ORDER
1. These cross appeals arise out of separate orders passed by the Ld. Commissioner of Income Tax (Appeals) [hereinafter referred to as “the Ld. CIT(A)”] against the orders passed by the Assessing Officer giving effect to the appellate orders of the Ld. CIT(A). Since certain issues involved in these appeals are common and interconnected, they were heard together and are being disposed of by this consolidated order for the sake of convenience.
ITA No.5916/Mum/2017 (Revenue’s Appeal) – A.Y. 2009-10
2. This appeal is directed against the order of the Ld. CIT(A) arising from the order passed by the Assessing Officer giving effect to the appellate order of the Ld. CIT(A) for Assessment Year 2009-10. The Revenue has raised four grounds relating to (i) relief granted in respect of write back of provision for employee benefits, (ii) deletion of interest charged under section 234D, (iii) computation of interest under section 244A and (iv) grant of interest under section 244A on excess selfassessment tax.
3. Briefly stated, the original assessment for the year under consideration was completed under section 143(3) of the Act. Pursuant to the appellate order passed by the Ld. CIT(A), the Assessing Officer passed an order giving effect thereto. Aggrieved by the relief granted by the Ld. CIT(A) while adjudicating the consequential issues arising from the order giving effect, the Revenue is in appeal before us raising following grounds:
“(1) Whether the facts and in the circumstances of the case and in law, the CIT(A) was correct in allowing the deduction on account of provision of written-back or provision for other employees benefits comprising of leave travel & home travel, sick leave and casual leave amounting to Rs. 15.47 Crore without appreciating the fact that the whole disallowance under the head of provision towards pension and other employee benefit of Rs. 1495.50 Crs comprising the said disallowance was upheld by the Ld. CIT(A) in assessee’s quantum no IT-33/11-12 vide order dated 29.03.2016. Therefore, the decision of Ld. CIT(A) is contradictory and hence a perverse order.
(2) On the facts and in the circumstances of the case and in law, the CIT(A) has erred in directing to delete the interest u/s 234D of Rs. 4,26,94,071/-considering that no refund granted was issued to assessee u/s 143(1) without appreciating the facts that as per case records refund had been issued u/s 143(1) of Rs. 1344,43,97,570/- and interest u/s 234D was levied.
(3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the Assessing Officer to adjust the refund granted, first towards interest amount refundable and thereafter consider the balance against the tax amount refundable which will lead to excess grant of interest, contrary to the Legislative provision and law which is regularly followed by the Department.
(4) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding that the assessee shall be entitled to interest under Section 244A of the Income Tax Act, 1961 in respect of excess self-assessment tax paid following the order of the Hon’ble Jurisdictional High Court in the case of
Stock Holding Corporation v.
CIT (
373 ITR 282) and directing the AO to compute the interest payable u/s 244 A from the date of payment on selfassessment tax, without appreciating that the excess amount was paid due to miscalculation by the assessee company itself and not due to erroneous assessment by the tax department and was hence not allowable as per decision of Delhi High Court vide dt. 26.02.2015 in the case of Engineers India Ltd.”
4. Ground No.1 relates to deletion of addition in respect of write back of provision for leave travel, home travel concession, sick leave and casual leave aggregating to ^15.47 crore.
5. The learned Departmental Representative relied upon the assessment order and submitted that the Ld. CIT(A) was not justified in directing the Assessing Officer to reduce the write back from the taxable income. According to him, the relief granted by the Ld. CIT(A) is inconsistent with the treatment accorded to the provision in the earlier year as it will amount to double deduction.
6. Per contra, the learned Authorised Representative submitted that the provision corresponding to the impugned write back had been disallowed while computing income for Assessment Year 2008-09. Therefore, unless the deduction is finally allowed in Assessment Year 2008-09, the write back cannot again be brought to tax as it would amount to taxing the same amount twice. He further submitted that subsequent to the impugned order, the Tribunal in assessee’s own case for Assessment Year 2008-09 has allowed the claim relating to the said provision and the consequential order giving effect is yet to attain finality. Therefore, according to him, the taxability of the write back has to follow the ultimate tax treatment accorded to the provision in Assessment Year 2008-09.
7. We have heard the rival submissions and perused the material available on record. We find merit in the contention of the learned Authorised Representative that the present issue cannot be decided independently of the proceedings for Assessment Year 2008-09. It is well settled that where an expenditure has been allowed as deduction in an earlier year, the subsequent write back thereof assumes the character of taxable income. Equally, where the corresponding deduction has not been allowed, bringing the write back to tax would amount to double taxation. Admittedly, the Tribunal has already rendered its decision in assessee’s own case for Assessment Year 2008-09 and the consequential effect thereof is yet to be worked out. In our considered opinion, the taxability of the impugned write back has necessarily to be examined in the light of the final effect given to the appellate orders for Assessment Year 2008-09.
8. We, therefore, set aside the impugned order on this issue and restore the matter to the file of the Assessing Officer with a direction to first give effect to the final appellate orders for Assessment Year 200809 and thereafter determine the taxability of the impugned write back in accordance with law after affording adequate opportunity of hearing to the assessee. Ground No.1 is treated as allowed for statistical purposes.
9. Ground No.2 relates to deletion of interest charged under section 234D.
10. The learned Authorised Representative submitted that after passing of the impugned order, the Tribunal disposed of the quantum appeal and the Assessing Officer has subsequently passed an order under section 143(3) read with section 254 giving effect to the Tribunal’s directions, whereby refund has been determined rather than tax liability, therefore 234D has no application. Consequently, the issue of levy of interest under section 234D requires fresh examination with reference to the final order giving effect to the Tribunal’s directions.
11. The learned Departmental Representative fairly submitted that the aforesaid factual developments require verification by the Assessing Officer.
12. We have considered the rival submissions. Levy of interest under section 234D is consequential upon the determination of excess tax liability after regular assessment. Since the assessment has subsequently undergone modification pursuant to the appellate orders, the consequential levy of interest also requires fresh computation. We, therefore, restore this issue to the file of the Assessing Officer with a direction to verify the final order passed giving effect to the Tribunal’s order and thereafter recompute interest under section 234D, if any, in accordance with law. Needless to observe, if ultimately no excess demand has been raised in regular assessment after the ITAT order, interest under section 234D shall not be chargeable. Ground No.2 is accordingly allowed for statistical purposes.
13. Ground No.3 & 4 relate to the direction of the Ld. CIT(A) that while computing interest under section 244A, the refunds granted earlier should first be adjusted towards the interest component and thereafter towards the principal tax component.
14. The learned Departmental Representative relied upon the assessment order and submitted that the Assessing Officer has computed the interest in accordance with the departmental practice and, therefore, the Ld. CIT(A) was not justified in directing a different mode of adjustment.
15. The learned Authorised Representative, on the other hand, submitted that the issue is squarely covered in favour of the assessee by the decision of the Hon’ble Delhi High Court in India Trade Promotion Organisation v. CIT [2014] 361 ITR 646 (Delhi), wherein it has been held that while adjusting the refund against the outstanding demand, the amount is first required to be appropriated towards the interest component and only thereafter towards the principal amount of tax. He further submitted that the aforesaid principle has consistently been followed by the Coordinate Benches of the Tribunal in assessee’s own case in ITA No.5910/Mum/2017 as well as in ITA Nos.1097 to 1102/Mum/2023.
16. We have heard the rival submissions and perused the material available on record. The controversy involved in the present ground is no longer res integra. The Hon’ble Delhi High Court in the case of India Trade Promotion Organisation (supra) has held that where the Revenue adjusts the refund against the outstanding tax demand, the adjustment has first to be made towards the interest component payable to the assessee and thereafter towards the principal tax component. The aforesaid principle has also been consistently followed by the Coordinate Benches of the Tribunal, including in assessee’s own cases.
17. Respectfully following the aforesaid judicial precedents, we uphold the direction of the Ld. CIT(A) directing the Assessing Officer to adjust the refunds already granted first towards the interest component and thereafter towards the principal tax component while computing interest under section 244A. Accordingly, Ground No.3 raised by the Revenue is dismissed.
18. In the result, the appeal of the Revenue is partly allowed for statistical purposes.
ITA No.2851/Mum/2019 (Assessee’s Appeal) – A.Y. 2011-12
19. We shall now take up the appeal filed by the assessee. This appeal is directed against the order of the Ld. CIT(A) arising from the order passed by the Assessing Officer giving effect to the appellate order of the Ld. CIT(A) for Assessment Year 2011-12. The assessee has raised two effective grounds relating to levy of interest under section 234D and short grant of interest under section 244A.
20. Briefly stated, pursuant to the appellate order passed by the Ld. CIT(A), the Assessing Officer passed an order giving effect thereto. Thereafter, while giving effect to the appellate order, the Assessing Officer recomputed the tax liability and charged interest under section 234D besides granting interest under section 244A. Aggrieved by the computation so made, the assessee preferred the present appeal before the Ld. CIT(A) and on being unsuccessful is in further appeal before us raising following grounds:
“1. Levy of interest under section 234D
1.1. The leaned CIT(A) erred in directing the Assessing Officer to recompute and levy interest under section 234D. He therefore erred in not directing the Assessing Officer to not levy interest under section 234D.
1.2. The learned CIT(A) erred in not appreciating that interest under section 234D can be levied only for the period from the date of grant of refund to the date of regular assessment.
1.3. The learned CIT(A) erred in not appreciating that in case of the aforesaid assessment year the date of grant of refund is April 2013 and the date of regular assessment is March 2013. Hence, there is no question of levy of interest under section 234D.
1.4. The learned CIT(A) erred in holding that the order dated 27 March 2018 giving effect to the CIT(A) order is to be treated as an extension of the original order under section 143(3) and hence needs to be treated as regular assessment.
2. Short grant of interest under section 244A
2.1. The learned CIT(A) erred in upholding the action of the Assessing Officer in granting short interest under section 244A.
2.2. The learned CIT(A) erred in not directing the Assessing Officer to adjust the amount of refund granted first towards interest receivable and the balance thereafter against the tax receivable.
3. Each one of the above grounds of appeal is without prejudice to the other.
4. The appellant reserves the right to amend, alter or add to the grounds of appeal.”
21. Ground No.1 relates to levy of interest under section 234D. During the course of hearing, the learned Authorised Representative submitted that the issue has been decided by the Coordinate Bench of the Tribunal in appeal against section 154 proceedings and, for proper appreciation of the controversy, placed the chronology of events before us.
22. The chronology of events, as placed before us, is reproduced below:
| Date |
Event |
| 29 November 2011 |
Original return of income filed |
| 25 February 2013 |
Revised return of income filed |
| 19 March 2013 |
Intimation u/s. 143(1) of the Income-tax Act, 1961 [‘the Act’] issued |
| 19 March 2013 |
Assessment Order passed u/s. 143(3) of the Act |
| 28 March 2013 |
Cheque for refund of the amount determined in the Intimation u/s. 143(1) received |
| 30 May 2014 |
Order u/s. 154 of the Act passed |
| 10 January 2017 |
Order u/s. 154 of the Act passed |
| 21 March 2017 |
CIT(A) Order passed in the appeal challenging the Assessment Order dated 19 March 2013 |
| 27 March 2018 (impugned Order) |
Order giving effect to the aforesaid CIT(A) Order dated 21 March 2017 passed |
| 24 March 2021 |
Receipt of Notice u/s. 154 |
| 31 March 2021 |
Submissions dated 26 March 2021 filed in response to the aforesaid notice dated 24 March 2021 |
| 31 March 2021 |
Order passed u/s. 154 rectifying the aforesaid order dated 10 January 2017 |
| 27 March 2024 |
Order passed by the CIT(A)/ NFAC in appeal against the Order dated 31 March 2021 passed u/s. 154 of the Act partly allowing the appeal filed by the Appellant. |
| 28 October 2024 |
Order passed by the Tribunal in the appeal against the Order dated 27 March 2024 passed by the CIT(A) wherein the Tribunal inter-alia held that interest can be levied only for one month i.e. for March 2013. |
23. Referring to the aforesaid chronology, the learned Authorised Representative submitted that the issue involved in the present appeal is squarely covered by the decision of the Coordinate Bench of the Tribunal in assessee’s own case in ITA No.2189/Mum/2024 dated 28.10.2024. It was submitted that after considering the entire sequence of events, the Tribunal held that though the refund was actually received by the assessee on 28.03.2013, interest under section 234D, if leviable, could be charged only for one month. It was, therefore, submitted that the Assessing Officer was not justified in computing the interest till the date of the order passed while giving effect to the appellate order and the issue being squarely covered, the interest deserves to be restricted to one month.
24. The learned Departmental Representative relied upon the order of the Ld. CIT(A).
25. We have heard the rival submissions and perused the material available on record. We find that the controversy involved in the present ground is no longer res integra. The Coordinate Bench of the Tribunal, while deciding the issue in appeal relating to section 154 on the same issue, after considering the chronology reproduced hereinabove, held that for the purpose of section 234D, interest could be levied only for one month. The operative findings of the Coordinate Bench read as under:-
“.7. We heard the rival submissions and considered the documents available in the record. In case of interest levied under section 234D, we find that the intimation U/s 143(1) of the Act was issued on 19/03/2013, but the refund was not issued. The assessee received the refund cheque on 28/03/2013 after completion of assessment under section 143(3) of the Act. The rectification was made on 10/01/2017 and finally on 31/03/2021 under section 154 of the Act. We find that for levy of interest under section 234D of the Act, refund ought to be granted to assessee under section 143(1) of the Act. In the instant case, the assessee bank submits that it did not receive any refund pursuant to an intimation under section 143(1) of the Act. So, there is no question of levy of interest under section 234D of the Act. The assessee further placed in the written submission that even if the interest under section 234D is to be levied only for one month i.e. from 01/03/2013 to 31/03/2013. We respectfully follow the order of Hon’ble Apex Court in the case of South Indian Bank Ltd (
supra) & Volkart Bros (
supra). Further, in the case of M/s Sundaram Finance Limited the section 234D of the Act delt the “regular assessment” which pertains to original order. We find in the case of
Hind Wire Industries Ltd. v.
CIT [
(1995) 212 ITR 639 (SC)], the Hon’ble Supreme Court held that a rectification order under Section 154 does not change the effective date of the original order. The original date of the order remains relevant. We respectfully observed this case supports the principle that a rectification under Section 154 does not alter the effective date of the original assessment order. Therefore, the limitation period for any further rectifications remains tied to the date of the initial order. The impugned appeal order is set aside in this issue of levying interest under section 234D of the Act. Accordingly, we restrict the interest only for one month, i.e. from 01/03/2013 to 31/03/2013 and the rest of the interest is deleted.”
26. The facts before us are identical. Respectfully following the decision of the Coordinate Bench in assessee’s own case, we direct the Assessing Officer to recompute the interest under section 234D by restricting the levy to one month. Ground No.1 is accordingly allowed.
27. Ground No.2 relates to short grant of interest under section 244A.
28. The learned Authorised Representative submitted that while computing interest under section 244A, the Assessing Officer ought to have adjusted the refunds already granted first towards the interest component and thereafter towards the principal tax component. The learned Departmental Representative relied upon the orders of the lower authorities.
29. We have heard the rival submissions and perused the material available on record. We find that an identical issue has already been adjudicated by us while disposing of Ground No.3 in Revenue’s appeal in ITA No.5916/Mum/2017 for Assessment Year 2009-10 hereinabove. Since the issue involved, the submissions advanced by the parties and the legal position governing the controversy are identical, the findings recorded by us while adjudicating Ground No.3 of the Revenue’s appeal shall apply mutatis mutandis to the present ground also. Accordingly, we direct the Assessing Officer to recompute the interest under section 244A by first adjusting the refunds already granted towards the interest component and thereafter towards the principal tax component. Ground No.2 is allowed.
30. In the result, the appeal of the assessee is allowed.
31. To sum up, the appeal of the Revenue in ITA No.5916/Mum/2017 is partly allowed for statistical purposes, whereas the appeal of the assessee in ITA No.2851/Mum/2019 is allowed.
