CIT vs. Birla Corporation Limited (Calcutta High Court)

DATE: February 2, 2016 (Date of pronouncement)
DATE: April 19, 2016 (Date of publication)
AY: 1992-93, 1993-94
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S. 244A(1)(b) is a residual provision under which interest on refund of excess payment of self-assessment tax is payable to the assessee. Such interest is also payable on the principles of restitution and unjust enrichment. Engineers India 373 ITR 377 (Del) is not good law

The High Court had to consider whether the assessee was entitled to interest u/s.244A of Income Tax Act, 1961 on refund arising due to excess payment on self assessment of tax in view of Section 244A(1)(b), read with the explanation thereto, of Income Tax Act, 1961? The department contented that the Explanation to Section 244A(1)(b) of Income Tax Act, 1961 bars payment of interest upon refund of excess payment on self-assessment and relied on CIT vs. Engineers India Ltd [2015] 373 ITR 377 (Delhi) wherein the benefit of interest on excess payment of self assessment tax was denied by relying on CIT v. Gujarat Fluoro Chemicals (2014) 1 SCC 126. HELD by the High Court rejecting the contention of the department:

(1) The dissenting note struck in CIT v. Engineers India Ltd. reported in [2015] 373 ITR 377 (Delhi) by the Division Bench of Delhi High Court does not commend to us for the following reasons:-

(a) The judgment in the case of Gujarat Fluro Chemicals is not even remotely connected with the issue which came up for consideration before the Division Bench. The issue was already covered by a judgement, in the case of Sutlej Industries (supra) of a co-ordinate bench.

(b) Apropos to the question one can argue on the basis of Gujrat Fluro Chemicals (supra) that “it is only that interest provided for under the statute which can be claimed by an assessee.”

(c) The Apex Court in the case of Tata Chemicals (supra) opined, in paragraph 38 quoted above, that “providing for payment of interest in case refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation.”

(d) Amount paid on self-assessment u/s 140A also partakes the character of assessed tax as would appear from explanation appended to Section 140A(1B) which provides that “assessed tax means the tax on the total income as declared in the return….”

(e) Sub-section 3 of Section 140A provides for consequences in case of omission by an assessee to pay such assessed tax u/s. 140A which is as follows:- “(3) If any assessee fails to pay the whole or any part of such tax or interest or both in accordance with the provisions of sub-section (1), he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax or interest or both remaining unpaid, and all the provisions of this Act shall apply accordingly.”

(f) The basis of the views expressed in Engineers India Ltd.(supra) is the reasoning appearing from paragraph 34 of the judgement (quoted above) which, with respect, did not take into account the import of Section 140A fully. Nor did the Division Bench contemplate a situation like the one before us. In this case, the occasion for refund arose because of the relief granted by the appellate forum.

(g) Restricting the scope of section 244A(1)(b) by reading the explanation as imposing a limitation thereto, the Division Bench omitted to notice the view expressed by their lordships in Tata Chemicals (supra) that the explanation to clause (b) would have effect only where payment of tax is made pursuant to a notice u/s.156 of the Act.

(h) From the circular issued by CBDT it would appear that Sectin 244A was enacted “to remove this inequity”. The Apex Court in Tata Chemicals (supra) held in paragraph 31 (quoted above) “a corresponding right exists to refund to individuals any sum paid by them as taxes which are found to have been wrongfully exacted or are believed to be, for any reason, inequitable.” Their Lordships also applied the maxim ex ae quo et bono which means “in equity and good conscience.”

(i) We are inclined to think that the right of the assessee to receive interest on refund is statutorily recognized by Sub-Section (1) of Section 244A when it provides that:-

“Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely.”

The aforesaid right is, we admit, subject to provisions of Section 244A. Section 244A does not deny payment of interest in case of refund of amount paid under Section 140A. On the contrary Clause-(b) being a residuary clause necessarily includes payment made u/s. 140A.

(j) And finally in the instant case the CIT(A) found that the income tax liability as assessed earlier was erroneous and hence he directed that the excess amount of tax including self assessment tax be refunded to the assessee. In these circumstances the principle of restitution would be squarely attracted and the revenue is also statutorily bound to pay interest u/s.244A(1)(b) to the assessee. The apex court in South Eastern Coalfield –Vs- State of M. P. reported in 2003 (8) SCC 648 has categorically held that once the doctrine of restitution is attracted, the interest is often a normal relief given. Restitution sometimes refers to “disgorging of something which has been taken” and sometimes refers to “compensation for injury done”.

(2) Law does not favour unjust enrichment nor does it favour unjust impoverishment. The principle of unjust enrichment proceeds on the basis that it would be unjust to allow one person to retain a benefit received at the expense of another person. It provides the theoretical foundation for the law governing the doctrine of restitution which was echoed in Tata Chemicals (supra).

(3) In the light of the discussion made above, we are of the opinion that Clause (b) of Sub-Section 1 of Section 244A is residual in nature and provides for interest on refund of excess self-assessment tax paid by the assessee. Furthermore the explanation to section 244A(1)(b) would have no application since the tax in question was not paid consequent to any notice of demand u/s. 156, rather it was paid u/s 140A. Hence according to mandate of section 244A(1)(b) interest is payable on refund of excess self assessment tax from the date of payment of such tax to the date when the refund is granted.

Stockholding Corporation of India –Vs- N.C. Tewari, CIT reported in (2015) 373 ITR 282 (Bom.)
CIT –Vs- Vijaya Bank reported in (2011) 338 ITR 489 (Karnataka)
CIT III –Vs- Sutlej Industries Ltd reported in (2010) 325 ITR 331

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