IMPORTANT POINT
The main legal point established in the judgment is that the words 'amount of refund' in Section 244A(1)(a) must be given their natural meaning, entitling the appellant to interest on the whole refund, including advance tax and TDS, from the first day of the assessment year.

JUDGMENT :

K.R. Shriram, J.

1. This is an appeal filed under Section 260A of the Income Tax Act, 1961 (the Act) impugning an order dated 5th December 2002 passed by the Income Tax Appellate Tribunal, Mumbai Bench (ITAT) dismissing appellant’s appeal and refusing grant of interest under Section 244A(1)(a) of the Act on the refund admissible to appellant. The ITAT refused to grant interest on the ground that the refund arising on regular assessment after allowing TDS and advance tax is less than 10% of the tax as determined on regular assessment.

2. For the Assessment Year 1989-1990 appellant returned an income of Rs.43,64,37,800/- as per the original return of income under Section 139 of the Act and paid tax of Rs.22,68,62,710/- [comprising of Rs.20,44,29,076/- as advance tax and tax deducted at source (TDS) and Rs.2,24,33,634/- of self assessment tax (SA Tax)]. While processing appellant’s return under Section 143(1) of the Act, the Assessing Officer made certain additions raising a demand of Rs.1,61,73,216/-. The said amount was paid by appellant on 25th June 1991.

3. Appellant’s return was picked up for scrutiny and in the order of assessment dated 21st March 1992 under Section 143(3) of the Act, income was ascertained at Rs.45,91,84,440/- determining a tax of Rs.24,35,95,193/-. A demand of Rs.3,32,42,443/- was raised of which a sum of Rs.3,19,86,809/- was paid by appellant on 22nd April 1992.

4. Appellant challenged the assessment order before the Commissioner of Income Tax (Appeals) [CIT(A)] who, by an order dated 29th January 1993, disposed the appeal. The Assessing Officer on 31st May 1993 passed an order giving effect (OGE) to the CIT(A)’s order computing income of appellant at Rs.35,93,17,870/-, i.e., even below the originally returned income of Rs.43,64,37,800/- and determining tax thereon at Rs.18,99,09,619/-. In the circumstances, appellant was entitled to a refund of Rs.5,24,29,950/-. Given that the income determined pursuant to the CIT(A)’s order was lower than the returned income, the refund necessarily included, not only taxes appellant paid pursuant to demands raised by the Assessing Officer under the assessment framed but also a portion of the advance tax, TDS and self assessment tax paid on the returned income.

Herein below is a table of returned income and refund due :

5. While granting refund the Assessing Officer was required to compute interest under Section 244A of the Act. In computing interest, the Assessing Officer granted interest only on the taxes that were paid pursuant to demands raised, and, denied interest on the advance tax, TDS and SA Tax paid by appellant. Insofar as SA tax component is concerned, the Assessing Officer vide his order dated 31st May 1993 summarily denied interest under Section 244A(1)(b) of the Act. Insofar as interest on advance tax and TDS is concerned, the Assessing Officer observed that since the component of advance tax and TDS in the tax refunded is lower than 10% of the tax on assessed income, appellant’s entitlement was hit by the proviso to Section 244A(1)(a) of the Act.

6. Being aggrieved, appellant approached the CIT(A). The CIT(A) by an order dated 1st January 1996 held that insofar as the SA Tax is concerned, appellant is entitled to interest under Section 244A(1)(b) of the Act for the reason that once assessment is framed, SA Tax is a