$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
13
+ W.P.(C) 1011/2016
PREETI N AGGARWALA ..... Petitioner
Through: Mr. Sandeep Sapra with Mr. Manu K.
Giri, Advocates.
versus
CHIEF COMMISSIONER OF INCOME TAX
& ANR. ..... Respondents
Through: Mr. Ashok Manchanda, Senior standing
counsel and Mr. Raghvendra Singh, Advocate.
WITH
14
+ W.P.(C) 1012/2016
NARESH KUMAR AGGARWAL ..... Petitioner
Through: Mr. Sandeep Sapra with Mr. Manu K.
Giri, Advocates.
versus
CHIEF COMMISSIONER OF INCOME TAX
& ANR. ..... Respondents
Through: Mr. Ashok Manchanda, Senior standing
counsel and Mr. Raghvendra Singh, Advocate.
AND
15
+ W.P.(C) 1183/2016
BRISK CAPITAL MARKET SERVICES LTD ..... Petitioner
Through: Mr. Sandeep Sapra with Mr. Manu K.
Giri, Advocates.
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 1 of 15
versus
CHIEF COMMISSIONER OF INCOME TAX
& ANR. ..... Respondents
Through: Mr. Ashok Manchanda, Senior standing
counsel and Mr. Raghvendra Singh, Advocate.
CORAM:
JUSTICE S. MURALIDHAR
JUSTICE CHANDER SHEKHAR
ORDER
% 01.05.2017
Dr. S. Muralidhar, J.
1. The central question involved in these three writ petitions under Article
226 of the Constitution of India is whether the expression ,,in any other case
occurring in Section 244A (1) (b) of the Income Tax Act, 1961 (,,Act)
would include the amount of refund which constitutes the interest that has
been waived by the Income Tax Department (,,Department) under Section
220 (2A) of the Act?
2. The factual background is that the three Petitioners were notified on 17 th
June 1997 under Special Courts (Trial of Offences relating to transactions in
Securities) Act, 1992 whereby all the assets were attached to be dealt with as
per orders of the Special Court.
3. The consequential assessments made under the Act in respect of each of
the Petitioners entailed their paying the substantial amounts towards tax and
interest. By a communication dated 29th August 2006 the Assistant
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 2 of 15
Commissioner of Income Tax (,,ACIT), Central, Circle-19, New Delhi
requested the Custodian (Special Court) for recovery of the income tax
demand.
4. By an order dated 19th March 2008 the Department recovered in the case
of Preeti Aggarwala (the Petitioner in W.P. (C) No. 1011 of 2016) a sum of
Rs. 3,74,323 towards interest under Section 220(2) of the Act for the AY
1998-99 by adjusting the refund due for AY 1992-93. In respect of Naresh
Kumar Aggarwal (the Petitioner in W.P. (C) No. 1012 of 2016) the dues in
respect of taxes and interest were recovered by the Respondent from the
Custodian under the orders of the Special Court by debiting the attached
account of the said Petitioner and also by adjusting refunds due for other
AYs 2002-03, 2004-2005 and 2006-07. In respect of Brisk Capital Market
Services Ltd. (the Petitioner in W.P. (C) No. 1183 of 2016) the dues in
respect of taxes and interest were recovered by the Respondent from the
Custodian under the orders of the Special Court by debiting the attached
account of the said Petitioner and also by adjusting refunds due for AYs
1993-94 up to 1996-97.
5. On 22nd August 2008 the three Petitioners filed applications for waiver of
interest under Section 220 (2A) of the IT Act for the various AYs. After
several letters and reminders by the Petitioners for disposal of their waiver
applications, the Chief Commissioner of Income Tax (,,CCIT), [Central] by
an order dated 30th March 2015 waived all the eligible amounts of interests
for late payments as under:
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 3 of 15
"Name of Assessee AY Amount waived
Brisk Capital P Ltd 1993-94 Rs. 8,31,016
Brisk Capital P Ltd 1993-94 Rs. 25,47,001
Brisk Capital P Ltd 1994-95 Rs. 59,678
Brisk Capital P Ltd 1995-96 Rs. 12,54,988
Brisk Capital P Ltd 1996-97 Rs. 15,31,016
TOTAL Rs. 62,24,677
Naresh Agarwal 2002-03 Rs. 73,62,609
Naresh Agarwal 2004-05 Rs. 4,62,945
Naresh Agarwal 2006-07 Rs. 1,66,097
Naresh Agarwal 2006-07 Rs. 6,787
TOTAL Rs. 79,78,839
Preeti Aggarwala 1998-99 Rs. 3,74,323."
6. After the Petitioners petitions for waiver of interest were decided, the
Petitioners filed an application dated 18th June 2015 before the Assessing
Officer (,,AO) for grant of interest on the above amounts under Section 244
A of the Act. These applications were rejected by the AO by an order dated
3rd August 2015 stating inter alia as under:
"3. Charging of interest under Section 220(2) is a statutory obligation
and nondiscretionary in nature. Tax refund is a refund of taxes when
the tax liability is less than the tax paid whereas in your case tax paid
was not in excess of demand due from you. Tax and interest paid in
your case was in accordance with the provisions of law and being
undisputed was correct. However, refund in your case accrued
because the Chief Commissioner of Income Tax exercised his
discretionary powers and waived the interest under Section 220(2A)
of the Act. Your right of refund of the waived amount arose only the
date of order passed under Section 220(2A) of the Act i.e. on 30th
March 2015 and the resultant refund was issued to you on 30th April
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 4 of 15
2015. The obligation to refund money received and retained without
right implies and carries with it the right of interest also whereas
charging of interest under Section 220(2) for non payment of tax
within the stipulated period is mandatory and as such department was
very much within its right to collect and retain the amount of interest.
According to the provisions of Section 244A (1) (b) of the Act,
interest is allowable in cases where refund of any amount becomes
due to the Assessee under this Act whereas the refund on account of
waiver under Section 220 (2A) is not under any statutory provisions
of the Act. Further the judicial pronouncements quoted by you have
been perused carefully and is found that the facts of your case are not
squarely covered with facts of the case laws relied upon by you.
4. In view of the facts and the provisions of the Act, you are not
entitled to the interest under Section 244A and your application under
reference is rejected."
7. Thereafter, the present three writ petitions were filed seeking the quashing
of the above orders dated 3rd August 2015 and for a direction to the
Department to pay the Petitioners simple interest @ 6% from the date of
recovery of the interest till the date of refund.
8. Mr. Sandeep Sapra, learned counsel appearing for the Petitioners, submits
that the expression ,,in any other case occurring in Section 244A (1) (b) of
the Act would include the interest waived by the CCIT pursuant to the
applications filed by the Petitioners under Section 220 (2A) of the Act. This
was a quantified sum representing interest which ought not to have been
charged in first place. According to him, by directing the said sum to be
refunded together with interest, the letter and spirit of Section 244A (1) (b)
of the Act would in fact be complied with. In other words, this should not be
viewed as ,,interest on interest as is sought to be contended by the
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 5 of 15
Department. Mr. Sapra submitted that with the language of statute being
clear and unambiguous there should be no difficulty in the Court directing
that the Petitioners should be paid the interest on the said sum under Section
244 A (1) (b) of the Act.
9. Reliance was placed by Mr Sapra on the decision in Union of India v.
Tata Chemicals Limited (2014) 363 ITR 658 and Circular No. 11/2016
dated 26th April 2016 issued by the Central Board of Direct Taxes (,,CBDT)
giving effect to the said decision in the context of TDS amount deducted in
excess under Section 195 of the Act. Reliance was also placed on the
decisions of this Court in India Trade Promotion Organization v.
Commissioner of Income Tax (2013) 361 ITR 646 and Commissioner of
Income Tax v. Sutlej Industries Limited (2010) 325 ITR 331. Reliance was
also placed on the decision dated 2nd February 2016 of the High Court at
Calcutta in ITA No. 526 of 2004 [Commissioner of Income Tax, Kolkata-I
v. Birla Corporation Limited].
10. On the other hand Mr. Ashok Manchanda, learned Senior standing
counsel for the Department, submitted that in the first place there was an
unexplained delay in Petitioners filing the present petitions ten months after
the order of waiver of interest dated 30th March 2015 and 9 months after 30th
April 2015 when the refunds were in fact issued. Mr. Manchanda contended
that on a collective reading of sub-clauses (a), (aa) and (b) of sub-section (1)
of Section 244 A of the Act together with the Explanation thereunder it
would become apparent that the expression ,,in any other case would apply
only in the cases of refund of tax and penalty and not any other amount.
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 6 of 15
11. Mr. Manchanda pointed out that the waiver of interest by CCIT was
discretionary. There was no delay in actually issuing the refund orders once
the CCIT passed the refund order dated 30th March 2015. Further, since
CCIT had waived the interest payable by the Petitioners, the question of
their incurring a financial loss did not arise. There was no general mandatory
rule that every amount of refund made by the Department to an Assessee
must carry interest thereon. Reliance was placed on the decision of this
Court in Commissioner of Income Tax v. Engineers India Limited (2015)
373 ITR 377 (Del).
12. Mr Manchanda submitted that the decision of the Supreme Court in
Union of India v. Tata Chemicals Limited (supra) was distinguishable on
facts. There the issue was about TDS having been wrongfully deducted
whereas in the present case interest under Section 220 (2A) of the Act was
charged due to failure on the part of the Petitioners to pay the demand raised
under Section 156 of the Act for various AYs within the time limits in terms
of Section 220 (1) of the Act. He relied on the decision of the Supreme
Court in Commissioner of Income Tax, Gujarat v. Gujarat Fluoro
Chemicals (2014) 43 Taxman.com 350 (SC) where it was held that only
that interest provided for under the statute may be claimed by an Assessee
and no other interest.
13. First, the Court would like to recapitulate the facts of the present case.
The assessments of the Petitioners for several years were held up on account
of the proceedings before the Special Court. In the case of Brisk Capital
Market Services Limited, the relevant AYs were 1993-94 to 1996-97; in the
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 7 of 15
case of Preeti Aggarwala, the relevant AY was 1998-99 and in the case of
Naresh Aggarwal the relevant AYs were 2002-03 to 2006-07. It is not
necessary at this stage for the Court to examine whether it was the
Petitioners or the Department who were responsible for the delay in
finalising the assessments. Delays were also on account of the proceedings
before the Special Court and elsewhere.
14. It is also not necessary to examine if the Petitioners were justified in
seeking waiver of interest under Section 220 (2) of the Act. Their
applications seeking waiver of interest filed on 22nd August 2008 were
finally disposed of by the CCIT only on 30th March 2015, i.e., after almost
seven years. Certainly, the Petitioners cannot be held responsible for such
delay. Obviously there was a loss suffered by the Assessees as the amounts
waived, and therefore refundable, were substantial. In the case of Brisk
Capital Market Services. Ltd. the interest amount waived was Rs. 62,24,677
In the case of Naresh Aggarwal it was Rs. 79,78,839 and in the case of
Preeti Aggarwala it was Rs. 3,74,323. Given this background, it cannot be
said there was any undue delay in the Petitioners approaching this Court for
relief.
15. The Court now proceeds to examine Section 244 A of the Act which
reads as under:
"244A (1) Where refund of any amount becomes due to the Assessee
under this Act, he shall, subject to the provisions of this Section, be
entitled to receive, in addition to the said amount, simple interest
thereon calculated in the following manner, namely:
(a) Where the refund is out of any tax collected at source under
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 8 of 15
Section 206C or paid by way of advance tax or treated as paid under
Section 199, during the financial year immediately preceding the
assessment year, such interest shall be calculated at the rate of one-
half per cent for every month or part of a month comprised in the
period,
(i) from the 1st day of April of the assessment year to the date on
which the refund is granted, if the return of income has been furnished
on or before the due date specified under sub-section (1) of Section
139; or
(ii) from the date of furnishing of return of income to the date on
which the refund is granted, in a case not covered under sub-clause (i)
(aa) Where the refund is out of any tax paid under Section 140A, such
interest shall be calculated at the rate of one-half per cent for every
month or part of a month comprised in the period, from the date of
furnishing of return of income or payment of tax, whichever is later,
to the date on which the refund is granted:
Provided that no interest under clause (a) or clause (aa) shall be
payable if the amount of refund is less than ten per cent of the tax as
determined under sub-section (1) of Section 143 or on regular
assessment.
(b) In any other case, such interest shall be calculated at the rate of
one half per cent for every month or part of a month comprised in the
period or periods from the date or, as the case may be, dates of
payment of the tax or penalty to the date on which the refund is
granted.
Explanation For the purposes of this clause, "date of payment of
tax and penalty" means the date on and from which the amount of tax
or penalty specified in the notice of demand issued under Section 156
is paid in excess of such demand."
16. It is not in issue that neither sub-clauses (a) (aa) of sub-section (1) of
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 9 of 15
Section 244 A of the Act applies in the present case. Clause (b) deals with
'any other case - which has to be a case other than refund of taxes or
penalties. Clause (b) stipulates that "in any other case" the interest payable
shall be calculated at the rate of one-half per cent for every month or part of
a month comprised in the period or periods from the date "or, as the case
may be" dates of payment of the "tax or penalty" to the date on which the
refund is granted.
17. This has to be read with the expression "refund of any amount that
becomes due" occurring in Section 244 A (1) of the Act. When the entire
sub-section (1) of Section 244 A of the Act is read as a whole, the legislative
intent does not appear to be to limit the expression "any amount becomes
due" occurring in Section 244A (1) or the expression "in any other case"
occurring in Section 244A (1) (b) only to tax and penalty as is sought to be
contended by the Department. The words "as the case may be" refers to the
period for which the interest will become payable and that the period is said
to be dates of payment of tax or penalty to the date on which the refund is
granted. This does not mean that the amount other than tax or penalty cannot
be included in the expression "in any other case". it is only reflective of the
periods for which such interest would become payable. In fact the
disjunctive "or" between the words "period" and "periods" indicates that 'in
any other case' interest would be calculated for every month or part of a
month comprised in the period or periods from the date o which the refund
is granted. The Court is not prepared to read the expression in the narrow
way as suggested by Mr. Manchanda.
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 10 of 15
18. The Explanation under clause (b) of Section 244 A (1) of the Act serves
to clarify the expression "the dates of payment of the tax or penalty." It is
not intended to and in fact does not whittle down the ambit of Section 244 A
(1) (b) of the Act.
19. In Commissioner of Income Tax v. Birla Corporation Limited (supra)
the question that arose was whether the Income Tax Appellate Tribunal
(ITAT) was justified in granting interest under Section 244A of the Act on
the refund arising due to excess payment on self-assessment of tax. It was
held that Section 244A does not mandate that interest cannot be allowed on
self-assessment tax paid under Section 140A of the IT Act. Relying on the
decisions in Commissioner of Income Tax v. Cholamandalam Investment
and Finance Company Limited (2007) 294 ITR 438 (Mad), ACIT v.
Kerala Transport Company (2014) 222 Taxman 149 (Ker), Commissioner
of Income Tax v. Mangalam Arts (2013) 218 Taxman 51 (Raj) , CIT v.
Punjab Chemical & Crop Protection Limited (2015) 231 Taxman 312, and
that of the Calcutta High Court in Commissioner of Income Tax v. Birla
Corporation Limited (supra) where it was held that "it cannot be said that
interest under Section 244A can be allowed only in cases where excess
payments of tax is made consequent to a notice of demand under Section
156. The language of the Act is clear and there is no ambiguity in it. Hence
the Assessee is clearly entitled to claim interest under Section 244A on
refund of excess self-assessment tax."
20. As correctly noted in Commissioner of Income Tax v. Birla
Corporation Limited (supra), there was a divergence of views of the
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 11 of 15
Division Benches of this Court in CIT v. Sutlej Industries (2010) 325 ITR
331 (Del) and CIT v. Engineers India Limited Ltd. (2015) 373 ITR 377
(Del). In the latter decision, the Court purportedly followed the decision of
the Supreme Court in Commissioner of Income Tax, Gujarat v. Gujarat
Fluoro Chemicals (supra) which did not deal with the issue of refund of
excess self-assessment tax. It may be noted at this stage that the question of
the conflict between the aforementioned two decisions of this Court in CIT
v. Sutlej Industries (supra) and CIT v. Engineers India Limited (supra) has
been referred to a larger Bench of this Court. However, the issue in the
present case does not involve refund of excess self-assessment tax.
21. Turning to the decision of the Supreme Court in Union of India v. Tata
Chemicals Limited (supra) the question that arose was whether the Revenue
was liable to pay interest on the refund of tax made to the Resident/Deductor
under Section 240 of the Act. Answering the said question in the
affirmative, the Supreme Court held as under:
"22. It is cardinal principle of interpretation of Statutes that the words
of a Statute must be understood in their natural, ordinary or popular
sense and construed according to their grammatical meaning unless
such construction leads to some absurdity or unless there is
something in the context or in the object of the Statute to the contrary.
The golden rule is that the words of a Statute must prima facie be
given their ordinary meaning. It is yet another rule of construction that
when the words of a Statute are clear, plain and unambiguous, then
the Courts are bound to give effect to that meaning irrespective of the
consequences. It is said that the words themselves best declare the
intention of the law giver. The Courts have adhered to the principle
that efforts should be made to give meaning to each and every word
used by the legislature and it is not a sound principle of construction
to brush aside words in a Statute as being inapposite surpluses, if they
can have proper application in circumstances conceivable within the
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 12 of 15
contemplation of the Statute (See Gurudevdatta VKSSS Maryadit v.
State of Maharashtra [2001] 4 SCC 534).
23. It is also well settled principle that the courts must interpret the
provisions of the Statute upon ascertaining the object of the legislation
through the medium or authoritative forms in which it is expressed. It
is well settled that the Court should, while interpreting the provisions
of the Statute, assign its ordinary meaning.
24. This Court in Shyam Sunder vs. Ram Kumar (2001) 8 SCC 24
has observed that in relation to beneficent construction, the basic rules
of interpretation are not to be applied where (i) the result would be re-
legislation of a provision by addition, substitution or alteration of
words and violence would be done to the spirit of legislation, (ii)
where the words of a Provision are capable of being given only one
meaning and (iii) where there is no ambiguity in a provision,
however, the Court may apply the rule of beneficent construction in
order to advance the object of the Act.
25. Before the insertion of Section 244A as a composite Section by
the Direct Tax Laws (Amendment) Act, 1987, the liability to pay
interest on refund of pre-paid taxes was contained in Sections 214,
243 read with Section 244 (1A) of the Act. The Parliament has
introduced a new Section in the place of Sections 214, 243 and 244 in
respect of assessment for the assessment year 1989-90 and onwards.
26. The language of the Section is precise, clear and unambiguous.
Sub-Section (1) of Section 244A speaks of interest on refund of the
amounts due to an assessee under the Act. The assessee is entitled for
the said amount of refund with interest thereon as calculated in
accordance with clause (a) & (b) of sub-Section (1) of Section 244A.
In calculating the interest payable, the section provides for different
dates from which the interest is to be calculated.
38. 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 the taxing
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 13 of 15
statute. Refund due and payable to the assessee is debt owned and
payable by the Revenue. The Government, there being no express
statutory provision for payment of interest on the refund of the excess
amount/tax collected by the Revenue, cannot shrug of its apparent
obligation to reimburse the deductors lawful monies with the accrued
interest for the period of undue retention of such monies. ....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."
22. The aforesaid decision in Union of India v. Tata Chemicals Limited
(supra) is clear in its enunciation that even if there is no express statutory
provision for payment of interest, the government cannot avoid its obligation
to reimburse the lawful monies "together with accrued interest" for the
period of "undue retention". Once it is clear that Section 244A (1) (b) of the
Act which talks of "any other case" does not have to be interpreted
restrictively and can include situations like in the present case, then it is
evident that there is nothing in the said provision which prohibits the
payment of interest on an amount of refund due to the Petitioners as a result
of the waiver of interest under Section 220(2A) of the Act. The circular of
the CBDT dated 26th April 2016 accepts the above proposition laid down in
Union of India v. Tata Chemicals Limited (supra) in its entirety.
23. The sum found refundable to the Petitioners as a result of the waiver of
interest order passed by the CCIT is a definite sum that was wrongly
deducted from the Petitioners as interest. Payment of interest on that sum by
the Revenue cannot be characterised as payment of 'interest on interest'. In
India Trade Promotion Organization v. CIT (supra) the question before the
Court concerned the denial of interest on refund. It was clarified that "if the
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 14 of 15
refund does not include interest due and payable on the amount refunded,
the Revenue would be liable to pay interest on the shortfall. This does not
amount to payment of interest on interest."
24. For all the aforementioned reasons, the Court sets aside the impugned
orders dated 3rd August 2015 of the AO denying the Petitioners interest on
the amounts refunded to them pursuant to the waiver order dated 30th March
2015 of the CCIT. The interest amount as claimed by the Petitioners on the
amount refunded to them will now be paid by the Department to the
Petitioners within four weeks from today in terms of Section 244 A (1) (b)
of the Act from the date of recovery till the date of payment.
25. The writ petitions are allowed in the above terms with no orders as to
costs.
S.MURALIDHAR, J
CHANDER SHEKHAR, J
MAY 01, 2017
Rm
W.P. (C) Nos. 1011, 1012, & 1183of 2016 Page 15 of 15
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