ORDER

1. Leave granted.

2. The issue that arise for our consideration and decision in this batch of appeals is, whether the revenue is legally responsible Under Section 244A of the Income Tax Act, 1961 (for short, "the Act") for payment of interest on the refund of tax made to the resident/deductor Under Section 240 of the Act.

3. At the outset, it is relevant to notice that the assessment years in all these appeals are on and after 01.04.1989, that is after the admittance of Section 244A of the Act by Direct Tax Laws (Amendment) Act, 1987 (4 of 1988) with effect from 01.04.1989, whereby provision for interest on refunds on any amount due to the Assessee under the Act was introduced.

FACTS:

4. We would refer to the facts in Civil Appeal No. 6301 of 2011. The Respondent is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the manufacture of nitrogenous fertilizer. During the assessment year 1997-98, the Respondent-company had commissioned its naptha desulphurization plant and to oversee the operation of the said plant it had sought the assistance of two technicians from M/s. Haldor Topsoe, Denmark. M/s. Haldor Topsoe had raised an invoice aggregating to US$ 43,290,06/- as service charges for services of the technicians (US$ 38,500/- ) and reimbursements of expenses (US$ 4,790/- ).

5. The resident/deductor had approached the Income Tax Officer Under Section 195(2) of the Act inter aliarequesting him to provide information/determination as to what percentage of tax should be withheld from the amounts payable to the foreign company, namely, M/s. Haldor Topsoe, Denmark. On the request so made, the Assessing Officer/Income Tax Officer had determined and passed Special order Under Section 195(2) of the Act directing the resident/deductor to deduct/withhold tax at the rate of 20% before remitting aforesaid amounts to M/s. Haldor Topsoe. Accordingly, the resident/deductor had deducted tax of Rs. 1,98,878/- on the entire amount of US$ 43,290.00/- and credited the same in favour of the Revenue.

6. After such deposit, the resident/deductor had preferred an appeal before the Commissioner of Income Tax (Appeals) against the aforesaid order passed by the Assessing Officer/Income Tax Officer Under Section 195(2)of the Act. The appellate authority while allowing the appeal so filed by the resident/deductor, had concluded, that, the reimbursement of expenses is not a part of the income for deduction of tax at source Under Section195 of the Act and accordingly, directed the refund of the tax that was deducted and paid over to the Revenue on the amount of US$ 4790.06/- representing reimbursement of expenses by order dated 12.07.2002.

7. After disposal of the appeal, the resident/deductor had claimed the refund of tax on US$ 4790/- (amounting to Rs. 22,005/- ) with the interest thereon as provided Under Section 244A(1) of the Act by its letter dated 09.12.2002.

8. The Assessing Officer/Income Tax Officer while declining the claim made, has observed, that, Section 244Aprovides for interest only on refunds due to the Assessee under the Act and not to the deductor and since the refund in the instant case is in view of the circulars viz. Circular No. 769 and 790 issued by the Central Board of Direct Taxes (for short "the Board") and not under the statutory provisions of the Act, no interest would accrue on the refunds Under Section 244A of the Act. Therefore, the Assessing Officer/Income Tax Officer while granting refund of the tax paid on the aforesaid amount has refused to entertain the claim for interest on the amount so refunded by order dated 29.07.2003.

9. Since the Assessing Officer/Income Tax Officer had declined to grant the interest on the amount so refunded, the resident/deductor had carried the matter by way of an appeal before the Commissioner of Income Tax (Appeals). The First Appellate Authority by its order dated 28.03.2005 has approved the orders passed by the Assessing Officer/Income Tax Officer and declined