1. Refund of excess tax paid — Claim for interest under Section 244(1) from the date of appellate order setting aside assessment for fresh assessment. (Para 1 )
Back
Next 
1995 Supreme(SC) 60
SUPREME COURT OF INDIA
B.P. JEEVAN REDDY, N.P. SINGH AND S.C. SEN, JJ.
Commissioner of Income-tax, Hyderabad, Appellant
Versus
Chittor Electric Supply Corporation and another, Respondents.
Civil Appeal No. 1413 of 1977
Decided on 13-1-1995.
Advocates appeared
Mr. J. Ramamurthy Sr. Advocate Mr. Manoj Arora and Ms. A. Subhashini, Advocates, for Appellant; Mr. S.S. Javali, Sr. Advocate, Mr. K. Ram Kumar and Ms. Anjani Aiyagari, Advocates, for Respondents.
* W.P. No. 5167 of 1975, D/- 7-9-1976 (Andh Pra)
Important Points
When an appellate order sets aside an assessment and directs a fresh assessment, no refund becomes due under Section 240 until the fresh assessment is completed. Therefore, interest under Section 244(1) is payable only from the date of the fresh assessment, not the date of the appellate order.
Subject
Taxation Law - Refund of Taxes
Act Referred
Headnote
Direct Tax Laws (Amendment) Act,1987 - Sections 240, 244(1), 237 and 243(1) - Indian Income-tax Act, 1922 - Section, 12-B - Income-tax Officer - Claim for interest - Court allowing writ petition filed by respondent-assessee and directing Revenue to pay to respondent interest on amount of per cent per annum Section Income-tax Act as prayed for by respondent is a limited company in liquidation and is represented by its Liquidators respondent-company was taken over by Government respondent received compensation therefore which amount was brought to tax by Revenue- Original assessment was completed appeal preferred by respondent was allowed by Appellate Assistant Commissioner He set aside assessment and directed Income-tax Officer to complete assessment afresh light of directions given by him- In short Appellate Assistant Commissioner directed that income of respondent- must determined Section Indian Income-tax Act and said Act- respondent filed an appeal before Tribunal questioning correctness of Appellate Assistant Commissioners Order but it was dismissed on Income-tax Officer n took up assessment proceeding and called upon respondent to furnish certain particulars- respondent furnished particulars finally and Income-tax Officer completed assessment on - As result of this assessment a sum was found refundable to respondent- It was refunded in same month- respondent –Held, Court- But it appears that on appeal Thommen J-s decision was reversed by a Bench in New Woodlands Hotel of Income-tax following decision of Allahabad High Court and decision of Bombay High Court of Income-tax Bombay - For reasons given by us hereinabove we cannot agree with decision Division Bench of Kerala High Court in New Woodlands Hotel case where an appellate or authority Act sets aside or cancels assessment and directs a fresh assessment to made situation contemplated by subsequently inserted proviso Court do not propose to express any opinion as what would be position where situation is different- Court may also mention that Court have not referred or taken into account sub-section for that matter to second proviso upon which argument can possibly be built up for reason that here tax amount was paid prior and also because applicability of that sub-section turns upon language employed rein such amount or any part having been found in appeal or proceeding under this Act to be in excess of amount which is liable to pay as tax amount concerned herein is very small and also because company is already under liquidation for a number of years this Court may not interfere with orders of High Court even though may declare law correctly- But this is a case where as a result of our order is not being asked to refund any amount which has already been received by it would only be disabled from claiming any further amount from Revenue- In such a case we see no reason to adopt course suggested by learned Counsel assuming that such a course is permissible in law upon which aspect we express no opinion - Appeal allowed
Legal Category Hierarchy
Advocates:
A.Subhashini, Anjani Aiyagiri, J.RAMAMURTHY, K.RAM KUMAR, MANOJ ARORA, S.S.JAVALI
A.Subhashini, Anjani Aiyagiri, J.RAMAMURTHY, K.RAM KUMAR, MANOJ ARORA, S.S.JAVALI
Table of Contents
2. Whether interest on refund is payable from the date of an appellate order setting aside assessment or only from the date of fresh assessment. (Para 2 )
3. Refund becomes due only when the amount properly chargeable is determined; a remand for fresh assessment does not immediately make tax paid refundable. (Para 4 , 5 , 6 )
4. Where an assessment is set aside for fresh assessment, refund becomes due only upon completion of such fresh assessment, not upon the appellate order. (Para 4 , 5 )
5. Appeal allowed — High Court judgment set aside — Order of the Commissioner of Income-tax restored. (Para 9 )
6. When does a refund of tax become due under the Income-tax Act?
A refund becomes due when the amount of tax paid by the assessee exceeds the amount with which they are properly chargeable under the Act for that assessment year. (Para 4 )
7. Is interest payable on a refund from the date an appellate authority sets aside an assessment and directs a fresh assessment?
No. When an assessment is set aside for fresh assessment, the assessment is deemed pending. Since the amount properly chargeable is not determined until the fresh assessment is completed, no refund is due on the date of the appellate order. (Para 4 , 5 )
8. What is the legal effect of the proviso to Section 240 added by the Direct Tax Laws (Amendment) Act, 1987?
The proviso is clarificatory, specifying that where an assessment is set aside or cancelled and a fresh assessment is directed, the refund, if any, shall become due only on the making of such fresh assessment. (Para 4 )
JUDGMENT
B. P. JEEVAN REDDY, J.:- This appeal is preferred against the decision of the Andhra Pradesh High Court allowing the writ petition filed by the respondent-assessee and directing the Revenue to pay to the respondent interest on the amount of Rs. 84,562/- from September 7, 1969 to August 14, 1973 at the rate of 6 per cent per annum under Section 244(1) of the Income-tax Act, as prayed for by the respondent. The respondent is a limited company in liquidation and is represented by its Liquidators. On November 24, 1960, the respondent-company was taken over by the Government. The respondent received compensation therefore which amount was brought to tax by the Revenue. Original assessment was completed on January 31, 1966. The appeal preferred by the respondent was allowed by the Appellate Assistant Commissioner on 6th March, 1969. He set aside the assessment and directed the Income-tax Officer to complete the assessment afresh in the light of the directions given by him. In short, the Appellate Assistant Commissioner directed that the income of the respondent-assessee must be determined under Section 12-B of the Indian Income-tax Act, 1922 and not under S. 10(2)(vii) of the said Act.The respondent filed an appeal before the Tribunal questioning the correctness of the Appellate Assistant Commissioners Order but it was dismissed on 20th September, 1971. The Income-tax Officer then took up the assessment proceeding and called upon the respondent to furnish certain particulars. The respondent furnished the particulars finally on 13th April, 1973 and the Income-tax Officer completed the assessment on 14th August, 1973. As a result of this assessment, a sum of Rs. 84,562/- was found refundable to the respondent. It was refunded in the same month. The respondent. laid a claim for interest under Section 244(1) of the Income-tax Act, 1961 for the period commencing on 6th March, 1969 (the date of the Appellate Assistant Commissioners Order) to August, 1973 (the month in which the assessment was finalised pursuant to the remand order and the refund made). The claim was rejected by the Income-tax Officer, against which order the respondent filed a revision before the Commissioner under Section 264 which too was rejected. The Commissioner opined inter alia that the respondent having delayed furnishing the particulars called for, was not justified in asking for interest from the date of the Appellate Assistant Commissioners Order. The assessee then approached the High Court of Andhra Pradesh by way of a Writ Petition No. 5167 o 1975 which has been allowed as aforestated.
2. Mr. Murthy, learned senior Advocate for the Revenue, assailed the correctness of the view taken by the High Court on the ground that it is in the teeth of the express provisions of Sections 240, 244(1), 237 and 243(1). He invited our attention to the proviso to Section 240 added by Direct Tax Laws (Amendment) Act, 1987 with effect from April 1, 1989, submitting that it was merely clarificatory of the pre-existing position. Counsel placed strong reliance upon the Full Bench decision of the Gujarat High Court in Saurashtra Cement and Chemical Industries Ltd. v. Income-tax Officer, (1992) 194 ITR 659, which interalia held that the aforesaid proviso is merely clarificatory. He also disputed the correctness of the decision of the Allahabad High Court in Purshottam Dayal Varshney v. Commr. of Income-tax, U.P., (1974) 94 ITR 187, which was relied upon by the assessee before the High Court as well as before us. Learned counsel also brought to our notice that the Orissa High Court has followed the Allahabad view in Grantha Mandir v. Commr. of Income-tax, 172 ITR 287, which, he submitted, is equally unsustainable.
3. For a proper appreciation of the contention raised herein, it is appropriate to notice a few provisions of the Act. Sections 237, 140 and 244(1) read as follows :
"237. Refunds. - If any person satisfies the (Assessing) Officer that the amount of tax paid by him or
