IN THE HIGH COURT OF KERALA AT ERNAKULAM
ITA.No. 1692 of 2009()
1. THE COMMISSIONER OF INCOME TAX,
... Petitioner
Vs
1. M/S KERALA CHEMICALS & PROTEINS LTD.,
... Respondent
For Petitioner :SRI.JOSE JOSEPH, SC, FOR INCOME TAX
For Respondent :SRI.JOSEPH KODIANTHARA
The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice V.K.MOHANAN
Dated :15/01/2010
O R D E R
C.R.
C .N. RAMACHANDRAN NAIR &
V.K. MOHANAN, JJ.
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I.T. A. No.1692 OF 2009
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Dated this the 15th day of January, 2010
JUDGMENT
Ramachandran Nair, J.
The question raised is whether the Tribunal was justified in
holding that the assessee is not liable to pay interest under Section
234D on excess refund granted while sending intimation under Section
143(1) of the Act for the assessment year 1999-2000. We have heard
senior counsel appearing for the appellant-revenue and senior counsel
Sri. Joseph Markose appearing for the respondent-assessee.
2. During the previous year relevant for the assessment year
1999-2000 the assessee had remitted substantial amount of advance
tax. However, in the return filed the assessee claimed refund of over
Rs. 47 lakhs which was granted after processing the return and while
sending intimation under Section 143(1) of the Act. This was done on
28.6.2000. However, the assessee’s case was taken up for regular
assessment under Section 143(3) of the Act and the assessing officer
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completed the assessment on 22.1.2004 wherein it was found that
refund granted while sending intimation was irregular inasmuch as the
entire amount refunded was payable as tax finally assessed. The tax
demanded on regular assessment is also stated to be paid later. While
issuing regular assessment under Section 143(3) the assessing officer
demanded interest under Section 234D on the refund amount granted
on 28.6.2000 but from 1.6.2003 the date on which Section 234D came
into force. However, the Commissioner of Income tax in exercise of
powers under Section 263 of the Act found that interest is payable
under Section 234D from the date of refund, that is 28.6.2000, till date
of regular assessment, that is 22.1.2004. When the assessee filed
appeal, the Tribunal held that Section 234D providing for interest will
apply only from the assessment year 2004-05 onwards and so much so,
the assessee is not liable to pay interest at all, even though the assessee
did not contest it’s liability for interest from 1.6.2003 onwards levied in
the regular assessment passed under Section 143(3) of the Act. In the
first place we are of the view that the levy of interest with effect from
1.6.2003 which was not the subject matter of revision before the
Commissioner under Section 263 could not have been the subject of
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decision by the Tribunal. In other words, the Tribunal has granted an
unsolicited relief to the assessee, which, in our view, is not within the
powers of the Tribunal. In any case, in view of our finding on the
effective date of operation of Section 234D stated hereunder, there is
no need to consider whether Tribunal could have granted the relief that
was not subject matter of appeal.
3. Section 234D, the scope of which is in issue, is extracted
hereunder for easy reference:
234D. Interest on excess refund.
(1) Subject to the other provisions of this Act, where
any refund is granted to the assessee under sub-section (1)
of Section 143, and–
(a) no refund is due on regular assessment; or
(b) the amount refunded under sub-section (1) of
section 143 exceeds the amount refundable on regular
assessment,the assessee shall be liable to pay simple interest at the rate
of one-half per cent 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.
………………………………………..
Senior counsel for the revenue referred to Notes on Clauses wherein
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the scope of the new provision is explained. However, since there is no
dispute as to the scope of the Section and the issue is only as to the
effective date from which interest could be levied on the assessee we
do not find anything useful in the Notes on Clauses. Admittedly
section 234D was introduced by Finance Act 2003 with effect from
1.6.2003. In our view this provision on interest is not introduced with
reference to any assessment year, which is obvious from the fact that it
is not effective from the beginning of the financial year. On the other
hand, this provision on interest will apply to all cases of refund granted
under Section 143(1) but interest could be levied only with effect from
1.6.2003. Even though refund in this case was granted while sending
intimation under Section 143(1) on 28.6.2000 and regular assessment
under Section 143(3) was completed converting the refund to demand
of tax on 22.1.2004, interest could be demanded only for the period
from 1.6.2003 till 22.1.2004 which is what is done by the assessing
officer. We do not find any justification for the Commissioner to give
any retrospectivity to Section 234D which is what he has done by
directing the assessing officer to revise the assessment levying interest
from the date of refund. In fact Commissioner has no authority to give
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retrospective operation to a substantive provision of law providing for
interest. Revenue has no answer to our query as to whether interest
under Section 234D could be levied in cases of regular assessment
completed under Section 143(3) prior to 1.6.2003 leading to demand of
refunded amount as tax determined on regular assessment. We are
therefore of the view that the Commissioner’s order under Section 263
was rightly found to be untenable by the Tribunal. However, we vacate
the finding of the Tribunal that Section 234D is applicable only from
the assessment year 2004-05 onwards. The view taken by the assessing
officer that Section applies from 1.6.2003 is the correct position.
Appeal is dismissed, but by restoring the ;assessment with
demand of interest levied under Section 234D with effect from
1.6.2003.
(C.N.RAMACHANDRAN NAIR)
Judge.
(V.K. MOHANAN)
Judge.
kk
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