UOI vs. Tata Chemicals Ltd (Supreme Court)

COURT:
CORAM:
SECTION(S):
GENRE:
CATCH WORDS:
COUNSEL:
DATE: (Date of pronouncement)
DATE: March 20, 2014 (Date of publication)
AY:
FILE:
CITATION:

Click here to download the judgement (tata_chem_195_TDS_refund_interest.pdf)


S. 244A: Deductor entitled to interest on refund of excess TDS from date of payment

The assessee made an application u/s 195(2) for permission to remit technical service charges and reimbursement of expenses to a foreign company without deduction of tax at source. The AO passed an order directing the assessee to deduct TDS at the rate of 20% before making remittance. The assessee effected the deduction and filed an appeal before the CIT(A) in which it claimed that the said remittance was not subject to TDS. The CIT(A) upheld the claim with regard to the reimbursement of expenses with the result that the TDS thereon was refunded to the assessee. However, the AO declined to grant interest u/s 244A on the said interest by relying on Circular Nos 769 dated 06.08.1998 and 790 dated 20.4.2000 issued by the CBDT. The CIT(A) upheld the AO’s stand though the Tribunal and High Court upheld the assessee’s stand. On appeal by the department to the Supreme Court HELD dismissing the appeal:

(i) A “tax refund” is a refund of taxes when the tax liability is less than the tax paid. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/ foreign company;

(ii) Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors’ lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course;

(iii) The said interest has to be calculated from the date of payment of such tax.

4 comments on “UOI vs. Tata Chemicals Ltd (Supreme Court)
  1. This Judgment is based on equity. Invariably Deptt vehementaly oppose whenever Assesse insist for Stay of Disputed Tax liability.Trbunal and Courts also refuses to grant stay during pendency of statutory Appeals.Instant Judgment is the only solution of which is basesd on the doctrine of Restitution.
    Binod Poddar Sr Adv
    Ranchi

  2. Vikram says:

    The Supreme Court has placed refund of all taxes at par and then proceeded to decide on the issue of interest. Where there is refund of tds, the question that arises is whether payer had contractually borne the tds liability and if yes, then he should be eligible for refund. In the instant case, apparently, the appeal relates to period prior to insertion of sec 248 and its unclear what’s the contractual position vis-a-vis TDS. Where the tds on the recepient, would the payer pass on the refund of taxes to the recepient along with interest. In absence thereof, would it be a case of unjust enrichment and call for a review of the judgement.

  3. AJAY KR. RAJPUT says:

    Whether the department deny to allow interest u/s 244A on the portion of refund arising due to relief claimed in respect of Taxes paid (Deemed to have been paid) under DTAA.

  4. Revenue cannot avoid interest payments to the assesse if excess TDS recd; Revenue is treated on par with any other person or as a legal person like a company. Art 12 set is also same.

    i wonder how such trivial issue did go upto hon SC. does it mean revenue do not what is its status? why tax payers money wasted on salaries and allowances of these kind of public servants.

    i would have liked if hon SC came very heavily on Revenue with appropriate exemplary fines that could only settle rule of law, we do not need such useless men at revenue as officers that would lead to belief government wastes taxpayers moneys not diligently when UPSC conducts some great civil services examination and give these worthies some IRS and like titles and these conferments show how tax payers moneys are wasted that aspect i expect hon court also address and pass strictures on government as also UPSC too that would really rivet correctly the things!

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