Petitioner bank challenged Income Tax orders denying interest on tax refunds. The Court held that delays caused by the assessee while curing defects in TDS certificates are attributable to the assessee.
Petitioner's writ petition challenging the orders denying interest on refund was dismissed.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE
FRIDAY, THE 23RD DAY OF SEPTEMBER 2016/1ST ASWINA, 1938
WP(C).No. 19283 of 2007 (U)
PETITIONER(S):
STATE BANK OF TRAVANCORE, HEAD OFFICE, POOJAPURA, THIRUVANANTHAPURAM - 695 012, REPRESENTED BY ITS DEPUTY GENERAL MANAGER, (FINANCE AND ACCOUNTS).
BY ADVS.SRI.P.BALAKRISHNAN SRI.V.SREEKUMAR
RESPONDENT(S) :
1. CHIEF COMMISSIONER OF INCOME TAX, AYAKAR BHAVAN, THIRUVANANTHAPURAM - 695 003.
2. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I (1), THIRUVANANTHAPURAM - 695 003.
3. DEPUTY COMMISSIONER OF INCOME TAX (ASSESSMENT), SPECIAL RANGE, THIRUVANANTHAPURAM.
4. THE CENTRAL BOARD OF DIRECT TAXES, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, NEW DELHI - 110 001.
BY ADVS. SRI.GEORGE K. GEORGE, SC
SRI.P.K.R.MENON,SR. COUNSEL SRI.JOSE JOSEPH, SC
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 11-08-2016 THE COURT ON 23-09-2016, DELIVERED THE FOLLOWING:
msv/
WP(C).No. 19283 of 2007 (U)
APPENDIX
PETITIONER(S)' EXHIBITS
EXHIBIT P5 TRUE COPY OF LETTER DTD.6.9.2006 ISSUED BY THE 4TH RESPONDENT TO THE PETITIONER.
RESPONDENT(S)' EXHIBITS
EXT.R1(A): COPY OF THE ORDER SHEET.
//TRUE COPY//
P.S.TO JUDGE
Msv/
**A.M.SHAFFIQUE, J * * * * * * * * * * * *** W.P.C.No.19283 of 2007
Dated this the 23rd day of September 2016
J U D G M E N T
Petitioner, an assessee under the Income Tax Act, 1961, has filed this writ petition challenging Ext.P1, P2, P3, P4 and P5 and for a direction to the respondents to pay the petitioner interest on the refund.
as per order dated 22/02/2004 and 27/05/2004, interest was not granted under Section 244A on account of the delay in curing the
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defects in the TDS certificates. Assessee therefore filed an application dated 15/04/2004 before the Chief Commissioner to grant interest under Section 244A on the TDS amount refunded to them as per proceedings dated 27/05/2004. This came to be rejected by the Chief Commissioner on the ground that the delay was attributable to the assessee. Exts.P2, P3 and P4 are similar orders passed with reference to assessment years 1993-94, 199293 and 2001-02. The petitioner appears to have taken up the matter before the Government of India, Ministry of Finance who informed the petitioner that they cannot directly interfere in the matter. It is, in these circumstances, inter alia contending that the delay cannot be attributable to the petitioner that this writ petition is filed.
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“6. For the assessment year 1992-93 interest under Section 244A was not granted for 27 months from January 1993 to March 1995 for the TDS certificates resubmitted after curing defects. For the Asst.year 1993-94, interest u/s 244A was not granted from August 1994 to December 1994 for the TDS certificates resubmitted after curing defects. For the Asst.Year 1995-96 also, interest u/s 244A was not granted for various dates as the TDS certificates were resubmitted on various dates after curing defects. This is strictly in accordance with the provisions of Section 244A(2) which stipulates that if the proceedings resulting in refund are delayed for reasons attributable to the assessee wholly or in part the period of delay so attributable to him shall be excluded from the period to which interest is payable. In this case the delay in proceedings granting refund was attributable to the assessee in filing proper TDS certificates after curing defects. While passing the order for these assessment years, the Chief Commissioner of Income Tax has not merely relied on the order for Assessment year 2001-02 but after considering all the facts and affording an opportunity of being heard to the applicant. The contentions of the assessee's representative were dealt with in great detail in these orders.
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The reference to the order for the assessment year 2001-02 was made only to state that there was no material to take a different view from that taken for that assessment year 2001-02. The orders for the assessment years 1992-93, 93-94 and 94-95 were passed after due application of mind and considering all the facts brought on record and mentioning the order for the assessment year 2001-02 was only incidental.”
the judgment of the Apex Court in Sandvik Asia Ltd. v. Commissioner of Income Tax and Others [(2006) 280 ITR 643] (SC) . Specific reference is made to paragraph 79 which reads as under:
“The facts and the law referred to in paragraph (supra) would clearly go to show that the appellant was indisputably entitled to interest under Sections 214 and 244 of the Act as held by the various High Courts and also of this Court. In the instant case, the appellant's money had been unjustifiably withheld by the Department for 17 years without any rhyme or reason. The interest was paid only at the instance and the intervention of this Court in Civil Appeal No. 1887 of 1992 dated 30.04.1997. Interest on delayed
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payment of refund was not paid to the appellant on 27.03.1981 and 30.04.1986 due to the erroneous view that had been taken by the officials of the respondents. Interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to compensation for this period of delay. The High Court has failed to appreciate that while charging interest from the assessees, the Department first adjusts the amount paid towards interest so that the principle amount of tax payable remain outstanding and they are entitled to charge interest till the entire outstanding is paid. But when it comes to granting of interest on refund of taxes, the refunds are first adjusted towards the taxes and then the balance towards interest. Hence as per the stand that the Department takes they are liable to pay interest only upto the date of refund of tax while they take the benefit of assessees funds by delaying the payment of interest on refunds without incurring any further liability to pay interest. This stand taken by the respondents is discriminatory in nature and thereby causing great prejudice to the lakhs and lakhs of assessees. Very large number of assessees are adversely affected inasmuch as the Income Tax Department can now simply refuse to pay to the assessees amounts of
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interest lawfully and admittedly due to that as has happened in the instant case. It is a case of the appellant as set out above in the instant case for the assessment year 1978-79, it has been deprived of an amount of Rs.40 lakhs for no fault of its own and exclusively because of the admittedly unlawful actions of the Income Tax Department for periods ranging up to 17 years without any compensation whatsoever from the Department. Such actions and consequences, in our opinion, seriously affected the administration of justice and the rule of law.”
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Department (for short 'Department') in giving simple interest on the amount of refund as provided under Section 244A(1) of the Act. However, Section 244A(2) indicates that if the proceedings resulting in the refund are delayed for reasons attributable to the assessee, the period of delay so attributable shall be excluded from the period for which interest is payable. 244A(1) and (2) of the IT Act reads as under:
“244A. Interest on refunds.
(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
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amount of refund is less than ten per cent of the tax as determined under sub-section (1) of section 115WE or 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 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.”
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Chief commissioner or Commissioner, whose decision is said to be final.
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becomes due. The amount becomes due only when all the procedures are completed. It does not become due on the date when the amount is deposited by the deductor to the Department. It becomes due only after finalisation of the returns. Of course, if the delay is on the part of the Department in finalizing the returns, interest is payable from the date on which it becomes due, i.e. from the 1st day of April of the assessment year to the date on which the refund is granted. However, sub Section (2) draws a slight deviation from 244A(1) by which the assessee is deprived of the interest, if the delay in the proceedings resulting in refund is attributable to the assessee whether wholly or in part. Therefore the first contention is totally out of place. The delay in the proceedings resulting in refund is definitely with reference to the finalisation of returns and not in regard to the proceedings for refund.
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the time spent for obtaining the corrected TDS certificates and presenting the same before the Income Tax Department shall not be a reason for denying interest.
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person from whom income tax deduction was made. Section 200 deals with the duty of the person deducting tax. Any person deducting any sum in accordance with the provisions of the Chapter shall pay within the prescribed time the sum so deducted to the credit of the Central Government or as the Board directs. They have also filed a statement in terms of Sub Section (3). Section 201 relates to the consequences of failure to deduct or pay. Section 203 further indicates that every person deducting tax in accordance with the provisions of the Chapter shall within such period as may be prescribed from the time of credit or payment of the sum, furnish to the person to whose account the credit is given or to whom such payment is made. A certificate to the effect that tax has been deducted and specifying the amount so deducted, rate of tax and such other particulars, as may be prescribed. Therefore, there cannot be any dispute about the fact that the obligation to provide a certificate for deducting tax is on the deductor. The question is, if there is any defect in such certificate, and the petitioner fails to get it cured before filing of the return, petitioner can be termed as a person who had caused the delay. No doubt, as rightly held by the respondent, if the
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defect is noticeable on receipt of the certificate, it is for the deductee who makes a claim on the basis of the certificate to get the defects cured. This is an instance where substantial time had elapsed for curing the defects, which according to the Department, is attributable to the assessee. When such a view is possible and the claim for interest is denied on that specific period, I do not think that this Court will be justified in taking a different view. No doubt, as rightly contended by the learned counsel for the petitioner, once the defect is cured, the parties have to go back to their original position, but the question is whether there is an obligation on the part of the Department to pay interest on the amount to be refunded. When a statute in the form of Section 244A(2) clearly specifies that interest need not be paid if the proceedings of refund is delayed for reasons attributable to the assessee, in that event, the respondents having refused interest on the basis of factual finding relying upon the statutory provision, I do not think that this Court will be justified in interfering with the said orders.
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whether the assessee was entitled to interest on the amounts of interest paid under Section 214 or 244 of the IT Act. Question considered was whether an assessee was entitled to be compensated by the Department for the delay in paying to the assessee all amounts admittedly due to it, the delay ranging from 12 to 17 years. I do not think that the factual issues arising in the present case and the judgment in Sandvik Asia Ltd. (supra) has any resemblance. Even otherwise, this is an instance where interest has been paid but denied only for certain period for reasons stated in the impugned orders, since the delay has been attributed to the assessee.
The writ petition is, therefore, dismissed.
(sd/-)
(A.M.SHAFFIQUE, JUDGE)
jsr
2 issues framed by the court
Whether delay in curing defects in TDS certificates by the assessee constitutes a delay attributable to the assessee under Section 244A(2) of the Income Tax Act, 1961.
Whether interest on refund can be denied when the delay in refund proceedings is attributable to the assessee's failure to submit defect-free TDS certificates promptly.
Colour shows how this judgement treated each authority
Sandvik Asia Ltd. v. Commissioner of Income Tax and OthersExplained¶13
Sandvik Asia Ltd. v. Commissioner of Income Tax and Others [(2006) 280 ITR 643] (SC)
2 provisions across 1 enactments
State Bank of Travancore
Chief Commissioner of Income Tax, Thiruvananthapuram
A.M. Shaffique
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
