How the Interest on Self Assessment tax Paid will be calculated ?
Payment of excess self-assessment tax can’t be regarded as payment of tax before processing of return under section 143(1). Thus, refund of excess self-assessment tax will not carry any interest from the date of payment but it will carry interest from the date of processing of return under section 143(1) till the date of granting of refund. Excess self-assessment tax, being not chargeable under Section 4(1), it cannot be regarded as payment of tax merely for the reason that the assessee has chosen to pay it. The same simply represents the deposit, made on an ad hoc basis, without any basis in fact or in law
IN THE ITAT MUMBAI BENCH ‘D’
Deputy Commissioner of Income-tax, Mumbai
AND SANJAY ARORA, ACCOUNTANT MEMBER
IT APPEAL NO. 8636 (MUM.) OF 2011
[ASSESSMENT YEAR 1994-95]
SEPTEMBER 1, 2015
Nitesh Joshi for the Appellant. Love Kumar for the Respondent.
Sanjay Arora, Accountant Member – This is an Appeal by the Assessee arising out of the Order by the Commissioner of Income Tax (Appeals)-6, Mumbai (‘CIT(A)’ for short) dated 30.09.2011, dismissing the Assessee’s appeal arising out of its regular assessment under the Income Tax Act, 1961 (‘the Act’ hereinafter) for the assessment year (A.Y.) 1994-95, i.e., as further modified by the order giving appeal effect dated 05.03.2010 determining the revised income at Rs.39,42,36,998/- and the concomitant tax liability at Rs.20,40,88,026/-.
2. The sole issue arising in the instant appeal is the exigibility to interest u/s.244A of the Act, if any, arising on the refund of tax to the assessee for the relevant year.
The respective cases of both the sides
3.1 The case of the assessee before us, as before the Revenue authorities, is that the refund being out of self assessment tax, is covered u/s. 244A(1)(b), which is an omnibus clause covering refund of, besides penalty, any tax, i.e., other than by way of tax collected at source, advance tax or tax deducted at source, which are covered u/s.244A(1)(a). The matter is by now well settled by series of decisions and, therefore, admits of no debate, so that where refund is out of self-assessment tax, interest u/s.244A(1)(b) would be exigible from the date of payment of tax to the date of grant of refund. Reliance stands placed before us on the decision in the case of Stockholding Corporation of India v. CIT (in WP No. 823 of 2000 dated 17.11.2014/copy on record), wherein, it is claimed, the aspect of ‘date of payment of tax’, w.e.f. which date interest u/s.244A(1)(b) is to be allowed, stands clarified, in a case of refund of self-assessment tax, to be the date of actual payment, i.e., after considering Explanation thereto.
3.2 The Revenue’s case, on the other hand, made with reference to the Explanation to section 244A(1)(b), is of absence of any specific provision for the grant of interest on self-assessment tax. The Explanation clearly specifies the ‘date of payment of tax or penalty’ in a case covered there-under, up to the date on and from which the tax (or penalty) specified in the notice of demand issued u/s. 156 is paid in excess of such demand. That is to say, that this indicates that self-assessment tax is not under contemplation of section 244A(1)(b) in-as-much as the same could not be the tax specified in the notice of demand u/s.156. Relying before us on the decision in the case of CIT v. Engineers India Ltd.  55 taxmann.com 1 (Del), it is contended that section 244A conceives of interest on refund of tax only in two situations, i.e., where arising out of prepaid taxes, viz. Advance-tax, TDS, etc. and, two, the tax specified in the notice of demand. In any case, in the facts of the case, tax stands paid almost entirely in excess of that payable per the return of income and, thus, paid in violation of the provision of section 140A or, alternatively, under no provision of law.
4. We have heard the parties, perused the material on record as well as the decisions cited, apart from the case law settling the law in the matter, and given our careful consideration to the matter. We begin by listing the primary facts and delineation of the settled law in the matter.
4.1 Primary facts:
|Income as per Return||..||39,84,26,927|
|Tax & Surchage Payable||..||20,61,85,934|
|(*) Shortfall of Advance-tax & TDS paid..||4,01,612|
|Self assessment tax paid||2,65,00,000|
[(*) Wrongly written as ‘Excess’ in the impugned order.]
4.2 The Law
The settled law qua the allowance of interest by the Revenue on grant of refund:
The Hon’ble Apex Court per its larger bench decision in the case of Modi Industries Ltd. v. CIT  216 ITR 759 (SC) explained that there is no right to get interest except as provided by the statute. The same stands reiterated, more recently, inCIT v. Gujarat Fluoro Chemicals  358 ITR 291 (SC), again by its larger bench, explaining its decision in Sandvik Asia Ltd. v. CIT  280 ITR 643 (SC) as being rendered in the peculiar facts of the case, without impacting the settled law in the matter; it holding as under:
‘8. Further it is brought to our notice that the Legislature by the Act No. 4 of 1988 (w.e.f. 01.04.1989) has inserted Section 244A to the Act which provides for interest on refunds under various contingencies. We clarify that it is only that interest provided for under the statute which may be claimed by an assessee from the Revenue and no other interest on such statutory interest.’
True, the apex court in Union of India v. Tata Chemicals Ltd.  363 ITR 658 (SC), relied upon in Stockholding Corporation of India (supra), clarified that the residuary clause (section 244A(1)(b)) shall cover all payments of tax, so that whenever tax is found to have been paid in excess of the amount which the assessee was obliged or otherwise required to pay under any provision of the Act, he shall be entitled to interest, being compensatory, there-under. However, the decision in Gujarat Fluoro Chemicals (supra) was also rendered in the context of s. 244A, even as the propositions of law stated inModi Industries Ltd. (supra) would equally apply to refund of tax under the Act. As such, to the extent inconsistent, we shall be guided by the larger bench decisions by the Apex Court, which shall prevail.
The settled law qua interpretation of statutes
The words of a Statute must prima facie be given their ordinary meaning. When the words are clear, plain and unambiguous, then the Courts are bound to give effect to that meaning irrespective of the consequences. Further, 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 contemplation of the Statute. Reference for the purpose be made to Tata Chemicals Ltd. (supra). Also refer, CIT v. Calcutta Knitwears  362 ITR 673 (SC).
4.3 The provision
Section 244A, in its relevant part, reads as under:
‘Interest on refunds
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 paid under section 115WJ or collected at source under 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 from the 1st day of April of the assessment year to the date on which the refund is granted:
Provided that no interest 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 and 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 or 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.
(2) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final.’
Section 244A(1)(b), i.e., the provision allowing interest on refund, clearly provides for payment of interest on tax paid in excess of that specified in the notice of demand. The reason is not far to seek. Except other than by way of prepaid taxes, covered u/s. 244A(1)(a), tax, which is subsequently found to be paid in excess, and thus refundable, would stand to be paid in pursuance to a demand. It is inconceivable that the assessee shall pay tax in excess of that demanded of him, in which case in fact it could not be said to be payment of tax in the first place. Such a payment in fact makes the said Explanation a non-starter. Is the payment, one may ask, besides being made de hors any demand or obligation to pay, for the purpose of seeking its refund? The said Explanation, thus, refers to a payment, though subsequent to the raising of the demand, in terms thereof, though is subsequently found to be in excess of the actual amount of tax payable under the Act, say, under revision or appeal proceedings, i.e., as per the notice of demand as finally issued. It is to be noted that a fresh notice of demand is prepared consequent to each modification in the amount of tax (or penalty) payable under the Act. Self assessment tax, i.e., the tax paid on a self assessment by the assessee, is of the same species as advance tax, required to be paid by the assessee tax-payer by estimating his current income, applying the current rate of tax thereon (refer ss. 207 to 210). Payment of self assessment tax is only to make good the shortfall in the payment of advance tax, which is pegged at hundred per cent of the tax due, i.e., as per the assessee’s own estimate. There does not seem to be any reason or basis to exclude the same, i.e., where a refund arises out of self assessment tax, from the purview of interest u/s. 244A. The matter is even otherwise covered by the decision in Stockholding Corporation of India (supra); the Hon’ble jurisdictional High Court answering the issue before it, i.e., of interest u/s. 244A on refund of self assessment tax, in the positive. It would thus not be incorrect to say that s. 244A(1) covers refund of tax, howsoever paid, i.e., under any provision of the Act. The distinction between the clauses (a) and (b) thereof is only with regard to the period from which interest is to be allowed, the terminus point in either case being the date of grand of refund. While the commencement period of interest is fixed at the first day of the April of the relevant assessment year for refund of prepaid tax, the residuary clause (b), governing refund of tax in any other case, is the date on and from the date tax is paid in excess of the demand raised on the assessee, i.e., what is determined to be paid under the Act upon following the procedure for assessment (Explanation to section 244A(1)(b)). The payment of tax, which is being refunded, therefore, for the purposes of s. 244A, can be both, anterior or subsequent, to the raising of the demand u/s. 156. This, however, does not in any manner contradict or is inconsistent with the ratio of the decisions in Modi Industries Ltd. (supra) and Gujarat Fluoro Chemicals (supra), settling the law that there is no right to get interest on refund except as provided by the statute.
In sum, we may at this stage recapitulate what stands discussed and found by us on the basis of a review of law as settled by the Hon’ble Apex Court:
|(a)||Interest under the Act, though compensatory, is to be paid in terms of the statute, i.e., is in pursuance of a statutory right granted thereby;|
|(b)||Interest u/s.244A is only on tax or penalty refundable, and is to be allowed there-under, i.e., in its terms;|
|(c)||Section 244A, where-under interest is to be allowed by the Revenue under the Act, is a complete provision, bearing both the grant of right to interest as well as the manner of its working;|
|(d)||Refund of tax or penalty under the Act is contemplated only along with upto date interest. It is not open to the Revenue to appropriate the refund granted only against principal amount (of tax or penalty), i.e., where interest is exigible thereon u/s.244A(1);|
|Qua Section 244A|
|(e)||Section 244A(1) covers various contingencies for the grant of refund of tax (or penalty), with clause (b) thereof being the residuary clause which covers all cases of refund of tax paid under any provision of the Act, other than by way of prepaid tax, i.e., paid toward tax liability during the relevant year. Cl. (b) stands caste separately only, as it transpires, for determining the period from which interest is to be granted, being April 1 of the assessment year for the prepaid taxes (covered by clause (a) thereof), while being with reference to the date of payment of tax in case of the latter (clause (b));|
|(f)||Inasmuch as interest on refund is to be granted u/s.244A, i.e., on the tax/penalty paid in excess, the same ought to be read in a manner which makes it workable, without of-course transgressing its essential attributes, adopting the cardinal principles of interpretation statutes, as listed hereinabove, quoting from the decision in Tata Chemicals Ltd. (supra);|
|(g)||These essential attributes, as gathered, are:|
|–||refund is of tax, paid either voluntarily or in pursuance to a demand, so long as it is under the provision of the Act;|
|–||the amount being refunded could be paid both anterior or subsequent to the date of demand as long as it stands paid in discharge of a statutory obligation;|
|–||the interest on refund of tax paid other than by way of prepaid tax, i.e., in any other case, is from the date of payment of tax, as defined.|
4.5 Analysis of the case of the opposing parties
We may, next, in light of the foregoing, examine the contentions of the Revenue. Its’ stand that section 244A(1)(b) does not cover a payment of tax by way of self-assessment tax, cannot be appreciated. The matter stands clarified by the Hon’ble jurisdictional High Court in Stockholding Corporation of India (supra). The self assessment tax is only a payment of tax, paid in discharge of an obligation under the Act. Where thus subsequently found as not payable, its refund shall attract concomitant interest, i.e., from the date of payment of tax to that of its refund. This would also answer the Revenue’s argument of the interest u/s.244A arising only where refund is of prepaid tax or of that specified in the notice of the demand. Surely, self-assessment tax, being only paid prior thereto, would not stand to be specified in the notice of demand. We have, however, read the provision holistically to mean that as long as tax stands paid under the provisions of the Act, in discharge of an obligation there-under, its subsequent refund, i.e., on being found as not payable per the notice of demand, would attract interest u/s. 244A(1)(b). The Revenue’s third argument, i.e., the tax being not paid in accordance with the section 140A, it does not therefore qualify to be self-assessment tax, however, cannot be faulted with.
4.6 Self Assessment Tax
Section 140A, in it’s relevant part, reads as under:
140A. (1) Where any tax is payable on the basis of any return required to be furnished under section 139 or section 142 or, as the case may be, section 148, after taking into account, the amount of tax, if any, paid under any provision of this Act,
the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return and the return shall be accompanied by proof of payment of such tax and interest.
Explanation. – Where the amount paid by the assessee under this sub-section falls short of the aggregate of the tax and interest as aforesaid, the amount so paid shall first be adjusted towards the interest payable as aforesaid and the balance, if any, shall be adjusted towards the tax payable.’
The same, clearly, contemplates payment of tax only on the basis of the return of income. Surely, only Rs.4.02 lacs out of a total of Rs.265 lacs could be said to be payment u/s.140A in the instant case. Under which provision of law, we wonder, is the excess payment made? The assessee explains the same to be to avoid payment of interest u/s.234B. But, then, the said explanation would be valid for and up to the payment of Rs.4.02 lacs, i.e., the amount of shortfall in tax after deducting prepaid taxes. In fact, the actual sum may be little higher in-as-much as the payment of interest u/s.234B would require to be, in terms of section140A r/w s. 140A(1B), appropriated first, and only the balance adjusted against the payment of tax. Rather, section 234B contemplates such saving, providing for payment of tax other than by way of self assessment tax (sec. 234B(2)), i.e., to make good the said shortfall, even prior to the payment of self-assessment tax. This payment, however, shall get subsumed while making payment of self assessment tax, which is reckoned or conceived as a positive sum, and cannot, by definition, be a negative sum (s.140A(1)). Further, as the break-up of the prepaid tax of Rs.2057.84 lacs in the present case would show, the volume of the tax payable as well as the shortfall in advance tax (Rs.4.02 lacs), clearly suggests no interest u/s. 234B being leviable, which is only where the advance tax fall short of 90% of the assessed tax. The payment of the excess Rs.260.98 lacs (i.e., Rs.265 lacs – Rs.4.02 lacs), adjusted downward for the amount of interest, if any, u/s.234B, cannot be regarded as payment of tax, much less as tax paid (or required to be) by way of self-assessment, or self assessment tax by definition. Tax stands clearly defined u/s. 2(43) of the Act to mean income tax chargeable under the provisions of the Act. Section 4 is the provision for charge of income tax. It is this tax which is required to be paid, principally by way of prepaid taxes, being tax deducted at source and advance tax, falling under Chapter XVII, titled ‘Collection and Recovery of Tax’. The same are, thus, provisions toward collection and recovery of tax, already charged. One could argue that even the same could be paid in excess, i.e., of the tax chargeable under the Act and, thus, strictly speaking, not ‘tax’ under the Act. The argument, though attractive, is misplaced. Firstly, TDS and TCS provisions oblige the deductor (or collector) to deduct or collect the tax, so that unless the deductee, following the prescribed procedure in its respect, seeks waiver, the payer is bound to deduct or, as the case may be, the payee collect tax at source. Similarly, the payment of advance tax is on the basis of an estimation of current income (section 209), which provision, as well as s. 210, stand noted in Engineers India Ltd.(supra), which could therefore be in excess, i.e., without attracting the disqualification of being advance tax. Without doubt, the Assessing Officer (A.O.) can u/s.210 call for the estimation of the assessee’s income for the year, as also the tax for the immediately preceding year, and where found to be in excess of the amount payable in terms of the clear provision, claim the same to be not advance tax. In fact, section 4(2) of the Act, clearly brings the tax deducted at source or paid in advance within the purview of section 4(1). But for the said provision, the Central Act providing for the charge of income tax and, at a prescribed rate, being applicable from an assessment year, the tax charged could not be recovered during the relevant previous year. The argument shall, therefore, not hold good for prepaid taxes in general, the interest on refund of which is governed by section 244A(1)(a).
The payment u/s.140A, on the other hand, stands on a different footing. The same is to be made after the close of the year, on the basis of the assessee’s own return for the year, as prepared. The payment made in excess of that required to be paid u/s.140A cannot therefore be regarded as payment there-under and, thus, as payment of self-assessment tax. The same does not fall under any other provision as well. Being not chargeable u/s. 4(1), it cannot be regarded as payment of tax, which cannot be so merely for the reason that the assessee has chosen to pay it. The same simply represents the deposit, made on an ad hoc basis, without any basis in fact or in law.
4.7 Refund of tax
The next question that arises is, that being so, how could the same be refunded in-as-much as the refund under the Act could only be of tax (or penalty), or even of interest, i.e., of a payment made under any provision of the Act. The said excess assumes the character of tax upon processing of the assessee’s return or on making the assessment for the relevant year. It may be appreciated that prior to this point in time, the A.O. has no power to refund the amount. It is only on the processing of the return of income, mandatory in all cases, setting off the said payment against the assessee’s tax liability for the year, i.e., by regarding it as paid toward tax, that the same assumes the character of a tax paid, entitled to refund u/s.143(1) r/w s. 237. Even so, it would be tax paid on processing (or assessment), and not as self assessment tax. Reference in this regard may be made to the decision in the case of Modi Industries Ltd. (supra).
It was explained therein that once the amount of advance tax is treated as payment of tax in respect of income of the relevant previous year and credit as such for the amount has been given in the assessment order, the amount looses the character of advance tax, and becomes income tax in respect of income for the year. The Apex Court clarified this while analysing the interest allowed u/s.214 of the Act, i.e., on refund of advance-tax, which was, as in the case of 244A, from the first day of the relevant assessment year, to the date of the assessment order. Reference here is made to illustrate the manner whereby an amount paid changes its character on assessment, i.e., on being allowed credit against the tax on income for the relevant previous year. The amount of excess, paid, thus, de hors any provision of law, would, nevertheless, come to be regarded as toward tax on the adjustment afore-said. The Intimation u/s.143(1) determining the amount payable is deemed notice of demand u/s.156, vide proviso thereto.
As explained earlier, prior to the processing/assessment, the A.O. is not empowered to take cognizance of this amount, much less refund it. In fact, even if therefore regarded as payment of tax from the date of payment of sum, i.e., in excess of that payable on the basis of the return, the delay in its refund, i.e., up to the date of processing/assessment, is attributable to the assessee and, as such, no interest would stand to be allowed for the period commencing from the date of payment to the date of adjustment as income tax in respect of income for the relevant previous year. This, then, provides the second, alternate reason for allowing interest on the excess payment (of Rs.2.61 crores) only from the date of processing of the payment of the return, and not from the date of actual payment. Further, the date of payment is to be given the meaning specified under the Act, and cannot, in view thereof, be read de hors the same, i.e., giving its plain meaning. When the statute gives a particular meaning to a particular set of words, interpretation has to be made accordingly. The apex court inWest Bengal State Warehousing Corporation v. Indrapuri Studio Pvt. Ltd. (in Civil Appeal No. 3865 of 2006 dated 19.10.2010) held that the use of the word ‘means’ in a definition signifies a hard and fast definition.
The ld. counsel was during hearing specifically questioned as to how the excess amount paid with reference to the tax per the return (i.e., Rs.2.61 crores), could be regarded as self assessment tax u/s.140A. He replied that the assessment was framed at a higher sum, justifying the payment of such excess. Even as we are unable to confirm this on the basis of the material on record, we consider the argument as invalid. Doing so would be in complete disregard of the clear language of the said provision as well as the scheme of the Act. The assessee is obliged under law to make its claims only per its return of income. It is, therefore, not open for him to, while doing so, act inconsistent therewith by making an admitted excess payment, de hors any provision in law. The tax as assessed by the A.O. is only tax on regular assessment. In fact, any tax paid earlier, i.e., by way of TDS or advance tax or by way of self assessment tax, or even otherwise, would on assessment acquire the character of tax on regular assessment, as explained by the Apex Court in Modi Industries Ltd. (supra). Yes, such excess will certainly save the assessee interest u/s. 234B, and only equitably in-as-much as he deposits the same with the Revenue, precluding charge of interest, and toward which we have noted the provision of s. 234B(2). But the same cannot be give rise to a claim of interest, which has necessarily to be in terms of law. In the present case also, irrespective of the acceptance or otherwise of its claims made per the return, the assessee stands to save interest u/s.234B, i.e., the purported purpose of the excess payment (refer: Ground of Appeal No. 1(c)), admitting tacitly to the excess payment being deliberate, which is even otherwise apparent from it being in excess of the tax payable per the return of income.
4.8 Decision in Stockholding Corporation of India (supra)
We, next, consider the decision in Stockholding Corporation of India (supra), which was pleaded before us as concluding the matter in the assessee’s favour. On the different aspects arising in the present case being pointed out to the ld. counsel; it being no doubted in principle that the interest u/s.244A is exigible on the refund of tax paid as self assessment tax, he would take us to paras 8, 9, 10 and 12. A careful reading of the same does not reveal anything inconsistent to what has been stated by us. No doubt, the Hon’ble Court relied on Tata Chemicals Ltd. (supra), wherein it stood held that whenever an amount is refunded to the assessee, the liability to interest by the Revenue arises as it is a kind of compensation for use and retention of the money collected by the Revenue (refer para 9). The same, however, with respect, cannot be regarded as the correct position in law in view of the decisions by the larger bench of the Apex Court in Modi Industries Ltd. (supra) and Gujarat Fluoro Chemicals (supra), even as noted by the Hon’ble High Court in Engineers India Ltd. (supra), before whom in fact the decision in Stockholding Corporation of India (supra) was also cited. The observations in Tata Chemicals Ltd. (supra), reproduced in Stockholding Corporation of India (supra), are to be read in the context of the facts of that case, again as noted in Engineers India Ltd. (supra), the tax being refunded in that case having been exacted by the Revenue. Further, as clarified in the subsequent para 10, the payment of self assessment tax was only in discharge of an obligation under the Act, so that the Hon’ble Court proceeded on the basis that the tax being paid was in terms of an obligation cast on the assessee u/s. 140A of the Act, as was the case in Tata Chemicals Ltd. (supra). Per the said decision, the Hon’ble jurisdictional Court has decided the issue of grant of interest on refund arising out of self assessment tax, and from the date of its payment, in the affirmative. Nothing more and nothing less. No other ratio or precedence, in our view, arises there-from, i.e., on the reading of the said decision as a whole. In fact, this is precisely what has been stated by us so that we draw support from the said decision. We are unable to, on the basis of the said reading, hold that the ratio of the said decision is that any amount paid de hors the provision of section 140A, or without reference thereto, is yet to be regarded as payment of tax made on self-assessment. Or that the amount paid in excess of that payable u/s.140A is yet to be regarded as payment of tax u/s.140A, and interest granted de hors the Explanation to section 240A(1)(b). Coming specifically to different paragraphs, we may state our understanding of the reading of the different paragraphs, as under:
|(a)||Paragraph 10 – The Hon’ble Court was, thereby, addressing the case of payment of self assessment tax, non payment of which would visit the assessee with consequences, so that it could not be regarded as voluntary. We have in the present case shown that the payment was not in discharge of any obligation under the Act, i.e., which was required to be made on the basis of the return. That is, except for the payment of Rs.4.02 lacs, as may be adjusted for the interest, if any, u/s.234B up to the date of payment, to which extent it is certainly payment by way of self-assessment tax;|
|(b)||Paragraph 12 – the Hob’ble Court discountenanced the Revenue counsel’s contention of interest under Explanation to section 244A(1)(b) being allowed from the date of notice of demand. In fact, the said Explanation nowhere states so. Reference to demand notice u/s.156 therein is not for any date but for the tax specified there-under. The Hon’ble Court rightly rejected the same, clarifying the starting point for the interest to be the date of payment of tax. We have, relying on the Modi Industries Ltd. (supra), opined that the earliest point where the excess amount, paid voluntarily, de hors any provision of law, could be regarded as payment of tax is on its adjustment against the tax payable by the assessee, i.e., after the filing of the return, on its processing, mandatory w.e.f. 01.04.1989. The Revenue cannot, rather, take cognisance of this sum prior thereto;|
|(c)||Para 8 – The Hon’be Court rejects the contention that tax paid cannot be disregarded merely because it is ultimately found as not payable. How could, it wonders, payment of tax be not considered as so merely because it becomes refundable later – nothing more and nothing less. The argument by the Revenue, equally applicable for advance tax and TDS, only needs to be stated to be rejected in-as-much as the subsequent refund cannot alter the character of the amount paid earlier, which can only be as per the provisions of the Act, as for example, the apex court explaining the change of character of advance tax to tax on regular assessment on being adjusted against the income tax in respect of the income for the year. In fact, this is precisely what has informed our decision in holding the excess amount as being regarded as toward tax on being allowed credit for on the processing of return of income.|
True, an argument was taken by the Hon’ble Court that the assessee appellant in that case sought a refund of Rs.47 lacs out of the self assessment tax of Rs.266 lacs. We have already noted that the payment of tax by way of self assessment tax or even prior thereto is only to make good the shortfall in the payment of tax. Clearly, in every case of refund, as pointed out by the Hon’ble Court, the refund would only be of the tax found not payable, so that the said argument cannot hold and, as pointed out by us earlier, would apply equally to advance tax/TDS. This in fact, is also apparent from the delineation of the issue vide para 1 of the Judgment, which clarifies of the refund as being of self assessment tax u/s.140A of the Act. The Hon’ble Court, thus, proceeded on the basis of what was refunded was self assessment tax paid u/s.140A of the Act. The Hon’ble Court was nowhere called upon to and neither did it, therefore, deliberate on the defining attributes of tax and, accordingly, opined as to what constitute ‘tax’. There is no reference to either section 140A or sections 2(43) and 4 of the Act by it. A decision, it is trite law, is only an authority on what it actually decides, and not what may remotely or even logically flow from it (refer: Goodyear India Ltd. v. State of Haryana  188 ITR 402 (SC); Blue Star Ltd. v. CIT 217 ITR 514 (Bom); Lachman Dass Bhatia Hingwala (P.) Ltd. v. Asstt. CIT  330 ITR 243 (Del.) (FB)). The issue of interest of tax paid other than as per s. 140A was not before the Hon’ble Court, for it to be regarded as laying down any legal proposition in its regard.
Further, even if regarded as holding of interest u/s.244A as payable on an amount, howsoever paid, and from the date of it’s payment, the same would be clearly inconsistent with the clear mandate of law per the decisions in Modi Industries Ltd. (supra) and Gujarat Fluoro Chemicals (supra) and, thus, not bind us in-as-much as the latter would prevail. In fact, the apex court in Tata Chemicals Ltd. (supra), has clearly held the tax refund as being a refund when tax liability is less than the tax paid, and which part of it therefore stands reproduced at para 9 of the decision by the Hon’ble Court. The amount deposited would therefore have to be firstly regarded as tax under the Act. It needs to be appreciated and borne in mind that what was paid in Tata Chemicals Ltd. (supra) was tax deducted at source, i.e., was, without doubt, tax and, further, only at the instance of the Revenue. In the present case, on the other hand, the excess amount stands paid admittedly without any obligation cast either by law, which clearly requires the payment to be on the basis of the return, purely on its own by the assessee. The same is, therefore, not tax, and can neither be considered as self assessment tax. The excess amount would only stand to be regarded as tax on its adjustment against the tax liability for the year on the processing of the return for that year, i.e., as per the scheme of the Act, and as further explained in Modi Industries Ltd. (supra). The Revenue is, in fact, prior thereto, an unwitting spectator, with the A.O. not empowered to grant refund thereof, which would only be subsequent to the filing of the return by the assessee, mandatorily provided by law (section 143(1)(a)).
What is binding is the ratio decendi of a decision, i.e., the pronouncement of law, and which we have already delineated hereinbefore referring also to, among others, paragraph 1 of the decision in the case of Stockholding Corporation of India(supra). Further, it is trite law that the decision is valid for what it actually decides. We may toward the said preposition refer to the following case law: CIT v. Girish Kumar Kothari  208 ITR 775 (Pat); Raman Bhattathiripad v. CIT 196 ITR 671 (Ker); and CIT v. K. Ramakrishnan  202 ITR 997 (Ker), relied upon by the ld. CIT(A).
Reliance on the cited decision, which we have carefully perused, would thus not have the effect of altering or otherwise adversely impact our decision.
4.9 We may, accordingly, sum up our findings, to be read in conjunction with the foregoing, as under:
|(a)||The Apex Court per its larger bench decisions in Modi Industries Ltd. (supra) and Gujarat Fluoro Chemicals(supra) settled that there is no right to get interest of refund except as provided by the statute. The proposition of the interest being exigible on any amount paid, irrespective of either any obligation to pay or even its character under the Act, and from the date of its payment (i.e., except in the case of prepaid tax), cannot, in view thereof, be countenanced;|
|(b)||Section 244A covers the allowance of interest on refund arising on payment of tax or penalty under the Act, and is a separate code in itself, providing for both the right to interest as well as the manner of its computation, including the resolution of any dispute qua the determination of the issue of the attribution of the delay, if any, in the grant of refund;|
|(c)||The provision is to read in terms of its clear language, albeit holistically, following the cardinal principles of the interpretation of statutes, as clarified by the apex court in, inter alia, Tata Chemicals Ltd. (supra). Words assigned a particular meaning shall have to be interpreted strictly (refer: Indrapuri Studio Pvt. Ltd. (supra));|
|(d)||The tax refund is, by definition, refund of tax paid under whatsoever provision in excess of the tax liability under the Act, as finally determined (Tata Chemicals Ltd. (supra)). The amount, however, ought to be paid by way of tax, in discharge of an obligation cast or required to be paid under any provision of law;|
|(e)||Interest, though compensatory, may not necessarily follow for any excess payment and, further, has to be only of excess tax paid to the Revenue, for the period provided by the specific provision of law. The same can supply the termini points, which could either be actual or artificial. For prepaid taxes, it is, irrespective of the date of payment, the first day of the relevant assessment year. In all other cases, it is the date of payment of tax as provided for, i.e., the date of payment in excess of the amount thereof as specified in the notice of demand. The same is to be given a strict meaning. As such, it refers to the actual date of payment provided that what is paid is tax. As a natural corollary, it is the date on which the amount assumes the character of tax;|
|(f)||Where an amount is paid with reference to or in violation of the provision, it cannot be said to be paid there-under. Section 140A requires payment of tax on the basis of the return, where-under only the assessee is to prefer his claims under the Act. The same, thus, contemplates an assessment by the assessee of its tax liability under the Act, as crystallized per the return finalized, i.e., for filing under the Act, paying the shortfall there-under, if any, along with the interest to date. How could it, even where not unambiguously worded, be otherwise, i.e., follow as it does the scheme of the Act. Any amount paid over and above the said shortfall cannot be regarded as tax, which, by definition, is that chargeable under the Act. [ss.2(43) r/w s. 4]. To regard any amount deposited as self assessment tax would be to do violence to the clear language of the provision of the Act, as well as its scheme;|
|(g)||The said case excess, however, on being allowed credit for against the tax payable, assumes the character of tax, i.e., upon the processing of the return for the relevant year, filed subsequently by the assessee, which constitutes a notice of demand u/s.156, vide proviso thereto. Prior thereto, the A.O. cannot take cognizance thereof, much less refund it. This, then, is the earliest point of time at which such excess can be regarded as payment of tax, exigible to refund u/s. 143(1) r/w s. 237. Not so regarding would make the machinery unworkable and prejudicial to the assessee. The assessee shall, therefore, be entitled to refund from this date to that of the grant of the refund;|
|(h)||The amount cannot be regarded as payment of tax at any point of time earlier to the date of credit referred to at para (g) above, i.e., prior to the processing of the return of income resulting in the refund. Even otherwise, the delay in the grant of refund, i.e., for the intervening period between the date of payment and date of processing of return, is to be necessarily ascribed to the assessee, disentitling him for the interest for the said period. As such, even regarding it as payment of tax from inception, i.e., for the sake of argument, would be of little moment;|
|(i)||Our decision is consistent with the said law as explained by the apex court per its decisions referred to earlier and, further, also the judgment by the Hon’ble jurisdictional High Court in Stockholding Corporation of India (supra). The latter, in ratio, decides the issue of grant of interest u/s.244A on the payment of self assessment tax, and from the date of its payment. The interest being allowed in the present case, i.e., on the excess amount paid with reference to the return, is only tax and not of self assessment tax, i.e., paid on self assessment on the basis of the return, so that it would not be from the anterior in time to it being regarded as tax;|
|(j)||We are fortified in our stand by the decision in Engineers India Ltd. (supra), rendered after considering other decisions in the matter. The Hon’ble Court, firstly, observes with reference to Gujarat Fluoro Chemicals (supra) that there was no liability on the Revenue to pay interest on refund beyond the liability created by the statutory provisions, noting that in Tata Chemicals Ltd. (supra) the collection of tax was subsequently found illegal (para 33). As such, there was no general rule that whenever a refund of income tax paid in excess is to be made, the Revenue must necessarily pay interest on the refund amount. It is the Revenue or the assessee, whoever is responsible for the excess payment, which must bear the interest burden or, as the case may be, loss of interest (para 34). The assessee having paid to in excess, as found per Intimation u/s. 143(1), was not entitled to interest thereon or prior thereto. We have, it may be noted, applying the decision in Modi Industries Ltd. (supra), stated that in-as-much as the credit is allowed for such payment, and only rightly so, against tax payable on the basis of the return, i.e., upon its processing u/s. 143(1), the same assumes the character of tax on such adjustment, so that interest shall arise to the assessee from that date up to the date of grant of refund. The Hon’ble jurisdictional High Court also observed this at para 8 of its Judgment in Stockholding Corporation of India (supra), stating that the A.O. passed the assessment order on 31.12.1996, accepting the entire amount paid as self assessment tax as payment of tax;|
|(k)||In the facts of the case, the refund to the extent of Rs.260.98 lacs, adjusted for the amount of interest u/s.234B, if any, up to 31.05.1994, shall arise only subsequent to the date of processing u/s.143(1), i.e., up to the date of grant of refund. In-as-much as the law does not contemplate grant of refund exclusive of interest, the same must necessarily be worked out at gross of interest u/s.244A up to the date of refund. The shortfall, if any, of the refund amount with reference to the amount so computed, would, therefore, have to be apportioned between the principal (tax) and interest amounts, so that interest u/s.244A shall arise on the un-refunded tax, while no interest u/s.244A is exigible under the Act on the unpaid interest there-under. The balance tax refund of Rs.20.98 lacs (i.e., Rs.2061.86 lacs – Rs.2040.88 lacs), would be governed by s. 244A(1)(a) of the Act.|
4.10 We decide accordingly.
5. In the result, the assessee’s appeal is allowed on the aforesaid terms.