Arijit Pasayat, C.J:— At the instance of the Revenue, the following question has been referred for the opinion of this court by the Income-Tax Appellate Tribunal, New Delhi (in short, the “Tribunal”), under section 256(1) of the Income-Tax Act, 1961 (in short “the Act”)
“Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the assessee is entitled to interest under section 244 on the amount of interest, amounting to Rs. 1,90,499 payable under section 214 of the Income-Tax Act, 1961?”
2. The dispute relates to the assessment year 1967-68.
3. The factual position which is almost undisputed is essentially as follows:
The assessee had paid advance tax of Rs. 8,08,667 for the concerned assessment year. However, on assessment the total demand raised by the order of assessment dated March 6, 1972, was Rs. 9,65,331. While raising the demand, the Income-Tax Officer had not given credit for the tax paid and had also not allowed certain other reliefs. The assessee filed an application for rectification on April 10, 1972. The Income-Tax Officer passed an order on October 10, 1972, by which he held that the assessee was entitled to refund of Rs. 3,72,726. He did not grant this refund in cash but adjusted it against the demand for the assessment year 1968-69. The assessee claimed interest on the advance tax paid by it under section 214 of the Act. This was partly denied by the Income-Tax Officer vide his order dated August 16, 1974. The assessee went in appeal to the Appellate Assistant Commissioner (in short “the AAC”). By order dated July 14, 1976, the Appellate Assistant Commissioner directed the Income-Tax Officer to allow interest up to October 10, 1972. This worked out to Rs. 1,90,499, calculated for the period from April 1, 1967, to September 30, 1972. Technically, interest was calculated up to October 10, 1972, but since no interest was payable for part of the month, it was calculated only upto September 30, 1972. Refund of the above interest was granted on April 21, 1977. The assessee therefore claimed that it should be granted further interest on the amount of Rs. 1,90,499 itself. The claim was made under section 244 of the Act. This was rejected by the Income-Tax Officer vide order dated November 2, 1977, on the ground that there was no provision in the Act for granting interest on interest payable under section 214 of the Act. His order was affirmed by the Commissioner of Income-Tax (Appeals) (in short, the CIT (A)) vide order dated September 7, 1978. The Commissioner of Income-Tax (Appeals) held that the amount of interest paid to the assessee could not be said to be a refund in terms of section 237 of the Act and therefore the assessee was not entitled to any interest under section 244 of the Act, as claimed. The assessee carried the matter in appeal before the Tribunal. The assessee's stand was that interest of Rs. 1,90,499 was allowed to it as per the appellate order of the Appellate Assistant Commissioner dated July 14, 1976, and was therefore a refund falling under section 240 of the Act. The said provision laid down that where, as a result of any appeal or any other proceeding under the Act refund of any amount becomes due to the assessee, the Income-Tax Officer shall, except as otherwise provided in the Act, refund the amount to the assessee without his having to make any claim in that behalf. Reference was also made to section 244(1) of the Act, which provided that where a refund is due to the assessee in pursuance of an order referred to under section 240 and the Income-Tax Officer does not grant the refund within a period of three months from the end of the month in which the order is passed, the Central Government shall pay simple interest at the stipulated rate per annum on the amount of refund due from the date immediately following the expiry of the date on which the refund is granted.
4. The stand of the Revenue was that there was no question of granting interest on interest payable under section 240. With reference to section 237 it was submitted that the said provision clearly lays down that if any person satisfies the Income-Tax Officer that the amount of tax paid by him for any assessment year exceeds the amount which is properly chargeable under the Act for that year, he shall be entitled to the refund of the excess. In a sense it was submitted that such a refund of the amount paid by the assessee or on its behalf under section 240 as well as section 244 are relatable to such amount only and not to any interest payable under section 214 of the Act.
5. The Tribunal did not accept the Revenue's stand and held that since the amount of Rs. 1,90,499 became refundable as a result of the appellate order which falls under section 240 of the Act, the assessee is clearly entitled to interest on that amount under section 244 of the Act, as the Income-Tax Officer failed to grant refund within the stipulated period. It was held that the assessee was entitled to interest only for the period from November 1, 1976, to April 21, 1977.
6. On being moved for a reference, the question as set out above has been referred for the opinion of this court.
7. We have heard learned counsel for the parties. It is the stand of learned counsel for the Revenue that in essence the Tribunal's order means grant of interest on interest which is not permissible under the statute. It is further his case that section 237 of the Act defines what is refund and therefore the assessee is not entitled to any sum which is not covered by section 237. Elaborating, he stated that it was the amount of advance tax which was paid in excess which is to be refunded and the question of any interest being allowed under section 244 does not arise. Learned counsel for the assessee, on the other hand, submitted that the language of the statute is very clear and the provision of section 244 makes the position clear that the assessee is entitled to interest.
8. In order to appreciate the rival submissions, it is necessary to take note of the provisions i.e, sections 214, 237, 240 and 244 at the relevant time, which read as follows.
“214. Interest payable by Government— (1) The Central Government shall pay simple interest at fifteen per cent, per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 to 213 exceeds the amount of the assessed tax, from the 1st day of April next following the said financial year to the date, of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year, during which it is payable by reason of the provisions of section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment:
Provided that in respect of any amount refunded on a provisional assessment under section 141A, no interest shall be paid for any period after the date of such provisional assessment.
237. Refunds— If any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of the excess.
240. Refund on appeal, etc.— Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf:
Provided that where, by the order aforesaid,—
(a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment;
(b) the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid-in excess of the tax chargeable on the total income returned by the assessee.
244. Interest on refund where no claim is needed—(1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Assessing Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at fifteen per cent, per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted.
(1A) Where the whole or any part of the refund referred to in sub-section (1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted:
Provided that, where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted:
Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding:
Provided also that where any interest is payable to an assessee under this sub-section, no interest under sub-section (1) shall be payable to him in respect of the amount so found to be in excess.
(2) Where a refund is withheld under the provisions of section 241, the Central Government shall pay interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceeding for the period commencing after the expiry of three months from the end of the month in which the order referred to in section 241 is passed to the date the refund is granted.
(3) The provisions of this section shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment years.”
9. Section 244 deals with interest on refund where no claim is needed. Sub-section (2), inter alia, provides that where a refund is due to the assessee, “in pursuance of an order referred to in section 240” and the Assessing Officer does not grant the refund within the stipulated time, the Central Government is required to pay simple interest at the stipulated rate. Section 240 deals with refund on appeal, etc. This provision clearly lays down that where as a result of any order passed in appeal or other proceedings under this Act, refund of any amount becomes due to the assessee, the Assessing Officer shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf. The crucial expressions in section 240 are “any amount which becomes due to the assessee as a result of any order passed in any appeal or other proceedings under the Act” and the “amount becomes due to the assessee”. Section 244 refers to the liability fastened on the Central Government in case of failure to grant refund within the stipulated time in a case where refund is due to the assessee in pursuance of an order referred to in section 240. A combined reading of both the provisions makes the position crystal clear that it is any amount which becomes due to the assessee and not necessarily the tax component. Undisputedly, a sum of Rs. 1,90,499 which qualifies for interest became payable to the assessee on the basis of an order passed under section 240 of the Act. Merely because this was inclusive of an amount which was payable under section 214 of the Act, that would not make the position any different. It is an amount which became due to the assessee on the basis of the appellate order. Therefore, the assessee was entitled to interest in terms of section 244 of the Act. A similar view has been taken by the Gujarat High Court in D.J Works v. Deputy CIT, [1992] 195 ITR 227 and Chiman Lal S. Patel v. CIT, [1994] 210 ITR 419 though with different conclusions. Above being the position, we answer the question in the affirmative, in favour of the assessee and against the Revenue.