{"id":231422,"date":"2006-01-27T00:00:00","date_gmt":"2006-01-26T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/sandvik-asia-ltd-vs-commissioner-of-income-tax-i-on-27-january-2006"},"modified":"2016-02-28T00:53:51","modified_gmt":"2016-02-27T19:23:51","slug":"sandvik-asia-ltd-vs-commissioner-of-income-tax-i-on-27-january-2006","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/sandvik-asia-ltd-vs-commissioner-of-income-tax-i-on-27-january-2006","title":{"rendered":"Sandvik Asia Ltd vs Commissioner Of Income Tax-I, … on 27 January, 2006"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Sandvik Asia Ltd vs Commissioner Of Income Tax-I, … on 27 January, 2006<\/div>\n
Author: . A Lakshmanan<\/div>\n
Bench: H.K. Sema, Dr. Ar. Lakshmanan<\/div>\n
           CASE NO.:\nAppeal (civil)  1337-1340 of 2005\n\nPETITIONER:\nSandvik Asia Ltd.\n\nRESPONDENT:\nCommissioner of Income Tax-I, Pune & Ors.\n\nDATE OF JUDGMENT: 27\/01\/2006\n\nBENCH:\nH.K. Sema & Dr. AR. Lakshmanan\n\nJUDGMENT:\n<\/pre>\n
J U D G M E N T<\/p>\n
Dr. AR. Lakshmanan, J.\n<\/p>\n
These appeals raise substantial and important questions of law of great general
\npublic importance as well as under the Income Tax Act, 1961 pertaining to assessment
\nyears 1977-78, 1978-79, 1981-82 and 1982-83 requiring consideration of this Court.
\nSince common questions of law and facts arise in all these appeals, they were heard
\ntogether and are being disposed of by this common judgment.  The impugned common
\njudgment was passed by the High Court of Bombay rejecting the appellant’s claim on
\ninterest holding that no such interest on interest is payable under any of the provisions
\nof the Income Tax Act, 1961 (for short ‘the Act’).\n<\/p>\n
The main issue raised in these appeals is whether an assessee is entitled to be
\ncompensated by the Income-tax Department for the delay in paying to the assessee
\namounts admittedly due to it?  The delay in the instant case was for various periods
\nranging from 12 to 17 years.\n<\/p>\n
The following facts are not in dispute:-\n<\/p>\n
Assessment Year 1977-78:\n<\/p>\n
Notice of demand was issued to the appellant by respondent No.2 for advance tax
\npayable of Rs.2,74,31,250\/-.  The appellant paid a sum of Rs.1,86,04,450\/-.
\nAssessment order was passed by respondent No.2 determining income of
\nRs.3,88,37,630\/-.  Respondent No.2, after rectifying his assessment order, determined
\nthe income of Rs.3,45,91,830\/- and tax thereon at Rs.1,99,76,781\/- and raised a
\ndemand for further tax payable of Rs.13,72,331\/-.  The appellant paid the said sum.
\nCommissioner of Income-tax (Appeals) disposed of the appellant’s appeal substantially
\nallowing the same.  Respondent No.2 gave effect to the appellate order determining
\nincome at Rs.2,68,88,220\/- and tax thereon at Rs.1,47,88,521.  The appellant on
\n30.04.1986 received a refund of Rs.42,38,260\/- and became entitled to receive interest
\non the refund and requested respondent No.2 to grant interest on refund under
\nSections 214 and 244 of the Act for the period from 01.4.1977 to 31.03.1986.\n<\/p>\n
Assessment Year 1978-79:\n<\/p>\n
Notice of demand was issued to the appellant by respondent No.2 for payment of
\nadvance tax on Rs.2,14,56,853\/-.  The appellant submitted its estimate of advance tax
\nand paid instalments thereon at Rs.1,11,81,844\/-.  An assessment order determining
\nincome of Rs.1,54,17,090\/- and tax payable thereon at Rs.89,03,368\/- after adjusting
\nthe advance tax paid against the tax payable a refund of Rs.22,78,476 was determined.
\nHowever, respondent No.2, declined to grant interest on refund to the appellant.  The
\nappellant filed a revision petition with Respondent No.1 under Section 264 of the Act
\nagainst the second respondent’s refusal to grant interest under Section 214 of the Act.
\nRespondent No.1 rejected the same.  Commissioner of Income-tax disposed of the
\nappellant’s appeal against the Assessment Order substantially allowing the same.
\nRespondent No.2 gave effect to the appellate order determining income at
\nRs.93,93,180\/- and tax payable thereon at Rs.54,24,561\/-  Respondent No.2 granted a
\nrefund of Rs.34,78,807\/- and the appellant also became entitled to receive interest on
\nthe said refund.\n<\/p>\n
Assessment Year 1981-82:\n<\/p>\n
The appellant submitted its estimate of advance tax and paid instalments thereon
\namounting to Rs. 1,49,62,292\/-.  Respondent No.2 passed a provisional Assessment
\nOrder determining the tax payable at Rs.1,29,54,736\/- and, therefore, granted a refund
\nof Rs.20,07,556\/-.  Respondent No.2 passed an Assessment Order determining the
\ntotal income of Rs.1,79,84,200\/- and tax payable thereon at Rs.1,06,33,157\/- and
\nhence granted a further refund on Rs.23,20,051\/-.  Along with the said refund, a sum of
\nRs.10,06,464\/- was also paid as interest under Section 214 of the Act.  The
\nCommissioner of Income-tax (Appeals) disposed of the appellant’s appeal substantially
\nallowing the same.  Respondent No.2 gave effect to the appellate order determining
\nincome of Rs.89,02,070\/- and tax payable thereon at Rs.52,63,348\/-.  The appellant
\nreceived a refund of Rs.53,69,809\/- and became entitled to receive interest on the
\nrefund.  The appellant requested to grant interest on refund under Sections 214 and
\n244 of the Act was for the period from 01.04.1981 to 31.03.1986.  Respondent No.2
\nrectified its order and granted further interest of Rs.1,87,203\/- under Section 214 of the
\nAct but refused to grant interest under Sections 214(1A) and 244 (1A) of the Act.
\nAssessment Year 1982-83:\n<\/p>\n
The appellant submitted its estimate of advance tax and paid instalments thereon of
\nRs. 1,45,48,006\/- a provisional Assessment Order determining the tax payable at
\nRs.1,28,46,079\/- and, therefore, granted a refund of Rs.17,01,927\/-.  He passed an
\nAssessment Order determining the total income of Rs.2,43,41,780\/- and tax payable
\nthereon at Rs.1,37,22,678\/- and raised demand for further tax of Rs.8,76,600\/- which
\nwas paid by the appellant on 30.03.1985.  The Commissioner of Income-tax (Appeals)
\ndisposed of the appellant’s appeal substantially allowing the same.  Respondent No.2
\ngave effect to the appellate order determining income of Rs.2,05,91,540\/- and tax
\npayable thereon at Rs.1,16,07,670\/-.  The appellant received a refund of
\nRs.21,15,008\/- and became entitled to receive interest on the refund.  The appellant
\nrequested respondent No.2 to grant interest on refund under Sections 214 and 244 of
\nthe Act for the period from 01.04.1982 to 31.03.1986.  Respondent No.2 granted
\ninterest of Rs.1,20,533\/-.\n<\/p>\n
FOR ALL FOUR ASSESSMENT YEARS
\n02.01.1987\tAppellant asked for further interest on the advance tax paid for the
\nAssessment Years 1977-78, 1978-79, 1981-82 & 1982-83
\n12.01.1987\tAppellant asked for further interest on the advance tax paid which was
\nrejected by Respondent No.2 holding that interest under Section 244(1A)
\nof the Act was admissible only on post assessment taxes.\n<\/p>\n
27.02.1987\tAppellant filed four Revision Petitions under Section 264 of the Act before
\nthe 1st respondent for grant of interest under Sections 214 and 244 of the
\nAct for the following periods:\n<\/p>\n
\t\tAssessment years \t\tPeriod
\n\t\t1977-78\t\t\t01.04.1977 to 30.04.1986
\n\t\t1978-79\t\t\t01.04.1978 to 30.04.1986
\n1981-82\t\t\t01.04.1981 to 30.04.1986
\n1982-83\t\t\t01.04.1982 to 30.04.1986
\n28.02.1990\tRespondent No.1 rejected the revision petitions.\n<\/p><\/blockquote>\n
30.04.1997\tBeing aggrieved by the 1st Respondent’s Order, appellant moved this
\nCourt which by its common order passed in Civil Appeal No.1887 of 1992
\nwith Civil Appeal Nos. 2649 of 1992 etc. directed respondent No.1 to
\nconsider the revision petitions in light of its decision in the case of Modi
\nIndustries Ltd. Vs. CIT reported in 216 ITR 759.\n<\/p>\n
The order of this Court dated 30.04.1997 is reproduced hereunder:-<\/p>\n
\n\"CIVIL APPEAL NO. 1887 OF 1992\n\nSandvik Asia Ltd.\t\t\t\t\t. Appellant\n\n\t\t\t\tVersus\n\n\nS.M.Soni & Ors.\n\n(With C.A.Nos. 2649\/92, 2550\/92, 2687\/92 & 1471\/96)\n\nO R D E R\n\n<\/pre>\n
These appeals are covered against the revenue by the decision of this Court in
\nModi Industries Ltd. & Ors. Vs. Commissioner of Income Tax 216 ITR 759.  For the
\nreasons given in the said judgment these appeals are allowed, the impugned order
\npassed by Respondent No. 1 are set aside and the matter is remitted to him for
\nconsidering the revision petitions filed by the appellant claiming interest under Section
\n214 of the Income Tax Act, 1961 in accordance with the principles laid down in Modi
\nIndustries Ltd. Case (supra).  No order as to costs.\n<\/p>\n
\t\t\t     Sd\/-\n<\/p>\n
(S.C.Agarwal)<\/p>\n
Sd\/-\n<\/p>\n
(D.P.Wadhwa)
\nNew Delhi,
\nApril 30, 1997″\n<\/p>\n
27.03.1998\tPursuant to the 1st Respondent’s direction, the 2nd Respondent passed
\nan Order paying amounts under Sections 214 and 244(1A) of the Act up
\nto the date of refund of tax.  The refund order has been marked as
\nAnnexure P-16 (Colly).\n<\/p>\n
\tFor the sake of brevity, the working of interest under Sections 214 and 244 (1A)
\nis reproduced hereunder:-<\/p>\n
\n\"WORKING OF INTEREST U\/S 214\/244 (1A)\nI)   Interest u\/s 214(1) of the\n      Act at 12% on Rs. 22,78,400\n      For the period 1.4.1978 to 28.2.1981\t\t\t\t 7,97,440\n\nii)   Interest u\/s 214(1) of the Act \n      at 12% p.a. on Rs. 34,78,800\/-\n      for the period 1.4.1978 to 27.3.1981 (u\/s 143(3))   \t          12,17,580\n\niii)   Int. u\/ss 244(1A) on Rs.\n       34,78,800\/- (R.O. issued on 23\/4\/1986)\n\nFrom 1.4.1981 to 30.9.1984 @ 12%\t\t\t          \t\t14,61,096\n\nFrom 1.10.1984 to 31.3.1986 @ 15%\t\t\t            \t\t7,82,730\n\t\t\t\t\t\t\t\t       ------------------\n\t\t\t\t\t\t\t\t          42,38,846\n\nInterest granted on 28.11.1986\t\t\t\t\t1,73,940\n\t\t\t\t\t\t\t\t       ------------------\nInterest payable to the assessee\t\t\t\t         40,84,906\n\n27\/3\/1998\n\t\t\t\t\t\t\t\t Sd\/-\n\t\t\t\t\t\t\t(Surinder Jit Singh)\n\t\t\t\t\t\t Dy. Commissioner of Income Tax\n\t\t\t\t\t\t\t   Spl.Rg.2, Pune\"\n<\/pre>\n
25.09.2000\tAppellant’s revision petition dated 03.07.1998 asking for interest on the
\ndelayed payment of interest up to the date of payment of the same was
\nrejected by the 1st respondent on the ground that as the monies were
\nrefunded to the assessee only after the direction of this Court, the
\nquestion of granting of interest for the period the matter was sub judice,
\ndoes not really arise.\n<\/p>\n
07.06.2001\tAppellant filed four writ petitions in the High Court at Bombay challenging
\nthe aforesaid orders of Respondent No.1.\n<\/p>\n
16.01.2004\tImpugned common judgment and order passed by the High Court.\n<\/p>\n
Aggrieved by the above common judgment, the appellant has filed the above
\ncivil appeals.\n<\/p>\n
We heard Mr. Jehangir D. Mistri, learned counsel assisted by Mr. Rustom B.
\nHathikhanawala, for the appellant and Mr. Mohan Parasaran, learned ASG assisted by
\nMr. Manish Tiwari and Others for the respondents.\n<\/p>\n
The order rejecting the claim for interest on interest is sought to be challenged
\non the ground that the appellant’s were entitled to be paid for interest @ 15% p.a. on
\nthe total amount of refund including the interest accrued thereon from the day such
\nrefund amount became due and payable till the date of actual payment in terms of
\nSections 214(1), 214(1A) and 244(1A) read with Section 240 and Section 244(1) of the
\nIncome Tax Act, 1961 and in the alternative, assuming that no such interest on interest
\nis payable under any of the provisions of the Act then the same shall be ordered to be
\npaid in exercise of writ jurisdiction since the amount  of interest payable under Section
\n214(1) read with Sections 214(1A) and 244(1A) of the said Act was illegally and
\nwrongfully withheld by the respondents for a very long period as stated in the writ
\npetition.\n<\/p>\n
Mr. Jehangir D. Mistri, learned counsel for the appellant, submitted that:\n<\/p>\n
1)\tIn view of the express provisions of the Act, the High Court ought to have
\nheld that an assessee is entitled to compensation by way of interest on
\nthe delay in the payment of amounts lawfully due to the appellant which
\nwere withheld wrongly and contrary to law by the Income-tax Department
\nfor an inordinately long period of up to 17 years;\n<\/p>\n
2)\tThe appellant being undisputedly entitled in law to receive certain
\namounts from the Department in view of excess taxes paid by\/collected
\nfrom it (which amounts included interest) and payment of these amounts
\nhaving been admittedly delayed by the respondents contrary to law, the
\nappellant was entitled to receive interest on the said amount;\n<\/p>\n
3)\tThe High Court is not right in holding that interest under Sections 214
\nand 244 of the Act is not a refund under Section 240 and hence
\nDepartment is not liable to pay interest under Section 244 in respect of
\ndelay in payment of the aforesaid interest;\n<\/p>\n
4)\tAdmittedly there was a delay on the part of the Department in paying the
\ninterest under Sections 214 and 244 of the Act.  The High Court has
\nfailed to appreciate that during the intervening period, the Department
\nhad enjoyed the benefit of these funds while the appellant was deprived
\nof the same;\n<\/p>\n
5)\tThe High Court failed to appreciate that the appellant’s monies had been
\nwithheld by the department contrary to law, that interest on delayed
\npayment of refund was not paid to the appellant on 27th March, 1981 and
\n30th April, 1986 due to the erroneous view that had been taken by the
\nrespondents, that this Court in the appellant’s own case had passed
\nOrder dated 30.04.1997 which finally resulted in the respondents granting
\ninterest on the delayed payment of refund, that the said Order of this
\nCourt is a declaration of law as it always was, that interest on refund was
\ngranted to the appellant after a substantial lapse of time and hence it
\nshould be entitled to interest for this period of delay;\n<\/p>\n
6)\tThe High Court has committed an error in basing its interpretation of the
\nprovisions of the Act very largely upon other statutory provisions which
\nwere not even enacted during the relevant time and which contentions
\nwere never urged or put to counsel appearing in the matter;\n<\/p>\n
7)\tThe High Court has also erred in purporting to distinguish\/explain the
\ndecision of this Court based on various decisions (about 20) which were
\nnever cited during the course of the hearing which were never put to
\ncounsel appearing and which, therefore, the appellant had no opportunity
\nof dealing with;\n<\/p>\n
8)\tThe decision of the High Court was erroneous as it rejected the
\nappellant’s claim on the sole ground that as the “amount due” to the
\nappellant was of interest, no compensation could be paid to it, even when
\ngross delay in payment was admittedly made by the Income-tax
\nDepartment contrary to law;\n<\/p>\n
9)\tThat the High Court erred in holding that an assessee was entitled to
\ninterest only on the amounts paid by him in excess of amounts
\nchargeable under the Act.  It ought to have held that interest is also
\npayable by the Income-tax Department under Section 244 or otherwise
\non any amount that becomes “due” to an assessee and which has not
\nbeen paid within the time allowed by the Act.\n<\/p>\n
10)\tThe High Court has erred in relying on the proviso to Section 240 of the
\nAct for reaching the conclusion that interest is payable only on the
\namounts paid by the assessee in excess of that chargeable under the
\nAct.  The High Court has miserably failed to appreciate that the proviso
\nwas inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect
\nfrom 1st April, 1989 and hence was not applicable to the present case.  In
\nany event, it failed to appreciate that proviso to Section 240 was inserted
\nto overcome the difficulty caused by the view that if any assessment had
\nbeen annulled for any reason the department was not permitted to retain
\neven the tax due on the basis of the returned income.\n<\/p>\n
Section 240 of the Act as it stood then at the relevant point of time, namely, the
\nassessment years in question and the insertion of the proviso to Section 240 w.e.f.
\n01.04.1989 is reproduced hereunder for the sake of convenience:-
\n“240. Refund on appeal, etc. Where, as a result of any order
\npassed in appeal or other proceeding under this Act, refund of any
\namount becomes due to the assessee, the Income-tax Officer shall,
\nexcept as otherwise provided in this Act, refund the amount to the
\nassessee without his having to make any claim in that behalf.”\n<\/p>\n
“240. Refund on appeal, etc. Where, as a result of any order
\npassed in appeal or other proceeding under this Act, refund of any
\namount becomes due to the assessee, the Assessing Officer shall,
\nexcept as otherwise provided in this Act, refund the amount to the
\nassessee without his having to make any claim in that behalf:\n<\/p>\n
7[Provided that where, by the order aforesaid,-\n<\/p>\n
(a)\tan assessment is set aside or cancelled and an order of fresh
\nassessment is directed to be made, the refund, if any, shall
\nbecome due only on the making of such fresh assessment;\n<\/p>\n
(b)\tthe assessment is annulled, the refund shall become due only
\nof the amount, if any, of the tax paid in excess of the tax
\nchargeable on the total income returned by the assessee.]”\n<\/p>\n
7. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1.4.1989.\n<\/p>\n
11)\tThe High Court erred in purporting to distinguish this Court’s decision in
\nNarendra Doshi’s case and, in particular, the said decision has sought to
\nbe distinguished based on various decisions which were never cited
\nduring the course of the hearing which were never put to counsel
\nappearing.\n<\/p>\n
In this context, the High Court has failed to appreciate that this
\nCourt in the case of C.I.T. vs. Narendra Doshi, 254 ITR 606 (SC) had
\nset out the two issues before itself, viz., whether when department had
\nnot challenged the correctness of the Gujarat High Court decisions it was
\nbound by the principle laid down therein;\n<\/p>\n
Whether the Gujarat High Court had rightly laid down the principle that an
\nassessee would be entitled to interest on interest.\n<\/p>\n
That sequitur to the first issue was that the department having accepted
\nthe Gujarat High Court decisions they were bound by the same and,
\ntherefore, they ought not to have filed an appeal against the M.P. High
\nCourt’s decision.  The High Court failed to appreciate that this Court did
\nnot hold that the department ought not to have filed an appeal.  On the
\ncontrary, it had decided the second issue while holding that, “following
\nthat principle, the question has, as we find, been rightly answered in the
\naffirmative and in favour of the assessee.”  It, therefore, erred in holding
\nthat this Court had only decided the issue relating to correctness of the
\ndecision of the M.P. High Court and not the decisions of the Gujarat High
\nCourt.\n<\/p>\n
12)\tThat the doctrine of merger was not argued at all before the High Court.
\nHowever, the High Court has considered the said point from pages 46-54
\nof its judgment.\n<\/p>\n
Mr. Jehangir D. Mistri, learned counsel for the appellant, took us through the
\nentire pleadings, annexures marked in these appeals and the documents relied on by
\nboth the parties in the High Court and of this court and also cited the following
\ndecisions in support of his contention.\n<\/p>\n
1.\tD.J. Works vs. Deputy Commissioner of Income-Tax,<\/a> 195 ITR 227\n<\/p>\n
2.\tCommissioner of Income-Tax vs. Narendra Doshi,<\/a> 254 ITR 606\n<\/p>\n
3.\tBerger Paints India Ltd. Vs. Commissioner of Income-Tax, 266 ITR 99\n<\/p>\n
4.\tUnion of India & Ors. Vs. Kaumudini Narayan Dalal & Anr., 249 ITR 219\n<\/p>\n
5.\tCommissioner of Income-Tax vs. Shivsagar Estate,<\/a> 257 ITR 59\n<\/p>\n
6.\tChimanlal S. Patel vs. Commissioner of Income-Tax & Anr., 210 ITR 419\n<\/p>\n
7.\tJwala Prasad Sikaria & Ors. Vs. Commissioner of Income-tax & Ors.,
\n175 ITR 535 at 539\n<\/p>\n
8.\tCommissioner of Income-tax vs. Goodyear India Ltd., 249 ITR 527\n<\/p>\n
9.\tCommissioner of Income-Tax vs. Needle Industries Pvt. Ltd.,<\/a> 233 ITR
\n370<\/span>\n<\/p>\n
10.\t Suresh B. Jain vs. P.K.P. Nair and Ors. 194 ITR 148<\/p>\n
Mr. Mohan Parasaran, learned ASG appearing for the respondents, on the other
\nhand, submitted that the Commissioner had decided the matter in terms of the
\ndirections issued by the Apex Court and the direction was to decide the claim in relation
\nto the interest payable to the appellant in the light of the law laid down in Modi
\nIndustries Ltd. case (supra).  According to him, none of the provisions of law
\ncontained in the said Act provide for payment of interest on interest and certainly under
\nSection 244(1).  He would further submit that in the matter of interpretation of a taxing
\nstatute and the provisions of law contained therein, there can be no scope for
\nconsideration of equity or intendment and what is expected is the strict interpretation.
\nHe has further argued that when the statute does not permit grant of interest, it would
\nbe inappropriate to grant interest in exercise of writ jurisdiction.\n<\/p>\n
Arguing further and placing strong reliance on Modi Industries Ltd. Case
\n(supra), Mr. Parasaran submitted that this Court in Modi Industries Ltd. Case (supra)
\nhas clarified two factors, namely, the amount on which the interest is to be granted and
\nthe time period for which the interest is to be granted under Sections 214 and 244 (1A).
\nThe decision of Modi Industries Ltd. Case (supra) does not refer to interest on interest
\nand that the decision of this Court had been given on September, 1995.\n<\/p>\n
Mr. Mohan Parasaran submitted that in the present case, the Assessing Officer
\ndid not grant interest to the assessee as per his claim and the Assessing Officer’s stand
\nwas upheld by the C.I.T. Pune vide his order dated 28.02.1990 under Section 264 and
\nit can be seen that the order under Section 264 passed by the CIT is as per the position
\nof law as it then was and before the decision of this Court and that the decision of Modi
\nIndustries Ltd. Case (supra) had been given in 1995 and this Court has only clarified
\nthe position regarding payment of interest under Sections 214 and 244(1A).  This
\nCourt’s decision was received on 29.09.1997.  Under such circumstances, it cannot be
\nsaid that the Department had wrongfully withheld the assesse’s money without any
\nauthority of law and naturally such a conclusion cannot be drawn.  The C.I.T. Pune had
\nconsidered and judiciously interpreted the provisions of Sections 214 and 244 (1A) as
\nper the established position of law as on that date i.e. 28.02.1990 and on the
\nassessee’s reference this Court had issued directions after seven years i.e. on
\n29.09.1997 which should have been expeditiously complied with as the monies were
\nrefunded to the assessee after the direction of this Court, the question of granting
\ninterest for the period the matter was sub judice, does not really arise.
\nMr. Mohan Parasaran has not cited or relied on any other judgment except Modi
\nIndustries Ltd. Case (supra).  It was further submitted that interest payable on the
\nrefund amount under Section 244(1) is a simple interest at the rate specified therein
\nand neither compound interest nor interest on interest is payable and that under
\nSection 244(1A) no further interest will be payable under Section 244(1) for the same
\nperiod and on the same amount and that there is no provision in the Act for payment of
\ninterest on interest.\n<\/p>\n
The High Court through a detailed analysis and study of relevant case law
\ncorrectly rejected the alternative claim of the appellant by following the decision of this
\nCourt in the case of Modi Industries case (supra), wherein the scope of Section 214 of
\nthe Act was discussed and it was held that there is no right to get interest on refund
\nexcept as provided by statute.  This Court was pleased to pass the order of remand on
\n30.4.1997 directing the Commission of Income Tax Pune, to consider the Revision
\nPetition in the light of the decision in the case of Modi Industries.  By order dated
\n29.9.1997, the Commissioner of Income Tax, Pune, directed the payment of interest
\naccording to the decision in Modi Industries case and in pursuance thereto the Dy.
\nCommissioner of Income Tax (SR-2), Pune, passed order dated 27.3.1998 giving effect
\nto the order of the CIT dated 29.9.1997 and granted interest to the tune of Rs.
\n40,84,906\/- in addition to Rs. 1,73,940\/- which had already been paid on 28.11.1986,
\nthereby totalling the interest amount to Rs. 42,38,846\/-.  This interest was calculated
\nstrictly as per the provisions of Section 214 read with Section 244(1A) of the Act.
\nHence it is vehemently denied that the Department has ever enjoyed any funds of the
\nappellant rather in all fairness and in strict accordance with the statute, the interest on
\nthe refund has been paid to the appellant.\n<\/p>\n
Questions of law:\n<\/p>\n
The substantial questions of law of general public importance arising out of the
\ncommon impugned judgment and order are as under:-\n<\/p>\n
A.  \tWhether in view of binding decisions of this Court the respondents are estopped
\nfrom urging that compensation as claimed by the appellant is not payable by
\nthem? And therefore whether the Bombay High Court erred in allowing them to
\nurge such a contention in the impugned judgment?\n<\/p>\n
B.\tAssuming for the sake of argument that there is no provision in the Income-tax
\nAct, 1961 (“the Act”) for grant of such compensation, this Court had upheld the
\nview of the Gujarat & Madhya Pradesh High Courts that compensation should be
\ngranted (whether called interest or otherwise) and hence the impugned judgment
\nwas contrary to a decision of this Court and ought to be reversed?
\nC.\tWhether on a proper interpretation of the various provisions of the Act an
\nassessee was entitled to be compensated for the delay in paying to it any
\n‘amount’ due to it even if such ‘amount’ comprised of interest, as had been held
\nby the Delhi and Madras High Courts and hence the impugned judgment was
\nerroneous and ought to be reversed ?\n<\/p>\n
D.\tWhether in any event in the facts and circumstances of the case the Bombay
\nHigh Court ought to have ordered that the assessee be compensated for the
\nextraordinary delay of up to 17 years?\n<\/p>\n
E.\tWhether the High Court ought to have held that sections 240 and 244 of the Act
\nrefer to ‘refund of any amount’, which phrase clearly includes any amount
\n(including interest) due by the Income Tax department to the assessee, and
\nhence the appellant was entitled to interest on the delay in the payment of
\namounts due from the Income-tax department ?\n<\/p>\n
F.\tWhether the High Court erred in purporting to distinguish\/explain the decision of
\nthis Court in the case of CIT vs. Narendra Doshi 254 ITR 606 (SC) based on
\ninter alia various (about 20) decisions which were never cited during the course
\nof the hearing, which were never put to counsel appearing and which therefore
\nthe appellant had no opportunity of dealing with?\n<\/p>\n
G.\tWhether the High Court erred in basing its interpretation of the provisions of the
\nAct very largely upon other statutory provisions which were not even enacted
\nduring the relevant time, and which contentions were never urged or put to
\ncounsel appearing in the matter?\n<\/p>\n
H.\tWhether the High Court is right in considering the doctrine of merger which
\ncontentions were never urged by counsel for both the sides.\n<\/p>\n
Before considering the rival claims, it would be beneficial to reproduce the
\nSection as it stood then (at the relevant point of time) Sections 237, 240 (reproduced in
\nparagraphs (supra), 243 & 244.\n<\/p>\n
“237. Refunds. If any person satisfies the Income-tax Officer that the
\namount of tax paid by him or on his behalf or treated as paid by him or on
\nhis behalf for any assessment year exceeds the amount with which he is
\nproperly chargeable under this Act for that Year, he shall be entitled to a
\nrefund of the excess.\n<\/p>\n
243. Interest on delayed refunds. (1) If the Income-tax Officer does not
\ngrant the refund  <\/p>\n
(a) in any case where the total income of the assessee does not consist
\nsolely of income from interest on securities or dividend, within three months
\nfrom the end of the month in which the total income is determined under this
\nAct, and<\/p>\n
(b) in any other case, within three months from the end of the month in
\nwhich the claim for refund is made under this Chapter,<\/p>\n
the Central Government shall pay the assessee simple interest at (twelve)
\nper cent per annum on the amount directed to be refunded from the date
\nimmediately following the expiry of the period of three months aforesaid to
\nthe date of the order granting the refund.\n<\/p>\n
Explanation : If the delay in granting the refund within the period of three
\nmonths aforesaid is attributable to the assessee, whether wholly or in part,
\nthe period of the delay attributable to him shall be excluded from the period
\nfor which interest is payable.\n<\/p>\n
(2) Where any question arises as to the period to be excluded for the
\npurposes of calculation of interest under the provisions of this section, such
\nquestion shall be determined by the Commissioner whose decision shall be
\nfinal.\n<\/p>\n
244. Interest on refund where no claim is needed. (1) Where a refund is
\ndue to the assessee in pursuance of an order referred to in section 240 and
\nthe Income-tax Officer does not grant the refund within a period of [three
\nmonths from the end of the month in which such order is passed], the
\nCentral Government shall pay to the assessee simple interest at [twelve] per
\ncent per annum on the amount of refund due from the date immediately
\nfollowing the expiry of the period of [three] months aforesaid to the date on
\nwhich the refund is granted.\n<\/p>\n
(1A) Where the whole or any part of the refund referred to in sub-section (1)
\nis due to the assessee, as a result of any amount having been paid by him
\nafter the 31st day of March, 1975, in pursuance of any order of assessment
\nor penalty and such amount or any part thereof having been found in appear
\nor other proceeding under this Act to be in excess of the amount which such
\nassessee is liable to pay as tax or penalty, as the case may be, under this
\nAct, the Central Government shall pay to such assessee simple interest at
\nthe rate specified in sub-section (1) on the amount so found to be in excess
\nfrom the date on which such amount was paid to the date on which the
\nrefund is granted:\n<\/p>\n
Provided that, where the amount so found to be in excess was paid in
\ninstalments, such interest shall be payable on the amount of each such
\ninstalment or any part of such instalment, which was in excess, from the
\ndate on which such instalment was paid to the date on which the refund is
\ngranted :\n<\/p>\n
Provided further that no interest under this sub-section shall be payable for
\na period of one month from the date of the passing of the order in appear or
\nother proceeding :\n<\/p>\n
Provided also that where any interest is payable to an assessee under this
\nsub-section, no interest under sub-section (1) shall be payable to him in
\nrespect of the amount so found to be in excess.\n<\/p>\n
(2)  Where a refund is withheld under the provisions of section 241, the
\nCentral Government shall pay interest at the aforesaid rate on the amount of
\nrefund ultimately determined to be due as a result of the appear or further
\nproceeding for the period commencing after the expiry of three months from
\nthe end of the month in which the order referred to in section 241 is passed
\nto the date the refund is granted.”\n<\/p>\n
We have given our anxious and thoughtful consideration on the elaborate
\nsubmissions made by counsel appearing on either side.  In our opinion, the High Court
\nhas failed to notice that in view of the express provisions of the Act an assessee is
\nentitled to compensation by way of interest on the delay in the payment of amounts
\nlawfully due to the appellant which were withheld wrongly and contrary to the law by the
\nDepartment for an inordinate long period of up to 17 years.  The High Court, in our
\nopinion, has unnecessarily made the judgment a bulky one by considering various
\nprovisions of the Act and, in particular, Section 240 which was inserted by Direct Tax
\nLaws (Amendment) Act, 1987 with effect from 01.04.1989 and hence was not
\napplicable to the present case.  The High Court has not considered Section 240 as it
\nstood then i.e. at the relevant point of time.  This apart, the High Court has also
\nconsidered the question of merger and relied on many number of judgments which
\nwere not even relied on or cited by counsel for the parties.  Counsel for the appellant
\nhas taken specific grounds in regard to the above factors in the special leave petition
\ngrounds which were not denied by the Department.  Cartload of judgments were cited
\nby counsel for the appellant which is directly and pointedly cover the issue raised in
\nthese appeals.\n<\/p>\n
1) D.J. Works vs. Deputy Commissioner of Income-Tax,<\/a> 195 ITR 227
\n\tThe above judgment is identical to the case on hand and there is no factual
\ndifference.  In awarding interest, the Gujarat High Court has held as under:
\n\t“Section 214(1) itself recognizes in principle the liability to pay
\ninterest on the amount of tax paid in excess of the amount of assessed tax
\nand which is retained by the Government.  Interest on the excess amount is
\npayable at the rate of 15 per cent from the first day of the year of
\nassessment to the date of regular assessment.  It would thus appear that
\nthe Legislature itself has considered it fair and reasonable to award interest
\non the amount paid in excess, which has been retained by the Government.
\nWe do not see any reason why the same principle should not be extended
\nto the payment of interest which has been wrongfully withheld by the
\nAssessing Officer or the Government.  It was the duty of the Assessing
\nOfficer to award interest on the excess amount of tax paid by the petitioner
\nwhile giving effect to the appellate order and granting refund of the excess
\namount.  If the excess tax paid cannot be retained without payment of
\ninterest, so also the interest which is payable thereon cannot be retained
\nwithout payment of interest.  Once the interest amount becomes due, it
\ntakes the same colour as the excess amount of tax which is refundable on
\nregular assessment.   Therefore, in our opinion, though there is no specific
\nprovision for payment of interest on the interest amount for which no order is
\npassed at the time of passing the order of refund of the excess amount and
\nwhich has been wrongfully retained, interest would be payable at the same
\nrate at which the excess amount carries interest.  In other words, the
\namount payable by way of interest would carry simple interest at the rate of
\n15 per cent  per annum from the date it became payable to the date it is
\nactually paid.  The decisions, which were cited at the Bar do not have a
\ndirect bearing on the above question and therefore, we do not propose to
\nrefer to or deal with them.  On general principles, we are of the opinion that
\nthe Government is liable to pay interest, at the rate applicable to the excess
\namount refunded to the assessee, on the interest amount which had
\nbecome due under section 214(1) of the Act.  In the light of the above
\ndiscussion, this petition must succeed.”\n<\/p>\n
2) Commissioner of Income-Tax vs. Narendra Doshi,<\/a> 254 ITR 606 (S.P. Bharucha,
\nY.K. Sabharwal and Brijesh Kumar,JJ.)
\nIn this case, this Court has affirmed the decision of the M.P. High Court  (Indore
\nBench) in I.T.R. No. 5 of 1996.  In that case, the High Court was called upon to answer
\nthe following question:\n<\/p>\n
“Whether, on the facts and in the circumstances of the case, the Income-tax
\nAppellate Tribunal was justified in law in upholding the order of the Deputy
\nCommissioner of Income-tax (Appeals), Indore, directing to allow interest on
\ninterest, when the law points for grant of simple interest only?”\n<\/p>\n
The High Court answered the question in the affirmative and in favour of the
\nassessee, relying upon the judgments which laid down that interest was payable on the
\nexcess amount paid towards income-tax.  The Tribunal, whose decision the M.P. High
\nCourt affirmed had relied upon the decision of the Gujarat High Court in the case of
\nD.J. Works vs. Deputy CIT<\/a> (supra), which had been followed by the same High Court
\nin Chimanlal S. Patel vs. CIT, (supra).  These decisions hold that the Revenue is liable
\nto pay interest on the amount of interest which it should have paid to the assessee but
\nhas unjustifiably failed to do.  This Court, in the above case, held as under:
\n“The Revenue has not challenged the correctness of the two decisions of
\nthe Gujarat High Court.  They must, therefore, be bound by the principle laid
\ndown therein.  Following that principle, the question has, as we find, been
\nrightly answered (by Madhya Pradesh High Court) in the affirmative and in
\nfavour of the assessee.  The civil appeal is dismissed. No order as to costs.”\n<\/p>\n
3) Berger Paints India Ltd. Vs. Commissioner of Income-Tax, 266 ITR 99 [K.G.
\nBalakrishnan and B.N. Srikrishna, JJ.]
\n\tThis case deals with doctrine of estoppel.  The decision in the case of one
\nassessee was accepted by the Department and the correctness was not challenged.
\nThis Court held that it is not open to the Department to challenge in the case of other
\nassesses without just cause.\n<\/p>\n
\tSpeaking for the Bench B.N. Srikrishna, J. has observed thus:
\n“There is no doubt that the judgment of the Gujarat High Court in Lakhanpal
\nNational Ltd.’s case [1986] 162 ITR 240 is completely in favour of the
\nassessee as it accepts the contention of the assessee in toto. It is not in
\ndispute that the decision in Lakhanpal National Ltd.’s case [1986] 162 ITR
\n240 (Guj) was not challenged by the Department before this court and thus
\nhas been accepted by the Department. The interpretation placed on section
\n43B in Lakhanpal National Ltd.’s case [1986] 162 ITR 240 (Guj) was directly
\nfollowed by the judgment of the Bombay High Court in CIT v. Bharat
\nPetroleum Corporation Ltd.<\/a> [2001] 252 ITR 43 and by the Madras High
\nCourt in Chemicals and Plastics India Ltd. v. CIT<\/a> [2003] 260 ITR 193. These
\ntwo judgments also appear to have been accepted by the Revenue and
\nhave not been challenged before this court at all. This fact asserted before
\nus by the petitioner-assessee has not been disputed in the counter affidavit
\nof the Department.\n<\/p>\n
In view of the judgments of this court in Union of India v. Kaumudini
\nNarayan Dalal<\/a> [2001] 249 ITR 219; CIT v. Narendra Doshi [2002] 254 ITR
\n606 and CIT v. Shivsagar Estate [2002] 257 ITR 59, the principle
\nestablished is that if the Revenue has not challenged the correctness of the
\nlaw laid down by the High Court and has accepted it in the case of one
\nassessee, then it is not open to the Revenue to challenge its correctness in
\nthe case of other assessees, without just cause.\n<\/p>\n
The decision in Lakhanpal National Ltd.’s case [1986] 162 ITR 240 (Guj),
\nwhich clearly laid down the interpretation of section 43B was followed by the
\njudgments of the Madras High Court and Bombay High Court and was again
\nfollowed by the decision of the Special Bench of the Income-tax Appellate
\nTribunal, none of which have been challenged. In these circumstances, the
\nprinciple laid down in Union of India v. Kaumudini Narayan Dalal<\/a> [2001] 249
\nITR 219 (SC); CIT v. Narendra Doshi [2002] 254 ITR 606 (SC) and CIT v.
\nShivsagar Estate [2002] 257 ITR 59 (SC) clearly applies. We see no “just
\ncause” as would justify departure from the principle. Hence, in our view, the
\nRevenue could not have been allowed to challenge the principle laid down
\nin Lakhanpal National Ltd.’s case [1986] 162 ITR 240 (Guj), which was
\nfollowed by the Inspecting Assistant Commissioner in the case of the
\nassessee in the three assessment years in question. We are, therefore, of
\nthe view that the Commissioner, the Income-tax Appellate Tribunal and the
\nCalcutta High Court erred in permitting the Revenue to raise a contention
\ncontrary to what was laid down by the Gujarat High Court in Lakhanpal
\nNational Ltd.’s case [1986] 162 ITR 240. This decision has been
\nsubsequently followed by the decisions of the Bombay High Court in CIT v.
\nBharat Petroleum Corporation Ltd.<\/a> [2001] 252 ITR 43 and the Madras High
\nCourt in Chemicals and Plastics India Ltd. v. CIT<\/a> [2003] 260 ITR 193 as well
\nas the decision of the Special Bench in Indian Communication Network Pvt.
\nLtd. v. IAC [1994] 206 ITR (AT) 96 (Delhi), which have all remained
\nunchallenged.”\n<\/p>\n
4) Union of India & Ors. Vs. Kaumudini Narayan Dalal & Anr., 249 ITR 219 (S.P.
\nBharucha, N. Santosh Hegde and Y.K. Sabharwal,JJ.)
\n\tIn this case, the Revenue followed the earlier judgment of the same High Court
\nin the case of Pradip Ramanlal Sheth vs. Union of India<\/a> [1993] 204 ITR 866.
\nEnquiries with the registry reveal that no appeal against that judgment was preferred by
\nthe Revenue.  This Court held thus:\n<\/p>\n
“If the Revenue did not accept the correctness of the judgment in the case
\nof Pradip Ramanlal Sheth [1993] 204 ITR 866 (Guj), it should have
\npreferred an appeal thereagainst and instructed counsel as to what the fate
\nof that appeal was or why no appeal was filed.  It is not open to the
\nRevenue to accept that judgment in the case of the assessee in that case
\nand challenge its correctness in the case of other assesses without just
\ncause.  For this reason, we decline to consider the correctness of the
\ndecision of the High Court in this matter and dismiss the civil appeal.  No
\norder as to costs.”\n<\/p>\n
5) Commissioner of Income-Tax vs. Shivsagar Estate,<\/a> 257 ITR 59 (S.P. Bharucha,
\nR.C. Lahoti and N. Santosh Hegde,JJ.)
\n\tIn this case, following its decision for an earlier year, the High Court held for
\ncertain subsequent years that the income from property held by 65 co-owners had to be
\nassessed separately in the hands of the individual co-owners and not in the hands of
\nan association of persons.  The Department preferred appeals and special leave
\npetitions to this Court.  This Court dismissed the appeals and petitions on the ground
\nthat no appeal had been taken to this Court for the earlier year.\n<\/p>\n
6)  Chimanlal S. Patel vs. Commissioner of Income-Tax & Anr., 210 ITR 419
\n\tIn this case, the Division Bench of the Gujarat High Court held as follows:-
\n\t“The Government is liable to pay interest on the interest amount at
\nthe same rate at which interest is payable on the excess amount refundable
\nto the assessee.  Excess tax cannot be returned without payment of
\ninterest: so also, interest which is payable thereon cannot be retained
\nwithout payment of interest.  There is no specific provision for payment of
\ninterest on the interest amount.  Interest would be payable at the same rate
\nat which the excess amount carries interest.”\n<\/p>\n
\tThe above judgment has also relied on the reported decision in the case of D.J.
\nWorks vs. Dy. CIT<\/a> [1992] 195 ITR 227 (Guj).\n<\/p>\n
\tThe Court further held as under:\n<\/p>\n
\t“Mr. Shah, learned advocate, further submitted that the Government
\nis liable to pay interest on the amount of tax paid in excess of the amount of
\nassessed tax and the Government has withheld payment of interest
\nwrongfully.  Section 214 of the Act itself recognises in principle the liability to
\npay interest on the amount of tax paid in excess of the amount of assessed
\ntax which is retained by the Government.  Relying on a reported decision in
\nthe case of D.J.Works v. Dy. CIT<\/a> (1992) 195 ITR 227 (Guj.) , the learned
\nadvocate submitted that the Government is liable to pay interest on the
\ninterest amount at the same rate at which interest is payable on the excess
\namount refundable to the assessee.  Excess tax cannot be returned without
\npayment of interest.  So also, interest which is payable thereon cannot be
\nretained without payment of interest.  The Court, while deciding the above
\ncase, observed that there is no specific provision for payment of interest on
\nthe interest amount.  Interest would be payable at the same rate at which
\nthe excess amount carries interest.  In other words, the court held that the
\namount payable by way of interest would carry simple interest at the rate of
\n15 per cent per annum from the date it became payable to the date it is
\nactually paid.”\n<\/p>\n
7) Jwala Prasad Sikaria & Ors. Vs. Commissioner of Income-tax & Ors., 175 ITR
\n535 at 539
\n\tIt was argued by Mr. Mohan Parasaran that interest payable on the refund
\namount under Section 244(1) is a simple interest at the rate specified therein and
\nneither compound interest nor interest on interest is payable and that under Section
\n244(1A), no further interest shall be payable under Section 244(1) for the same period
\nand on the same amount and that there is no provision in the Act for payment of
\ninterest on interest.  This contention, in our opinion, has no merits.  Learned counsel for
\nthe assessee cited the decision Jwala Prasad Sikaria & Ors. (supra)  in support of his
\ncontention wherein the Gauhati High Court held that a citizen is entitled to payment of
\ninterest due to delay even if there is no statutory provision in this regard.  The grant of
\ninterest to owners whose property was requisitioned under the provisions of the
\nRequisitioning and Acquisition of Immovable Property Act, 1952, was upheld in Abhay
\nSingh Surana vs. Secretary, Ministry of Communication, AIR<\/a> 1987 SC 2177, and
\nDeputy Commissioner vs. Mamat Kaibarta, AIR 1984 Gauhati 25.  The High Court
\nheld that where an assessment is made under the Act of 1922 after the commencement
\nof the 1961 Act and refund is granted to the assessee, interest is payable on such
\nrefund.  The High Court has further held:\n<\/p>\n
“The interest would, however, be deemed to have accrued after expiry of
\nthree months from the end of the month in which refund had become
\npayable.  The rate applicable would be that applicable to grant of refund
\nunder the Act of 1961 at the relevant time.”\n<\/p>\n
\tThe above decision was cited before the Bombay High Court.  The High Court
\nvery conveniently omitted to consider the decision holding that the decision in 175 ITR
\n535 was in the peculiar facts of that case.\n<\/p>\n
8) Commissioner of Income-tax vs. Goodyear India Ltd., 249 ITR 527
\n\tIn the above case, the dispute relates to the assessment year 1967-68.  At the
\ninstance of the Revenue, the following question has been referred for the opinion of the
\nHigh Court by the Income-tax Appellate Tribunal, New Delhi.
\n“Whether on the facts and in the circumstances of the case, the Tribunal is
\nright in holding that the assessee is entitled to interest under section 244 on
\nthe amount of interest amounting to Rs.1,90,499 payable under section 214
\nof the Income-tax Act, 1961?”\n<\/p>\n
\tArijit Pasayat, C.J. speaking for the Bench held as follows:-
\n\t“The provisions of this section shall not apply in respect of any
\nassessment for the assessment year commencing on the 1st day of April,
\n1989, or any subsequent assessment years.\n<\/p>\n
Section 244 deals with interest on refund where no claim is needed.
\nSub-section (2), inter alia, provides that where a refund is due to the
\nassessee, “in pursuance of an order referred to in section 240” and the
\nAssessing Officer does not grant the refund within the stipulated time, the
\nCentral Government is required to pay simple interest at the stipulated rate.
\nSection 240 deals with refund on appeal etc.  This provision clearly lays
\ndown that where as a result of any order passed in appeal or other
\nproceedings under this Act, refund of any amount becomes due to the
\nassessee, the Assessing Officer shall, except as otherwise provided in this
\nAct, refund the amount to the assessee without his having to make any
\nclaim in that behalf.   The crucial expressions in section 240 are “any
\namount which becomes due to the assessee as a result of any order
\npassed in any appeal or other proceedings under the Act” and the “amount
\nbecomes due to the assessee”.  Section 244 refers to the liability fastened
\non the Central Government in case of failure to grant refund within the
\nstipulated time in a case where refund is due to the assessee in pursuance
\nof an order referred to in section 240.  A combined reading of both the
\nprovisions makes the position crystal clear that it is any amount which
\nbecomes due to the assessee and not necessarily the tax component.
\nUndisputedly, a sum of Rs.1,90,499 which qualifies for interest became
\npayable to the assessee on the basis of an order passed under section 240
\nof the Act.  Merely because this was inclusive of an amount which was
\npayable under section 214 of the Act, that would not make the position any
\ndifferent.  It is an amount which became due to the assessee on the basis
\nof the appellate order.  Therefore, the assessee was entitled to interest in
\nterms of section 244 of the Act.  A similar view has been taken by the
\nGujarat High Court in D.J.Works v Deputy CIT (1992) 195 ITR 227 and
\nChiman Lal S.Patel v. CIT<\/a> (1994) 210 ITR 419 though with different
\nconclusions.  Above being the position, we answer the question in the
\naffirmative, in favour of the assessee and against the Revenue.”\n<\/p>\n
9) Commissioner of Income-Tax vs. Needle Industries Pvt. Ltd.,<\/a> 233 ITR 370
\n\tMr. Parasaran argued that the High Court was right in law in rejecting the
\nappellant’s claim on the sole ground that as the amount due to the appellant was on
\ninterest, no compensation could be paid to it even when gross delay in payment was
\nadmittedly made by the Department contrary to law.  The Division Bench of the Madras
\nHigh Court in Commissioner of Income-Tax vs. Needle Industries Pvt. Ltd.,<\/a> 233 ITR
\n370 succinctly interpreted the expression “amount” in Section 244(1A).  In that case,
\nthe original assessment for the assessment year 1974-75 was completed on August 29,
\n1977 and the order of assessment was the subject-matter of appeal before the
\nappellate authority and the Tribunal.  The Tribunal ordered refund.  The ITO allowed
\ninterest under section 244 (1A) the assessee filed an appeal against the order passed
\nby the ITO refusing to grant interest on interest.  The Tribunal, on an appeal by the
\nRevenue upheld the due to the CIT (Appeals) and held that the assessee was entitled
\nto interest under Section 244(1A) in respect of interest calculated under section 139(8)
\nand 215 and refunded under the provisions of the Act.  The Tribunal at the instance of
\nthe Revenue referred certain questions of law for consideration by the High Court.  The
\nHigh Court, while construing the expression “amount” in earlier part of Section 244(1A)
\nheld that it would refer to not only the tax but also the interest on the expression
\n“amount” is a neutral expression and it cannot be limited to the tax paid in pursuance of
\nthe order of assessment.  The High Court held as follows:\n<\/p>\n
“Further, the expression, “amount” in the earlier part of the section 244(1A)
\nwould refer to not only the tax but also the interest and the expression
\n“amount” is a neutral expression and it cannot be limited to the tax paid in
\npursuance of the order of assessment.  We are of the opinion that the
\nexpression “tax or penalty” found in the later part of the section 244(1A)
\nwould not qualify or restrict the scope of the expression “amount” found in
\nthe earlier part to mean only “tax or penalty”.  As already seen, the function
\nof the later part of section 244(1A) of the Act is to find out the excess of the
\namount which the assessee paid by way of tax or penalty and that is the
\nreason the expression “tax or penalty” has been employed.  However, to
\ndetermine the amount on which the Revenue is liable to pay interest,
\nsection 244(1A) gives emphasis on the amount paid by the assessee in
\npursuance of the order of assessment and the amount, in our opinion,
\ncannot be limited to the amount of tax or penalty, but would encompass the
\namount of interest paid by the assess.  The clear intention of Parliament is
\nthat the right to interest will compensate the assessee for the excess
\npayment during the intervening period when the assessee did not have the
\nbenefit of use of such money paid in whatsoever character.  In addition, if a
\nliteral meaning is                                       given to the expression, “tax”\n<\/p>\n
found in the later part of section 244(1A) of the Act, it will create an
\nanomalous situation resulting in exclusion of the concept of the interest.  In
\nour opinion, the word “tax” in the later part of section 244(1A) has to be
\nconstrued in the light of the expression “amount”  found in the earlier part of
\nsection 244(1A) of the Act to include the amount of interest paid by the
\nassessee.  Therefore, in the context of section 244(1A)  of the Act, the
\nexpression “tax”, in our opinion, would include interest also and the
\ndefinition of tax in section 2(43) meaning “income-tax” cannot be applied in
\nthe context of section 244(1A) of the Act.  Consequently, the interest paid in
\npursuance of the order of assessment has to be regarded as forming part of
\nincome-tax or an adjunct to income-tax.  The result would be that the
\nassessee is entitled to interest on the interest refunded also.  As a matter of
\nfact, in the subsequent order of rectification, the Income-tax Officer has
\ngranted interest on the refunded interest which clearly shows the right
\nthinking of the Department in accepting the position that the assessee would
\nbe entitled to interest on the interest refunded.  The view of the Appellate
\nTribunal that the assessee would be entitled to interest on the refunded
\namount of interest levied under sections 139(8) and 215 of the Act is legally
\nsustainable in law.”\n<\/p>\n
(Underlining is ours)<\/p>\n
\tIn the above judgment, the Madras High Court has followed the judgment in the
\ncase of CIT vs. Ambat Echukutty Menon [1988] 173 ITR 581 (kerala) and CIT vs.
\nSardar Balwant Singh Gujral [1990] 86 CTR 64(MP).  The Madhya Pradesh High
\nCourt in Sardar Balwant Singh Gujral’s case (supra) held that the liability to pay
\ninterest is on the amount of refund due and the assessee would be entitled to interest
\non the amount of refund due which includes interest paid under Sections 139(8) and
\n215 of the Act.  While agreeing with the view expressed by the Kerala High Court and
\nthe Madhya Pradesh High Court, the Madras High Court held that the expression
\n“amount” in Section 244(1A) of the Act would include the amount of interest levied and
\npaid under Sections 139(8) and 215 of the Act and collected in pursuance of an order of
\nassessment which was refunded.\n<\/p>\n
10) Suresh B. Jain vs. P.K.P. Nair and Ors. 194 ITR 148
\n\tThe learned single Judge of the Bombay High Court in the judgment reported
\nabove while interpreting the provisions of Section 245 held that a restricted meaning
\ncannot be given to the word “refund” which is commonly understood generic term which
\nrefers to the payment by the Income-tax Department on any amount due to an
\nassessee and it does not mean only the return of an amount paid to the Department by
\nan assessee.\n<\/p>\n
\tThe Court held further
\n“The Income-tax Act envisages several situations where amounts are to be
\npaid to the Department or by the Department which include income-tax,
\npenalty, interest, etc., of any assessment year, arrears in respect of these
\nitems for earlier years, amounts under any head wrongly paid or paid in
\nexcess, amounts pertaining to one person considered in another’s hands
\nand, while computing the tax liability or penalty for any year, separate
\nnotices are issued for different items but demand or refund is made of the
\nnet figure which cannot, therefore, be identified as tax.  The amount of
\ninterest paid on refunds should not be treated in isolation and the concept of
\nthe word “refund” does not admit of a limited meaning but must be held to
\nmean any amount payable by the Department to an assessee whether as
\nand by way of “refund” or “interest”.  After all, the amount of interest payable
\nto an assessee under section 244 (1A) of the Income-tax Act, 1961, is also
\nan amount that is refunded by the Department to an assessee and, if the
\nsame is not permitted to be adjusted under section 245, almost absurd, if
\nnot ridiculous, results may ensue inasmuch as the Income-tax Department
\nwould be required to pay a certain sum of money to an assessee on
\naccount of interest with one hand and take back the same amount as tax
\nliability with the other.  This may not only be an inconvenient and
\ncumbersome procedure for the Income-tax Department but may also put an
\nassessee to unnecessary inconvenience and harassment in that one has to
\ntake the amount of interest with one hand and pay back the same amount to
\nthe Income-tax Department as tax liability with the other.  Therefore, if a
\nrestricted and technical meaning is given to the word “refund” while
\nimplementing the provisions of section 245, no useful purpose would be
\nserved either of the Income-tax Department or of an assessee.  There is,
\ntherefore, nothing wrong if interest payable to an assessee under section
\n244(1A) of the said Act is set off and adjusted against the tax liability of an
\nassessee under section 245 as if the said amount was a refund due to an
\nassessee.”\n<\/p>\n
We have already considered the judgments cited by learned counsel appearing
\non either side.  We shall now further analyse and discuss about the various judgments
\ncited by the counsel concerned and the arguments advanced by the respective counsel
\nwith reference to the pleadings and of the judgment of the Bombay High Court.\n<\/p>\n
Estoppel
\nIn the present hearing Mr. Mohan Parasaran only argued that there was no
\ndecision of this Court on the merits of the matter and hence estoppel could not apply.  It
\nis submitted with respect that whether or not there is a decision of this Court on the
\nmerits of the matter is of no relevance, further, even in Berger Paint’s case (supra)
\nthere was no decision of this Court on the merits of the matter and the principle of
\nestoppel was applied.  The only consideration laid down by this Court is whether there
\nis any “just cause” to depart from the principle of estoppel.  It is submitted that in the
\ninstant case there is no ‘just cause’ and none has even been claimed by the Revenue.
\nFinally it is the appellant’s case that this Court has taken a decision on the merits of the
\nmatter.\n<\/p>\n
Assuming that there is no provision in the Act for payment of compensation,
\ncompensation for delay is required to be paid in view of decision of inter alia this
\nCourt:\n<\/p>\n
\tThe Gujarat High Court in D.J. Works and Chimanlal Patel’s cases (supra)
\nhad taken the view that even proceeding on the basis that there was no specific
\nprovision for payment of interest on amounts of interest which had been wrongfully
\nretained, the Act itself recognized in principle the liability of the department to pay
\ninterest where excess tax was retained and the Court held that the same principle
\nshould be extended to cases where interest was retained.  The Court held that once
\ninterest becomes due it takes the same colour as excess amounts of tax and they
\nawarded interest thereon at the rates prescribed under the Act.\n<\/p>\n
\tThe Madhya Pradesh High Court in an Income-tax reference ITR No. 5 of 1996
\nfollowed the Gujarat High Court decisions and answered in the affirmative and in favour
\nof the assessee, a question as to whether the Tribunal was right in holding that interest
\nwas payable on delayed payments of interest.  The question specifically refers to the
\ndepartment’s claim that the law allegedly does not provide for any such payment.\n<\/p>\n
This Court in Narendra Doshi’s case (supra) dismissed the appeal filed by the
\nIncome-tax Department against the said judgment of the Madhya Pradesh High Court.
\nThis Court specifically held that following the principle laid down by the Gujarat High
\nCourt, viz., that “the Revenue is liable to pay interest on the amount of interest which
\nit should have paid to the assessee but has unjustifiably failed to do the question has,
\nas we find, been rightly answered in the affirmative and in favour of the assessee.” This
\nis clearly a decision of this Court on the merits of the matter, albeit proceeding on the
\nassumption that there was no provision in the Act granting interest on unpaid interest,
\nin favour of the appellant’s contentions.\n<\/p>\n
In the impugned order, the Bombay High Court has held that the Madhya
\nPradesh High Court was not on the point of payment of interest on interest, a view is ex
\nfacie erroneous and clearly impossible to sustain as a plain reading of the question
\nbefore the Madhya Pradesh High Court will show.\n<\/p>\n
The Gauhati High Court in Jwala Prasad Sikaria’s case (supra) had also taken
\na similar view that an assessee is entitled to payment of interest due to delay even if
\nthere is no statutory provision in this regard.  In the impugned order, the Bombay High
\nCourt has held that the decision was in the peculiar facts of the case without
\nelaborating any further as to what these peculiar facts were or how they had any
\nbearing on the case.\n<\/p>\n
In the present hearing, Mr. Mohan Parasaran has further argued that  there is no
\nprovision in the Act for the grant of further compensation and hence the same cannot
\nbe granted.  Per contra, Mr. Jehangir D. Mistri submitted that there is a provision for
\ngrant of compensation but, be that as it may, the Gujarat High Court has proceeded on
\nthe basis that there is no such provision and yet allowed compensation to an assessee
\nin circumstances identical to the appellant’s.  Further it is submitted that on a proper
\nreading of this Court’s judgment in Narendra Doshi’s case (supra) the Gujarat view
\nhas been upheld by this Court on its merits as well.  In this view of the matter, the
\nquestion of there being no provision to grant compensation becomes irrelevant and
\nimmaterial.  Further the Gauhati & Madhya Pradesh High Courts have also taken the
\nsame view.\n<\/p>\n
Mr. Mohan Parasaran argued that the Gujarat High Court principle has to be
\nconfined to cases where the amounts due to an assessee have been ‘unjustifiably’
\nwithheld.  The revenue argued that in the present case the amounts have not been
\nunjustifiably withheld since the order of this Court dated 30.04.1997 only required the
\nrevenue to apply the decision of Modi Industries case (supra) insofar as interest under
\nSection 214 was concerned, and this has been strictly complied with.  In our view, the
\nwithholding by the revenue commenced in 1981 and 1986 by its refusal to pay interest
\namounts due to the appellant and hence the order of this Court on 30.04.1997 is of no
\nrelevance.\n<\/p>\n
The counsel for the Revenue argued that the reason for not granting interest
\nwas that the amounts on which interest was claimed was amounts of advance tax and
\nno interest under Section 214 could be paid on advance tax after the date of the order
\nof assessment.  The question of what interest was payable to it is not the subject matter
\nof the present dispute at all and is now agreed, settled and concluded.  In any event,
\nthe contentions urged are erroneous as this Court in Modi Industries case (supra) has
\nclarified that advance tax is to be treated as paid pursuant to an order of assessment
\nand hence interest is payable thereon but under Section 244 of the Act.\n<\/p>\n
In our view, there is no question of the delay being ‘justifiable’ as is argued and
\nin any event if the revenue takes an erroneous view of the law, that cannot mean that
\nthe withholding of monies is ‘justifiable’ or ‘not wrongful’.  There is no exception to the
\nprinciple laid down for an allegedly ‘justifiable’ withholding, and even if there was, 17 (or\n<\/p>\n
12) years delay has not been and cannot in the circumstances be justified.\n<\/p>\n
Does the Act provide for payment of compensation for delayed payment of
\namounts due to an assessee in a case where these amounts include interest?
\n\tIn our view, the Act recognizes the principle that a person should only be taxed
\nin accordance with law and hence where excess amounts of tax are collected from an
\nassessee or any amounts are wrongfully withheld from an assessee without authority of
\nlaw the revenue must compensate the assessee.\n<\/p>\n
At the initial stage of any proceedings under the Act any refund will depend on
\nwhether any tax has been paid by an assessee in excess of tax actually payable to him
\nand it is for this reason that Section 237 of the Act is phrased in terms of tax paid in
\nexcess of amounts properly chargeable.  It is, however, of importance to appreciate that
\nsection 240 of the Act, which provides for refund by the Revenue on appeal etc., deals
\nwith all subsequent stages of proceedings and therefore is phrased in terms of ‘any
\namount’ becoming due to an assessee.\n<\/p>\n
\tThe Delhi High Court in Goodyear India Ltd. Case (supra) held that an assessee
\nis entitled to further interest under Section 244 of the Act on interest under Section 214
\nof the Act which had been withheld by the Revenue.  The case of the Revenue was that
\ninterest payable to an assessee under Section 214 of the Act was not a refund as
\ndefined in Section 237 of the Act and hence no interest could be granted to the
\nassessee under Section 244 of the Act.  The Court held that for this purpose Section
\n240 of the Act was relevant which referred to refund of ‘any amount becoming due to
\nan assessee’ and that the said phrase would include interest and hence the assessee
\nwas entitled to further interest on interest wrongfully withheld.  It is also important to
\nappreciate that the Delhi High Court also referred to the Gujarat High Court decision in
\nD.J. Works case (supra) and read it as taking the same view.  This supports the view of
\nthe appellant on the correct reading of the Gujarat decision.\n<\/p>\n
As already noticed in paragraph supra, the Madras High Court in Needle
\nIndustries Private Ltd. Case (supra) has also interpreted the phrase ‘any amount’ in the
\nsame manner when considering the provisions of Section 244(1A) of the Act, which
\nalso uses the same phrase in the context of interest payable by the Revenue.  In
\nexpress terms the Court held that the expression referred not only to the tax but also to
\ninterest.  The Court agreed with a similar view taken by the Kerala High Court in the
\ncase of Ambat Echukutty Menon (supra).  Both these were cases where the Court was
\ncalled upon to decide whether further interest was payable by the Revenue on interest
\nwhich had to be repaid to assessee.\n<\/p>\n
\tIn our opinion, the appellant is entitled to interest under Section 244 and\/or
\nSection 244A of the Act in accordance with the terms and provisions of the said
\nsections.  The interest previously granted to it has been computed up to 27.03.1981
\nand 31.03.1986 (under different sections of the Act) and it’s present claim is for
\ncompensation for periods of delay after these dates.\n<\/p>\n
\tIn the impugned order, the Bombay High Court has rejected the appellant’s
\ncontention mainly on the ground that the word refund must mean an amount previously
\npaid by an assessee and does not relate to an amount payable by the revenue by way
\nof interest on such sums.  The High Court’s conclusion is based mainly on the wording
\nof the proviso to Section 240 of the Act.   As already discussed by us in paragraph
\nsupra the proviso can have no relevance whatsoever as it was not part of the Act during
\nthe relevant period.  The said proviso was inserted with effect from 01.04.1989.\n<\/p>\n
The High Court in its judgment has referred to the provisions of Section 244(1A)
\nand the decision of this Court in Modi Industries Ltd. (supra) extracted two paragraphs
\nfrom this Court’s judgment holding that there can be no question of paying interest
\nunder both Section 214(1A) and 244(1A) of the Act simultaneously, and further that
\nthere is no right to receive interest except as provided by the statute. The decision in
\nModi Industries case (supra) has no bearing whatsoever on the issue in hand as the
\nissue in that case was the correct meaning of the phrase “regular assessment” and as a
\nconsequence under which provision an assessee was entitled to interest for the period
\nup to the date of regular assessment and thereafter.  The matter of what was due to it
\nin terms of the decision in Modi Industries case is over, concluded, no longer in dispute
\nand was agreed\/accepted on 27.03.1998 when the 2nd respondent gave effect to the
\nprevious order of this Court dated 30.04.1997.  The working of the respondents itself
\nconclusively shows, further the interest received is admittedly in accordance with the
\nAct. The decision in Modi Industries case (supra), in our view, has no bearing
\nwhatsoever on the matter in hand.  The main issue now is whether an assessee is
\nentitled to be compensated by the Revenue for the delay in paying to the assessee’s
\namounts admittedly due to it?\n<\/p>\n
The High Court has dissented from the decision of the Delhi High Court in
\nGoodyear’s case (supra) on the utterly and ex facie erroneous ground that it
\nproceeded on an assumption as to the meaning of the phrase “any amount”.  A plain
\nreading of the Delhi High Court judgment will show that this reasoning is utterly
\nerroneous, false and unsustainable.\n<\/p>\n
The High Court has not followed the decision of this Court in Narendra Doshi’s
\ncase (supra) on the ground that this Court did not decide that further interest was
\npayable by interpretation of the Act.    What was urged before the High Court was that
\nthis Court decided the matter by upholding the Gujarat High Court view which
\nproceeded on the basis that the provisions of the Act did not provide for such further
\ninterest.\n<\/p>\n
The High Court has merely noted the decision of the Madras High Court in
\nNeedle Industries case (supra) without dealing with the same in any manner.\n<\/p>\n
The High Court similarly noted and failed to deal with the Kerala High Court’s
\ndecision in Ambat Echukutty Menon’s case (supra) and a previous decision of the
\nBombay High Court itself in the case of Suresh B. Jain’s case (supra).\n<\/p>\n
      \t In the present appeal, the respondents have argued that the compensation
\nclaimed by the appellant is for delay by the revenue in paying of interest, and this does
\nfall within the meaning of refund as set out in Section 237 of the Act. The relevant
\nprovision is Section 240 of the Act which clearly lays down that what is relevant is
\nwhether any amount has become due to an assessee, and further the phrase any
\namount will also encompass interest.  This view has been accepted by various High
\nCourts such as the Delhi, Madras, Kerala High Court etc.
\nWhether on general principles the assessee ought to have been compensated for
\nthe inordinate delay in receiving monies properly due to it?
\n\tThe learned counsel for the appellant says that it cannot be denied that it has
\nbeen deprived of the use of it’s monies for periods ranging from 12 to 17 years.  It also
\ncannot be denied that such deprivation is solely due to the actions of the revenue which
\nhave been held by this Court to be contrary to the provisions of the Act,  on general
\nprinciples it ought to be compensated for such deprivation.
\n\tIn the impugned order, the Bombay High Court has held that no compensation is
\nrequired to be paid since “. there was a serious dispute between the parties, which
\nwas ultimately ordered to be paid pursuant to the order passed by this Court on
\n30.04.1997.  Undisputedly, the amount pursuant thereto was paid on 27.03.1998”.
\nThe Court further held that since the amount was paid once the controversy was
\nresolved there was no wrongful retention of monies.  No authority can ever accept an
\nobligation to make payment and simply refuse to pay.  In each and every case an
\nauthority must at least claim to act in accordance with law and hence claim it has no
\nobligation to pay for some reason or another.  When the claims of the authority are
\nfound to be unsustainable or erroneous by the Courts it follows that the authority has
\nacted wrongfully in the sense of not in accordance with law and compensation to the
\nparty deprived must follow.  If the decision of the High Court is upheld it would mean
\nthat there can never be any wrongful retention by an authority until this Court holds that
\ntheir stand is not in accordance with law.  Therefore, that on this issue as well, the
\nimpugned judgment cannot be sustained and ought to be reversed.\n<\/p>\n
In the present context, it is pertinent to refer to the Circular on Trade Notice
\nissued by the Central Excise Department on the subject of refund of deposits made in
\nterms of Section 35F of the Central Excise Act, 1944 and 129E of the Customs Act,
\n1962.  The Circular is reproduced hereunder:-\n<\/p>\n
“Refund\/Return of deposits made under Section 35F of CEA, 1944 and
\nSection 129E of Customs Act, 1962 – Clarifications<\/p>\n
The issue relating to refund of pre-deposit made during the
\npendency of appeal was discussed in the Board Meeting.  It was decided
\nthat since the practice in the Department had all along been to consider
\nsuch deposits as other than duty, such deposits should be returned in the
\nevent the appellant succeeds in appeal or the matter is remanded for fresh
\nadjudication.\n<\/p>\n
2.\tIt would be pertinent to mention that the Revenue had recently filed
\na Special Leave Petition against Mumbai High Court’s order in the matter of
\nNELCO LTD, challenging the grant of interest on delayed refund of pre-
\ndeposit as to whether :\n<\/p>\n
(i)\tthe High Court is right in granting interest to the depositor since the
\nlaw contained in Section 35F of the Act does in no way provide for any type
\nof compensation in the event of an appellant finally succeeding  in  the
\nappeal, and,<\/p>\n
(ii)\tthe refunds so claimed are covered under the provisions of Section
\n11B of the Act and are governed by the parameters applicable to the claim
\nof refund of duty as the amount is deposited under Section 35F  of the
\nCentral Excise Act, 1944.\n<\/p>\n
The Hon’ble Supreme Court vide its order dated 26-11-2001
\ndismissed the appeal.   Even though the Apex Court did not spell out the
\nreasons for dismissal, it can well be construed in the light of its earlier
\njudgment in the case of Suvidhe Ltd. and Mahavir Aluminium that the law
\nrelating to refund of pre-deposit has become final.\n<\/p>\n
3. In order to attain uniformity and to regulate such refunds it is clarified that
\nrefund applications under Section 11B(1) of the Central Excise Act, 1944 or
\nunder Section 27(1) of the Customs Act, 1962 need not be insisted upon.  A
\nsimple letter from the person who has made such deposit, requesting the
\nreturn of the amount, along with an attested Xerox copy of the order-in-
\nappeal or CEGAT order consequent to which the deposit made becomes
\nreturnable and an attested Xerox copy of the Challan in Form TR6
\nevidencing the payment of the amount of such deposit, addressed  to the
\nconcerned Assistant\/Deputy Commissioner of Central Excise or Customs,
\nas the case may be, will suffice for the purpose.  All pending refund
\napplications already made under the relevant provisions of the Indirect Tax
\nEnactments for return of such deposits and which are pending with the
\nauthorities will also be treated as simple letters asking for return of the
\ndeposits, and will be processed as such.  Similarly, bank guarantees
\nexecuted in lieu of cash deposits shall also be returned.\n<\/p>\n
4.\tThe above instructions may be brought to the notice of the field
\nformations with a request to comply with the directions and settle all the
\nclaims without any further delay.  Any deviation and resultant liability to
\ninterest on delayed refunds shall be viewed strictly.\n<\/p>\n
5.\tAll the trade associations may be requested to bring the contents of
\nthis circular to the knowledge of their members and the trade in general.\n<\/p>\n
6.\tKindly acknowledge receipt.\n<\/p>\n
[Source : M.F.(D.R.) F.No. 275\/37\/2K-CX.8A, dated 2-1-2002]”\n<\/p>\n
A close scrutiny of the contents of the Circular dated 2.1.2002 would disclose as
\nto the modalities for return of pre-deposits.  It again reiterated that in terms of the
\nSupreme Court order such pre-deposit must be returned within 3 months from the date
\nof the order passed by the Tribunal, Court or other fiscal authority unless there is a stay
\non the order of the fiscal authority, tribunal, court by a superior court.  The Department
\nhas very clearly stated in the above circular that the delay beyond the period of 3
\nmonths in such cases will be viewed adversely and appropriate disciplinary action will
\nbe initiated against the concerned defaulting officers, a direction was also issued to all
\nconcerned to note that defaulter will entail a interest liability if such liability accrue by
\nreason of any orders of the Tribunal\/Court such orders will have to be complied with
\nand it may be recoverable from the concerned officers.  All the Commissioners were
\nadvised implementation of these instructions and ensure their implementation through a
\nsuitable monitoring mechanism.  It is also specifically mentioned that the
\nCommissioners under respective jurisdiction should be advised that similar matters
\npending in the High Courts must be withdrawn and compliance reported and that the
\nBoard has also decided to implement the orders passed by the Tribunal already passed
\nfor payment of interest and the interest payable shall be paid forthwith.\n<\/p>\n
The facts and the law referred to in paragraph (supra) would clearly go to show
\nthat the appellant was undisputably entitled to interest under Sections 214 and 244 of
\nthe Act as held by the various High Courts and also of this Court.  In the instant case,
\nthe appellant’s money had been unjustifiably withheld by the Department for 17 years
\nwithout any rhyme or reason.  The interest was paid only at the instance and the
\nintervention of this Court in Civil Appeal No. 1887 of 1992 dated 30.04.1997.  Interest
\non delayed payment of refund was not paid to the appellant on 27.03.1981 and
\n30.04.1986 due to the erroneous view that had been taken by the officials of the
\nrespondents.  Interest on refund was granted to the appellant after a substantial lapse
\nof time and hence it should be entitled to compensation for this period of delay.  The
\nHigh Court has failed to appreciate that while charging interest from the assesses, the
\nDepartment first adjusts the amount paid towards interest so that the principle amount
\nof tax payable remain outstanding and they are entitled to charge interest till the entire
\noutstanding is paid.  But when it comes to granting of interest on refund of taxes, the
\nrefunds are first adjusted towards the taxes and then the balance towards interest.
\nHence as per the stand that the Department takes they are liable to pay interest only
\nupto the date of refund of tax while they take the benefit of assesses funds by delaying
\nthe payment of interest on refunds without incurring any further liability to pay interest.
\nThis stand taken by the respondents is discriminatory in nature and thereby causing
\ngreat prejudice to the lakhs and lakhs of assesses.  Very large number of assesses are
\nadversely affected inasmuch as the Income Tax Department can now simply refuse to
\npay to the assesses amounts of interest lawfully and admittedly due to that as has
\nhappened in the instant case.  It is a case of the appellant as set out above in the
\ninstant case for the assessment year 1978-79, it has been deprived of an amount of
\nRs.40 lakhs for no fault of its own and exclusively because of the admittedly unlawful
\nactions of the Income Tax Department for periods ranging up to 17 years without any
\ncompensation whatsoever from the Department.  Such actions and consequences, in
\nour opinion, seriously affected the administration of justice and the rule of law.\n<\/p>\n
COMPENSATION:\n<\/p>\n
The word ‘Compensation’ has been defined in P. Ramanatha Aiyar’s Advanced
\nLaw Lexicon 3rd Edition 2005 page 918 as follows:\n<\/p>\n
“An act which a Court orders to be done, or money which a Court
\norders to be paid, by a person whose acts or omissions have caused
\nloss or injury to another in order that thereby the person damnified
\nmay receive equal value for his loss, or be made whole in respect of
\nhis injury; the consideration or price of a privilege purchased; some
\nthing given or obtained as an equivalent; the rendering of an
\nequivalent in value or amount; an equivalent given for property taken
\nor for an injury done to another; the giving back an equivalent in either
\nmoney which is but the measure of value, or in actual value otherwise
\nconferred; a recompense in value; a recompense given for a thing
\nreceived recompense for the whole injury suffered; remuneration or
\nsatisfaction for injury or damage of every description; remuneration for
\nloss of time, necessary expenditures, and for permanent disability if
\nsuch be the result; remuneration for the injury directly and proximately
\ncaused by a breach of contract or duty; remuneration or wages given
\nto an employee or officer.”\n<\/p>\n
There cannot be any doubt that the award of interest on the refunded amount is
\nas per the statute provisions of law as it then stood and on the peculiar facts and
\ncircumstances of each case.  When a specific provision has been made under the
\nstatute, such provision has to govern the field.  Therefore, the Court has to take all
\nrelevant factors into consideration while awarding the rate of interest on the
\ncompensation.\n<\/p>\n
This is the fit and proper case in which action should be initiated against all the
\nofficers concerned who were all in charge of this case at the appropriate and relevant
\npoint of time and because of whose inaction the appellant was made to suffer both
\nfinancially and mentally, even though the amount was liable to be refunded in the year
\n1986 and even prior to.  A copy of this judgment will be forwarded to the
\nHon’ble Minister for Finance for his perusal and further appropriate action against the
\nerring officials on whose lethargic and adamant attitude the Department has to suffer
\nfinancially.\n<\/p>\n
By allowing this appeal, the Income-tax Department would have to pay a huge
\nsum of money by way of compensation at the rate specified in the Act, varying from
\n12% to 15% which would be on the high side.  Though, we hold that the Department is
\nsolely responsible for the delayed payment, we feel that the interest of justice would be
\namply met if we order payment of simple interest @ 9% p.a. from the date it became
\npayable till the date it is actually paid.  Even though the appellant is entitled to interest
\nprior to 31.03.1986, learned counsel for the appellant fairly restricted his claim towards
\ninterest from 31.03.1986 to 27.03.1998 on which date a sum of Rs.40,84,906\/- was
\nrefunded.\n<\/p>\n
\tThe assessment years in question in the four appeals are the assessment years
\n1977-78, 1978-79, 1981-82 and 1982-83.  Already the matter was pending for more
\nthan two decades.  We, therefore, direct the respondents herein to pay the interest on
\nRs.40,84,906 (rounded of to Rs.40,84,900) simple interest @ 9% p.a. from 31.03.1986
\nto 27.03.1998 within one month from today failing which the Department shall pay the
\npenal interest @ 15% p.a. for the above said period.\n<\/p>\n
\tIn the result, the appeals stand allowed.  We have no hesitation to set aside the
\nimpugned judgment of the High Court of Bombay.  No costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Sandvik Asia Ltd vs Commissioner Of Income Tax-I, … on 27 January, 2006 Author: . A Lakshmanan Bench: H.K. Sema, Dr. Ar. Lakshmanan CASE NO.: Appeal (civil) 1337-1340 of 2005 PETITIONER: Sandvik Asia Ltd. RESPONDENT: Commissioner of Income Tax-I, Pune & Ors. DATE OF JUDGMENT: 27\/01\/2006 BENCH: H.K. Sema & Dr. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-231422","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nSandvik Asia Ltd vs Commissioner Of Income Tax-I, ... on 27 January, 2006 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/sandvik-asia-ltd-vs-commissioner-of-income-tax-i-on-27-january-2006\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sandvik Asia Ltd vs Commissioner Of Income Tax-I, ... on 27 January, 2006 - 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