucher. We, therefore, direct the AO 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 s. 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 Dy. 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.

 

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