Posted On by &filed under High Court, Punjab-Haryana High Court.


Punjab-Haryana High Court
National Horticulture Board vs Union Of India & Ors. on 9 October, 2000
Equivalent citations: 2001 253 ITR 12 P H
Author: C S Singhvi


JUDGMENT

C. S. Singhvi, J.

This is a petition for quashing of the orders dated 23-4-1999, and 6-12-1999, passed by the Income Tax Officer, Ward-I, Gurgaon (respondent No. 3) and the Commissioner of Income Tax, Rohtak (respondent No. 2), declining the petitioner’s prayer for payment of interest in accordance with section 244A(2) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). The petitioner has also prayed for issuance of a writ in the nature of mandamus directing the respondents to pay interest on the amount of tax paid by it in relation to the assessment year 1996-97.

The facts necessary for deciding the issue raised in the petition are that by an order dated 2-10-1998, passed under section 143(3) of the Act, respondent No. 3 created a demand of Rs. 26,81,17,875 against the petitioner. That order was upheld by the Commissioner (Appeals) and the Income Tax Appellate Tribunal. On 9-2-1999, the petitioner moved an application under section 10(23C)(iv) of the Act for grant of exemption. Vide notification dated 6-4-1999, the Central Board of Direct Taxes accepted its prayer. Thereafter, the petitioner filed application dated 9-4-1999 for refund of the amount of tax deposited in pursuance of the order passed by respondent No. 3. Simultaneously, it claimed interest in terms of section 244A(2). By an order dated 23-4-1999, respondent No. 3 partly allowed the said application and ordered refund of the tax, but declined to award interest by observing that the rectification application was being disposed of within a fortnight of its filing. A similar application filed by the petitioner was rejected by respondent No. 2, vide his order dated 6-12-1999.

The petitioner has challenged the rejection of its prayer for award of interest by contending that in terms of section 244A(1)(b), the respondents are bound to pay interest with effect from 9-2-1999 i.e., the date on which the application for exemption had been filed. According to it, in view of the exemption granted by the Board under section 10(23C)(iv), the department will be deemed to have illegally retained the amount of tax deposited in pursuance of the order passed by respondent No. 3.

In the written statement filed on behalf of the respondents, it has been averred that the petitioner’s prayer for award of interest was rightly declined because the application for refund filed on its behalf was disposed of within a period of 15 days.

Before proceeding further, we may mention that when the case was listed for motion hearing, this court had declined the petitioner’s prayer for directing the respondents to pay interest for the period commencing from 9-2-1999, and had issued notices on the limited question as to whether the respondents should pay interest for the period from 9-4-1999, to the date of refund. The relevant extract of that order is reproduced below :

“Assessment in this case was framed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), on 7-10-1998, and a sum of Rs. 26,81,17,075 was recovered from the petitioner as tax. Thereafter, the petitioner moved an application for seeking exemption from income-tax under section 10(23C)(iv) of the Act on 9-2-1999, and the notification in this regard was issued by the Central Board of Direct Taxes on 6-4-1999. Basing its claim on the exemption granted, the petitioner moved an application for rectification of the order of assessment on 9-4-1999, seeking refund of the tax already deposited. This application was allowed by the competent authority on 23-4-1999. The claim for interest has been rejected on the ground that delay in approaching the department for the rectification of the order of assessment was attributable to the assessee and that there was no undue delay caused by the department in refunding the amount. By order dated 23-4-1999, the Income Tax Officer, Ward-I, Gurgaon, rejected the claim of the petitioner for interest on the refunded amount on the aforesaid ground. Not satisfied with this order, the petitioner filed a petition under section 244A of the Act before the Commissioner which too has been rejected by order dated 6-12-1999. It is against these orders that the present petition has been filed under article 226 of the Constitution.

The argument of learned counsel for the petitioner is that the petitioner is entitled to interest on the refunded amount from 9-2-1999 to 23-4-1999. We are unable to accept this contention. As already observed, the assessment was framed on 7-10-1998, and it was long thereafter that the petitioner applied for seeking exemption under section 10(23C)(iv) of the Act on 9-2-1999, and the notification granting exemption was published on 6-4-1999. It was then the petitioner applied for rectification of the order of assessment on 9-4-1999. We are, therefore, satisfied that the delay in claiming refund was attributable to the assessee inasmuch as it did not apply for the same prior to 9-4-1999. In this view of the matter, we are satisfied that the petitioner-assessee is not entitled to any interest up to 9-4-1999.

The next contention of learned counsel for the petitioner is that the Board should at least be given interest from 9-4-1999, till the date of refund when the application for rectification was allowed.

Notice of motion to the respondents for 29-8-2000, on this limited issue.”

Shri A. K. Mittal argued that in view of the mandate of section 244A(1)(b) of the Act, the petitioner is entitled to get interest as of right and the respondents cannot refuse to pay the same on the ground that the application filed for award of interest was decided without delay. Learned counsel submitted that the right to receive interest does not depend on the submission of an application by the assessee and, therefore, the rejection by respondents Nos. 2 and 3 of the petitioner’s prayer for payment of interest should be declared illegal and quashed. Shri R. P. Sawhney, senior counsel appearing for the respondents, defended the impugned orders by pointing out that there was no delay in the decision of the application dated 9-4-1999 filed by the petitioner for refund of tax. He argued that the submission of application by the assessee is implicit in the scheme of section 244A(1) and as the disposal of the application filed by the petitioner was not delayed, it is not entitled to receive interest in terms of clause (b) of sub-section (1) of section 244A.

We have thoughtfully considered the respective submissions.

Chapter XIX of the Act contains various provisions relating to refund of the amount paid by an assessee. Section 244A(1) and (2), which finds place in this Chapter and which governs the award of interest on refund, reads as under:

“244A. Interest on refunds.(1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely :

(a) where the refund is out of any tax collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one per cent for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted :

Provided that no interest shall be payable if the amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 143 or on regular assessment ;

(b) in any other case, such interest shall be calculated at the rate of one per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted.

Explanation.For the purposes of this clause, ‘date of payment of tax or penalty’ means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand.

(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final. . . .”

A conjoint reading of the provisions quoted above shows that the assessee is entitled to receive interest on the amount of refund at the rates prescribed in clauses (a) and (b) of sub-section (1) of section 244A. The rationale underlying this provision is to compensate the assessee in lieu of the deprivation of his property right by virtue of unlawful collection of tax. If the proceedings resulting in the refund are delayed due to reasons attributable to the assessee, then the period of delay has to be excluded from the period for which the interest is payable. In other words, if the assessee is responsible for the delay in the finalisation of the proceedings on the basis of which he becomes entitled to refund, then the period of delay is to be excluded from the total period for which interest becomes payable. However, there is nothing in the plain language of sub-section (1) and (2) of section 244A from which it can be inferred that the assessee can be deprived of the interest in respect of the period during which his application for refund remains pending before the competent authority.

The argument of Shri Sawhney that the submission of an application for award of interest is implicit in the scheme of section 244A and interest cannot be claimed by the assessee as of right unless there is an unexplained delay in deciding such application sounds attractive but lacks merit and deserves to be rejected because a reading of the plain language of section 244A(1) and its two clauses makes it clear that the right to receive interest on the amount of refund does not depend on the submission of an application by the assessee. Rather, it follows as a natural corollary to the assessee’s right to receive refund. Therefore, the mere fact that the application filed by the petitioner was decided expeditiously cannot be made a ground for declining its prayer for award of interest.

For the reasons mentioned above, the writ petition is allowed. Orders dated 23-4-1999, and 6-12-1999, passed by respondents Nos. 3 and 2 are declared illegal and quashed with the direction to the respondents to pay interest to the petitioner in terms of section 244A(1)(b) on the amount of tax deposited in pursuance of the order passed by respondent No. 3. Such interest shall be payable for the period between 9-4-1999 and 23-4-1999. The concerned authority is directed to pay the amount to the petitioner within a period of two months from the date of submission/receipt of the certified copy of this order.

The Registry is directed to issue certified copy dasti on payment of fee prescribed for urgent applications.


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