HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE T. SUNIL CHOWDARY ITTA No. 150 OF 2002 05-09-2014 BETWEEN Commissioner of Income Tax-III, Hyderabad …Appellant And Sirpur Paper Mills Ltd., Hyderabad …..Respondent HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND HON’BLE SRI JUSTICE T. SUNIL CHOWDARY ITTA No. 150 OF 2002
JUDGMENT: (per the Hon'ble Sri Justice L. Narasimha Reddy)
The respondent is an assessee under the Income Tax Act, 1961 (for short, ‘the Act’). For the assessment year 1979-80, it paid advance tax of Rs.38,00,000/-. However, in the regular assessment, the tax liability was fixed at a lower figure. Thereby, the respondent became entitled to be refunded the amount. There was a dispute as to the period for which interest must be paid on the refundable amount. Ultimately, in relation to the claim of the respondent, the matter went up to the Supreme Court in the form of Civil Appeal No. 284 of 1991. Following its own judgment in
[1]
Modi Industries Ltd., & Ors v. Commissioner of Income Tax , the Supreme Court disposed of the appeal on 30-04-1997 directing that the interest shall be paid from the first day of next previous year till the date of regular assessment. The amount, together with interest has since been paid.
The respondent laid a claim for a sum of Rs.38,90,824/- in the form of interest on interest, for the period between 1985 and 1997. The Income Tax Officer did not accede to the request of the respondent. The appeal filed by the respondent before the Commissioner (Appeals) was rejected. Thereupon, he filed I.T.A No. 735/Hyd/1998 before the Hyderabad Bench of the Income Tax Appellate Tribunal (for short, ‘the Tribunal’). The Tribunal allowed the appeal through order dated 18-06-2002. Hence, this further appeal under Section 260A of the Act by the Revenue.
Heard Sri S.R. Ashok, learned Senior Standing Counsel for the appellant and Sri Vijay Ashrit, learned counsel for the respondent.
The claim of the respondent for refund of amount paid as advance tax together with interest was the subject matter of the proceedings under the Act which ultimately ended up in Civil Appeal No. 284 of 1991. That was allowed by the Supreme Court following its decision in Modi Industries case (1 supra). The judgment was to the effect that the assessee shall be entitled to be paid the interest on the refundable amount from the date of regular assessment to the date of refund. The appeal was disposed of in terms of the following order:
“This appeal is covered in favour of the appellant by the decision of this Court in Modi Industries Ltd. & Ors. vs. Commissioner of Income Tax, 216 ITR 759. For the reasons given in the said judgment, this appeal is allowed. The impugned judgment of the High Court is set aside and the Writ Petition filed by the appellant is allowed and the respondents are directed to consider the claim of the appellant for payment of interest on the excess amount of tax under Section 214 of the Income Tax Act, 1961 in accordance with the principles laid down in the decision in Modi Industries Ltd. case (supra). No order as to costs.”
Not only the amount of advance tax treated as not leviable, but also interest of Rs.21,39,442/- from the date of regular assessment i.e., 01-04-1979 up to the date of payment i.e., 25-09- 1982 was paid. The respondent however claimed a sum of Rs.38,90,824/-. The respondent filed an appeal before the Commissioner and the same was dismissed. In ITA No.735/Hyd/1998 filed by the respondent herein, the Tribunal took note of the judgment of the Supreme Court in CIT v. Narendra
[2]
Doshi and held that the respondent shall be entitled to be paid interest on interest.
There are quite a large number of precedents rendered by the Supreme Court as well as the High Courts to the effect that the department is under an obligation to pay interest on interest also, if there was no basis for the delay in refund of the excess amount collected towards tax. We are in total agreement with that proposition. However, before a claim for interest on interest is allowed, the Court or the Tribunal for that matter, is required to take the relevant factors into account.
If there was no dispute as to the refund of the excess amount collected as tax and was not refunded within the stipulated time, interest which is almost in the form of compensation is payable on the interest. The periods for which such interest must be calculated has also been referred.
What makes difference in the instant case is that the very application to refund the advance tax as well as the quantum thereof was the subject matter of the proceedings which culminated in the Supreme Court. The civil appeal was allowed and the Supreme Court gave a specific direction as to the steps to be taken in the matter. The respondent has no complaint as to the implementation of the direction issued by the Supreme Court. However, it laid claim for interest on interest. In case, the respondent was of the view that it is entitled to be paid interest on interest, it ought to have claimed before the Hon’ble Supreme court. There was not even a mention thereof. Claiming any amount over and above what was awarded by the Supreme Court would amount to widening the purport of the order of the Supreme Court. If any clarification in this regard was needed, the respondent ought to have filed an application for that purpose. The Tribunal did not take this aspect into account. Once amounts are paid in compliance with the directions issued by a Court, no inferior forum or Court can modify the direction thereof directly or indirectly.
The respondent placed reliance upon the judgment of the
[3]
Supreme Court in Sandvik Asia Ltd., vs. CIT . The circumstances under which the interest on interest was claimed in that case are similar to those in the instant case. There also the claim of the assessee therein for refund and interest went up to the Supreme Court and the order similar to the one passed in Civil Appeal No. 284 of 1991 was also passed therein. As a matter of fact, Civil Appeal No. 284 of 1991 in relation to the claim of the respondent herein and Civil Appeal Nos. 2468, 2450 and 2689 of 1992 filed by the assesses in Sandvik Asia Ltd.,’s case (3 supra) were part of the same batch and were disposed of through common order.
In the second round of litigation in the instant case, claim was made for interest on interest. However, revision was filed against the order of the assessing authority rejecting the claim. The revision was also dismissed by the concerned authority. Thereupon the assessee filed a writ petition before the Bombay High Court and the writ petition was dismissed on 16-01-2004.
One significant difference noticed between the case on hand and Sandvik Asia Ltd.,’s case (3 supra) is that the plea as to merger was not raised before the Bombay High Court. Though the plea as to merger was not there before the Bombay High Court, it has dismissed the writ petition on that basis. In the instant case, it is not so. The department vehemently pleaded that all the claims, which the respondent was entitled to regarding the refund, have merged into the orders of the Supreme Court and unless there was a specific direction issued by the Supreme Court for payment of interest on interest also, there was no occasion for the respondent to lay a claim. This contention is reinforced from the fact that the Hon’ble Supreme Court has simply directed the authorities to extend the benefit by taking into account the principle laid down in Modi Industries case (1 supra) and in the said case, there was no direction for payment of interest on interest. Therefore, we are of the view that notwithstanding the fact that there are precedents which held that in a given case, an assessee is entitled to be paid interest on interest also, once the refund of the amount collected towards advance tax and the correspondent interest are paid in compliance with the direction issued by a Court, an assessee cannot claim interest on interest, independent of the order on the basis of which such payments are made.
The appeal is accordingly allowed and the order of the Tribunal is set aside.
The miscellaneous petitions pending in this appeal shall also stand disposed of. There shall be no order as to costs.
L. NARASIMHA REDDY, J T. SUNIL CHOWDARY, J 05-09-2014 ks Note: LR copy to be marked.
B/O ks
[1] 216 ITR 759
[2] 254 ITR 606
[3] (2006) 2 SCC 508