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Gujarat Alkalies & C... v. Jt. Commissioner Of ...
Concise Analytical Summary of the Judgment (per Honourable Mr. Justice K.A. Puj)
Factual and Procedural Background
The petitioner, a public limited company, entered into a loan arrangement and related supply contracts for equipment for a 90 MW power project. To part-finance the purchase, the petitioner obtained a foreign currency loan and became liable to remit interest and commitment charges to ANZ Banking Group (Germany). The petitioner sought prior approval from the Ministry of Finance under section 10(15)(iv)(c) of the Income Tax Act, 1961 for exemption of such interest, and also requested a No Objection Certificate from the assessing officer to remit interest without tax deduction.
The required approval had not arrived by the remittance deadline. To avoid contractual or financial consequences, the petitioner remitted the interest and commitment charges and, simultaneously, paid tax (stated in the record as Rs. 10,70,660/- paid on 21.12.1996). Subsequently, the Ministry of Finance granted the approval under section 10(15)(iv)(c) by letter dated May 1997. The petitioner sought refund of the tax paid, but the Assistant/Additional Commissioner rejected the claim relying on procedural grounds and Board Circulars (including Circular No. 285 and later Circular No. 790), and refused refund. The petitioner filed a writ petition under Article 226 seeking quashing of the decision denying refund and a mandatory direction to refund Rs. 10,70,660/- with interest (petitioner sought interest at 15% p.a. from 21.12.1996). The writ petition was admitted, notices issued, and the matter was heard by this Court.
Legal Issues Presented
- Whether the petitioner is entitled to refund of Rs. 10,70,660/- paid as tax (TDS/challan) on 21.12.1996 in respect of interest and commitment charges remitted to ANZ Bank, in view of subsequent approval under section 10(15)(iv)(c) of the Income Tax Act?
- Whether retention of the amount by the Income Tax Department after such approval amounts to wrongful retention when the payments to the foreign bank were made in full and the rate of interest did not exceed the rate approved by the Central Government?
- Whether the Board Circulars relied upon by the revenue (notably Circular No. 768 dated 06.08.1998 and Circular No. 790 dated 20.04.2000) or procedural requirements relating to Section 195 precluded granting refund to the petitioner?
- What relief, if any, should be ordered (refund and interest), and on what basis and from what date?
Arguments of the Parties
Petitioner's Arguments
- The interest payable to ANZ Bank was exempt under section 10(15)(iv)(c) of the Income Tax Act once approval was granted, so no tax was ultimately payable in respect of that interest and the tax paid is refundable.
- The petitioner paid the tax only because approval had not yet been received and the remittance deadline meant it had to avoid default; the payment was thus made under compulsion or a bona fide mistake.
- Circular No. 768 (dated 06.08.1998) provides that tax deducted at source found to be in excess should be refunded; consequently, refund should be directed along with interest (petitioner sought 15% p.a. from 21.12.1996).
- The petitioner did not retain or recover the tax amount from ANZ Bank; the full contractual payment was made to ANZ and ANZ has not claimed the TDS amount from the department.
- Judicial decisions (Bombay High Court and Gujarat High Court precedents cited) support refund with interest where excess tax has been paid bona fide or under compelling circumstances.
Respondents' Arguments
- The tax was properly collectible at the relevant time because approval under section 10(15)(iv)(c) had not been granted at the time of remittance; therefore the payment was taxable when made.
- The petitioner was legally obliged to deduct tax at source at the time of payment; the petitioner deposited the amount to comply with statutory and contractual requirements.
- Circular No. 768 prescribes conditions and safeguards for refund under Section 195, and those conditions were not satisfied here; moreover Circular No. 768 was subsequently clarified or limited by Circular No. 790 dated 20.04.2000, which excludes refund to the deductor in certain circumstances.
- Correct procedure, according to respondents, would be for the foreign payee to file returns and claim adjustment/refund; because that step has not occurred, refund to the petitioner cannot be granted (or certain conditions for refund are unmet).
- Even if some part of Circular No. 768 could be read in favour of the petitioner, it must be applied as a whole and its clauses (including Clause 6 that refers to no interest) cannot be selectively relied upon.
- It was also pointed out that the challan entry referred to Section 194-A, which deals with interest payable to residents; the correct provision for non-resident payees is Section 195 — an issue the respondents raised to highlight procedural/technical irregularity in the payment record.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Bhartiya Engineering Corporation (P) Ltd. v. R.G. Deshpande, Additional Commissioner of Income Tax, 130 ITR 442 (Bombay) | Principle that the Government should not perpetuate injustice or retain a taxpayer's money merely because of procedural delay; courts should guard against harsh results caused by technicalities or delay. | The Court noted this authority supports the proposition that refunds should not be denied because of delay, and that relief may be granted to avoid injustice where taxpayer acted bona fide. |
| Basantlal Tulsidas Agrawal v. Commissioner of Income Tax, 254 ITR 255 (Guj) | Holding that excess amount paid under a bona fide mistake is required to be refunded with interest (Court granted interest at 15% and higher rate if delayed beyond specified time). | The Court relied on this decision to support awarding refund with interest where payment was made under a bona fide mistake or compelling circumstances. |
| G.E. India Technology Centre P. Ltd. v. Commissioner of Income Tax, (2010) 327 ITR 456 (SC) | Interpretation of Section 195(1): a person paying interest or any other sum to a non-resident need not deduct tax if such sum is not chargeable to tax under the Act. | The Court invoked this principle to underline that tax deduction obligation arises only if the sum is chargeable to tax; accordingly, if the payment is not chargeable (e.g., exempt under section 10), the deductor is not liable to withhold tax. |
Court's Reasoning and Analysis
The Court began by reconstructing the factual matrix: contractual arrangements for supply and foreign financing, the sequence of approvals and communications, and the actual payments made. It noted that the petitioner had sought Central Government approval under section 10(15)(iv)(c) and a No Objection Certificate from the assessing officer before remittance, but approval arrived only later (May 1997).
The Court observed a procedural inconsistency in the records: the challan entry showed payment under Section 194-A (applicable to interest paid to residents), whereas the payments were to a foreign bank and the correct statutory provision at the time for such payments was Section 195. The Court emphasized the substantive inquiry rather than technical classification: the key legal question is whether, on the facts, the payments were exempt under section 10(15)(iv)(c) once approval was received and whether the rate of interest paid exceeded the rate approved by the Central Government.
Two threshold factual criteria were identified and satisfied on record: (1) the approval under section 10(15)(iv)(c) was ultimately granted; and (2) the rate of interest charged did not exceed the rate approved by the Central Government. The Court also found that the petitioner had paid ANZ Bank in full (no part withheld) and had not recovered from ANZ the TDS amount; ANZ had not claimed the amount from the department. Given these facts, the Court reasoned that retaining the TDS amount would amount to retention of tax wrongly charged or levied.
On the relevance of Board Circulars, the Court acknowledged Circular No. 768 (which provides for refund where TDS is in excess) and Circular No. 790 (which limits certain refunds). However, the Court held that even absent reliance on any Circular, the legal position is that a sum paid to the Government which the payer was not liable to pay (because the payment was ultimately exempt) must be refunded. The Court treated the authorities relied upon by the petitioner as supportive of the broader equitable and legal principle that excess or mistaken payments made in good faith should be refunded with interest.
Balancing the statutory provisions, the Ministers' approval, the fact of full payment to the foreign bank and non-recovery from the payee, and the cited case law, the Court concluded that the petitioner was entitled to a refund of Rs. 10,70,660/-. As to relief, the Court exercised its equitable and statutory supervisory jurisdiction to direct refund with interest, but at a rate different from that claimed by the petitioner.
The Court also specified an administrative caveat: the revenue is permitted to adjust the refund against any outstanding tax liability of the petitioner, but such adjustment must be preceded by intimation to the petitioner.
Holding and Implications
Core Ruling: PETITION ALLOWED — the petitioner is entitled to a refund of Rs. 10,70,660/- with interest.
Specifics of relief granted:
- The petitioner is awarded refund of Rs. 10,70,660/-.
- Interest is directed at the rate of 12% per annum, calculated from the date of the first application for refund made by the petitioner to the Central Government (18.06.1997) until the date of actual payment to the petitioner by the Central Government.
- The revenue may, after giving intimation to the petitioner, adjust the refund amount against any outstanding tax liability of the petitioner.
- The petition is allowed and the rule made absolute to the extent directed; there is no order as to costs.
Implications:
- The direct consequence is that the Income Tax Department must refund the stated amount with the specified interest rate, subject to permissible adjustment against outstanding liabilities after notice.
- The Court's decision rests on application of section 10(15)(iv)(c) (approval and rate compliance), the factual finding that the full contractual payment was made to the foreign bank and that the payee has not claimed the amount from the revenue, and established principles that excess tax paid bona fide should be refunded with interest. The judgment does not purport to lay down a broad new legal principle beyond these conclusions, but applies existing statute and precedent to the facts of this case.
No other sections, remedies, or ancillary directions beyond those stated above were ordered in the provided opinion.
CAV JUDGMENT
(Per: HONOURABLE MR. JUSTICE K.A PUJ)
1. The petitioner has filed this petition under Article 226 of the Constitution of India, praying for quashing of the decision of the respondents not to grant the refund of an amount of Rs. 10,70,660/-. The petitioner has also prayed for the mandatory direction to the respondents to immediately refund the said amount along with interest at the rate of 15% per annum from 21.12.1996 to the date of actual payment to the petitioner.
2. This Court has issued notice on 18.10.2000 Petition was admitted and rule was issued on 10.1.2001 On service of notice, an affidavit in reply is filed by the then Commissioner of Income Tax, Vadodara on 5.12.2000
3. Heard Mr. J.P Shah, learned counsel appearing with Mr. Manish J. Shah for the petitioner and Mr. M.R Bhatt, learned senior advocate appearing with Ms. Mauna M. Bhatt for the respondents.
4. The brief facts giving rise to the present petition are that, the petitioner is a public limited company. The petitioner entered into a loan agreement dated 30.4.1996 with a German Company, namely, ANZ Banking Group Limited. The petitioner wrote a letter dated 12.9.1996 to the Ministry of Finance, Department of Revenue, Government of India, New Delhi, seeking approval for exemption under section 10(15)(iv)(c) of the Income Tax Act, 1961 for the payment to ANZ Bank Limited, Germany of principal amount, interest etc. The petitioner thereafter wrote a letter dated 16.12.1996 to the assessing officer requesting him to grant No Objection Certificate for payment of interest and commitment charges to the said ANZ Bank, payable on 23.12.1996 on the said foreign currency loan of United States at 17.06 Million US$ for 90 MW power project loan borrowing approved by the Government of India. The petitioner has specifically mentioned in the said letter that the matter was very urgent and the remittance was to be made on or before 23.12.1996, to avoid financial and other consequences and hence the issuance of No Objection Certificate immediately would be of a great assistance to the petitioner to ensure timely compliance. The petitioner has also informed that it has to pay interest of 2,89,940.78 US$ by way of interest and 12464.41 US$ by way of commitment charges. The petitioner had neither received No Objection Certificate from the assessing officer nor had received the approval under section 10(15)(iv)(c) of the Act. The petitioner, therefore, remitted the interest and commitment charges and paid the tax thereon, amounting to Rs. 10,17,660/- on 21.12.1996
5. Despite the fact that the petitioner applied for the approval somewhere in the middle of 1996, it got an approval under section 10(15)(iv)(c) from the respondents by a letter dated 1.5.1997 The petitioner remitted all the subsequent payment of interest and commitment charges to ANZ Bank without deducting any tax thereon because of this approval received by the petitioner. But for this approval, the petitioner would have to deduct tax at the time of remittance of interest to ANZ Bank. The petitioner thereafter wrote several letters asking the Income Tax Officer, T.D.S to pay back the said amount of Rs. 10,70,660/-. The petitioner has made clear in all these letters that since its approval application was pending, the petitioner paid the tax, otherwise it would have to make a default in payment to ANZ Bank and since the approval has been received, thereafter the above payment of Rs. 10,70,660/- made by the petitioner must be refunded to it immediately. The Assistant Commissioner of Income Tax, however, by his letter dated 12th May, 1998, rejected the claim of the petitioner. While rejecting the petitioner's application, it was stated that no order in this behalf was made by the Assessing Officer and Circular No. 285 is in regard to payment under Section 192 to 194D but not under Section 195. The petitioner thereafter wrote another letter on 06.08.1998 narrating all the facts and praying for refund of Rs. 10,70,660/-. The petitioner was also informed by letter dated 14 September, 2000 that the petitioner was not entitled to refund of the said amount of Rs. 10,70,660/- in accordance with Circular No. 790 dated 20.04.2000
6. Mr. J.P Shah, learned Counsel appearing for the petitioner has submitted that the provisions contained in section 10(15)(iv)(c) lay down that any interest payable by the industrial undertaking in India on any moneys borrowed or debt incurred by it in a foreign country in respect of the purchase out side India of raw materials or components or capital plant and machinery to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, is not a taxable income of the payer. He has further submitted that interest remitted by the petitioner was exempted under section 10(15)(iv)(c) of the Act and hence there was no tax payable in respect thereof. The tax paid was refundable. Mr. Shah further submitted that the petitioner could have held back the payment of interest to the foreign party and paid the interest after the approval and thereby avoided to pay any tax but the result of that would have been that the image of the country in a foreign country would have suffered and even the image of the petitioner with the foreign party from which it had got a huge loan would have also suffered.
7. Mr. Shah, in support of his submission, relies on the Circular No. 768 dated 6 August, 1998 which lays down inter alia that if the tax deducted at source is found to be in excess it should be refunded. Mr. Shah further submitted that the action of the respondents in not granting the refund even after a period of 14 years by now, is absolutely against law and unjust. He has, therefore, submitted that the respondent authorities should be directed to give the refund immediately with interest at 15% per annum from 21.12.1996
8. Mr. Shah further submitted that the petitioner has not withheld the amount of tax paid by him nor ANZ Bank has been paid less to the extent of the amount paid by the petitioner to the Income Tax Department. He has further submitted that the ANZ Bank has not claimed any amount, much less, the amount of Rs. 10,70,660/- from the Income Tax Department till this date. Even an affidavit is filed by Shri Arun Kumar Mishra, Deputy General Manager (Finance) of the petitioner company, stating that the petitioner has not recovered from M/s ANZ Bank, the amount of Rs. 10,70,660/- or any portion thereof which the petitioner had paid on 21.12.1996 to the Income Tax Department to remit the first installment of interest and commitment charges. The petitioner had remitted the said amount of interest and commitment charges in full on 23rd December, 1996 without deducting any Income Tax thereon. Mr. Shah has, therefore, submitted that the petitioner is entitled to claim the refund of the above amount and hence the respondents are required to be directed to grant the refund with interest as prayed for.
9. In support of his submissions Mr. Shah relied on the decision of the Bombay High Court in the case of Bhartiya Engineering Corporation (P) Ltd. v. R.G Deshpande, Additional Commissioner of Income Tax, 130 ITR 442 (Bombay) wherein, while quashing and setting aside the order passed by the Commissioner of Income Tax of not condoning the delay, the Court held that:
“An impression had been given to the Public Accounts Committee that the Government was anxious not to perpetrate injustice and swallow money of the taxpayer merely because the taxpayer has been a little lethargic and allowed its claim to be barred by limitation”.
10. Mr. Shah has further relied on the decision of this Court in the case of Basantlal Tulsidas Agrawal v. Commissioner of Income Tax, 254 ITR 255 (Guj), wherein the assessee was claiming refund of excess amount paid, over and above tax due on the declared income. The claim of the assessee was denied. On challenge being made to the said decision of the revenue authorities before this Court, it was held that the excess amount paid under a bonafide mistake is required to be refunded with interest and accordingly Court has granted interest at the rate of 15% and if the amount were not paid within two months, the interest would be charged at the rate of 24%.
11. Mr. Shah has further relied on the decision of the Hon'ble Apex Court in the case of G.E India Technology Centre P. Ltd. v. Commissioner of Income Tax (2010) 327 ITR 456 (SC), wherein it is held that:
“The most important expression in Section 195(1) of the Income Tax Act, 1961, dealing with deduction of tax at source consist of the words $$$chargeable under the provisions of the Act.$$$ A person paying interest or any other sum to a non-resident is not liable to deduct tax if such sum is not chargeable to tax under the Act.”
12. Considering the facts and circumstances of the case and the relevant provisions of the statutes and the case law on the subject, Mr. Shah has strongly urged that the respondents should be directed mandatorily to refund the amount of Rs. 10,70.660/- with interest at the rate of 15% per annum, forthwith.
13. Mr. Manish R. Bhatt, learned senior counsel appearing for the respondents, on the other hand has submitted that the claim of refund made by the petitioner in this petition straightway deserves to be rejected. He has submitted that the interest and commitment charges payable to ANZ Bank was taxable in absence of approval under section 10(15)(iv)(c) of the Act at the relevant time when the amount was remitted to the foreign concern. He has further submitted that the claim of the petitioner that tax was paid by it to show the better image of the country, is not only irrelevant but also concealing the factual aspect. The petitioner has deposited the amount with Government just to fulfill the requirements of Clause 10(15)(iv)(c) of the Act as well as the agreement with the foreign concern in respect of taxes, levies, fees and other cost. The petitioner was legally bound to deduct tax at source at the relevant time. The petitioner has heavily relied on Circular No. 768 dated 6 August, 1998, issued by the Central Board of Direct Taxes which prescribes the procedure for refund of tax deducted at source under Section 195 of the Act, to the tax deducer under the circumstances narrated in the Circular. The said Circular is not applicable to the facts of the petitioner's case. He has, therefore, submitted that even if, the Circular is applicable and even if, it is presumed that the petitioner is entitled for the benefit provided under the Circular, the other conditions of the Circular are not fulfilled. The Circular clearly lays down the manner in which refund is to be issued, the accounting of refund to be made and safeguard to be observed for granting the refund. He has further submitted that the correct procedure for obtaining refund from the department is to file the return of income by the foreign concern as per law. Since this has not been done, no refund can be granted to the petitioner. He has further submitted that the Circular No. 768 dated 6 August, 1998 was subsequently withdrawn by the Circular No. 790 of 1998 and hence the petitioner cannot ask for the relief on the basis of the Circular which is already withdrawn.
14. Mr. Bhatt has further submitted that it is nowhere stated in the petition nor even in the affidavit filed recently, pursuant to the direction of this Court that payment is covered under Section 10(15) of the Act. He has further submitted that it is not clear as to whether a payee has taken credit of the amount of tax paid by the petitioner. He has further submitted that Circular No. 768 specifically refers to the adjustment of refund towards outstanding tax liabilities and hence even if the petitioner is entitled to refund, the said amount is required to be adjusted against the outstanding tax liabilities, if any. He has further submitted that the Clause-6 of the Circular specifically states that the refund is to be granted without any interest. He has, therefore, submitted that if the Circular is made applicable, it has to be applied as a whole and no particular Clause can be relied on ignoring other Clauses. He has, therefore, submitted that the petitioner is not entitled to any relief in this petition and the petition deserves to be dismissed with cost.
15. Having heard learned Counsels appearing for the parties and having considered their rival submissions in light of the statutory provisions contained in the Income Tax Act, 1961 as well as the relevant case law on the subject, the Court is of the view that the petitioner's claim for refund of Rs. 10,70,660/- deserves to be allowed. The facts on record reveal that the petitioner has entered into the contract on 14.10.1995 with Larsen & Toubro Limited (L&T), Mumbai for supply of certain equipments, goods and materials for the 90 MW Combined Cycle Co-Generation Power Plant for petitioner's chemical complex at Dahej. M/s. L&T had, thereafter, placed an order on behalf of the petitioner on European Gas Turbine (EGT), Germany on 18.12.1995 valued at US$ 17.20 M (CIF) for supply of 02 Nos. of Gas Turbines and 02 Nos. of matching generators and their auxiliary for the said Combined Cycle Captive Co-Generation Power Plant. The petitioner thereafter, negotiated for the credit package with Australia and New Zealand Banking Group Limited (ANZ Bank), Germany for part financing upto 85% value of the said purchase order of L&T on EGT. Both L&T & EGT were agreeable to the petitioner for availing the said credit package from ANZ Bank, Germany. For that purpose, they have entered into tripartite contract on 22.02.1996 The bills of lading and invoices of EGT were made to L&T, Mumbai on account of the petitioner. The petitioner was to pay interest, commitment fees, out of pocket expenses and installment of principal amount of the loan contract directly to ANZ Bank, Germany without deduction of any tax. The petitioner, therefore, requested the Ministry of Finance, Government of India, New Delhi vide its letter dated 12.09.1996 to grant approval of exemption under section 10(15)(iv)(c) of the Income Tax Act, 1961.
16. Since the approval from Government of India, Ministry of Finance was awaited for according of their exemption for deduction of income tax withholding tax from payment of interest and commitment charges to ANZ Bank and since the interest and commitment charges were required to be remitted on or before 23.12.1996 with due approval of RBI, in accordance with the terms of loan agreement, the petitioner requested vide its letter dated 16.12.1996 to the Deputy Commissioner of Income-tax, Baroda to issue No Objection Certificate for payment of withholding tax on interest and commitment charges payable to ANZ Bank, without payment of income tax.
17. Since the approval has not come and the petitioner had to fulfill its obligation under the agreement, the petitioner had made the payment of tax of Rs. 10,70,660/- by way of TDS on interest payable to ANZ Bank, Germany. The challan produced on record shows that the said payment is stated to have been made under Section 194-A of the Income Tax Act. However, Section 194-A deals with interest other than $$$Interest on securities$$$ and under this section, any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income, shall,…………………… deduct income-tax thereon at the rates in force. Here admittedly, no payment is to be made to a resident and hence, Section 194-A is not applicable. The said payment is to be made under Section 195 of the Act, which says that any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act shall ……………………. deduct income tax thereon at the rates in force.
18. The petitioner thereafter again wrote a letter to the Government of India, Ministry of Finance, New Delhi on 22.03.1997 supplying certain more details and requesting them to expedite the approval of exemption of income tax under section 10(15)(iv)(c) of the Income Tax Act, 1961 for payment of interest and commitment charges to ANZ Bank, Germany on 17.63 M US $. Pursuant to this letter, Government of India, Ministry of Finance, New Delhi vide its letter of May 1997 granted approval to rate of interest, fees and other charges in respect of the loan/credit taken by the petitioner from the foreign party in respect of the loan amount of 15.64 M US $ as well as the rate of interest, arrangement fee and commitment fees at the rate mentioned in the said letter. On receipt of this approval from the Central Government, the petitioner wrote a letter dated 25.03.1998 to the Additional Commissioner of Income Tax, Baroda claiming refund of withholding tax of Rs. 10,70,660/- paid on 21.12.1996 from the payment of interest and commitment charges made to ANZ Bank on foreign currency loan of 17.06 M US $. The said request of the petitioner was turned down by the Additional Commissioner vide his letter dated 12.05.1998 only on the ground that no order in this behalf was made by the Assessing Officer for non-deduction of tax at source and that the Central Board of Direct Taxes vide Circular No. 285 dated 21.10.1980 has prescribed the procedure of refunding the excess of the amount actually deducted or deductible from the salaries and other types of payments under Section 192 to 194D of the Act. Since the Board has excluded Section 195, it was not possible for him to direct the Income Tax Officer to grant the refund as desired by the petitioner.
19. The petitioner thereafter wrote another letter on 24.09.1998 to the Deputy Commissioner of Income Tax, Baroda stating that the condition to be complied with was only with regard to the approval of the Central Government and since the said approval was received, though late, the Assessing Officer must grant the refund of the tax paid of Rs. 10,70,660/- which was not actually required to be paid by the petitioner. The petitioner had also invited the attention of the Deputy Commissioner to the Circular No. 768 dated 06.08.1998 under which the Assessing Office is empowered for refund of the tax deducted at source under Section 195 of the Act which is found to be in excess of tax deductible as it was not required to be paid in view of the exemption from the Act on remittance and interest on commitment charges under section 10(15)(iv)(c) of the Income Tax Act, 1961. Even this request of the petitioner was turned down by the Commissioner of Income Tax vide his letter dated 14.09.2000 stating that the petitioner is not entitled for refund of TDS as per the Board Circular No. 790 dated 20.04.2000 This Circular No. 790 of 20.04.2000 clarified that refund shall not be issued to the deductor of tax in the cases referred to in Clause (I)(c) of paragraph 4 of Circular No. 768 dated 06.08.1998 It is at this stage, the petitioner had approached this Court by way of the present writ petition.
20. Section 10 deals with incomes not included in total income. It says that in computing the total income of a previous year of any person, any income falling within any of the clauses mentioned therein shall not be included. Clause (15) of Section 10 deals with income by way of interest, premium on redemption or other payment on such securities, bonds etc. Sub-clause (iv)(c) deals with interest payable by an industrial undertaking in India or any moneys borrowed or debt incurred by it in a foreign country in respect of the purchase outside India of raw materials or components or capital plant and machinery to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan or debt and its repayment. There is no dispute about the fact that the rate of interest at which the payment was made to ANZ Bank did not exceed the rate approved by the Central Government. Simply because the approval was received late and the petitioner had to make payment to the foreign bank and for that purpose, the tax was deposited with the Central Government, it does not mean that the petitioner is not entitled to the refund of the said amount. One has to only see as to whether the approval under section 10(15)(iv)(c) of the Act is received and whether, the rate of interest at which the payment was made exceeds the rate approved by the Central Government. If these two criteria are satisfied, then simply because such approval is received late, would not disentitle the petitioner to claim refund of the amount of tax already paid. It is also an admitted fact that the petitioner has made full payment to ANZ Bank. No part of the interest amount or commitment charges was withheld by the petitioner. The payment made to the Income Tax department is over and above the payment required to be made to ANZ Bank. It is also an admitted position that till this date, ANZ Bank has not claimed this amount of Rs. 10,70,660/- from the Income Tax department. It is not within the case of the Income Tax department that the said ANZ Bank has claimed any such amount or that the petitioner has made less payment to ANZ Bank to the extent of Rs. 10,70,660/-.
21. In the above view of the matter, the retention of the above amount by the Income Tax department would certainly tantamount to retention of the amount of tax wrongly charged or levied on the petitioner. It is, therefore, neither legal nor material to retain this amount and deny the refund of this amount to the petitioner. The cases relied on by the petitioner would certainly help the case of the petitioner as the amount paid to the Central Government under mistaken belief or even the amount paid to the Central Government under compelling circumstances though the petitioner is not liable to pay such amount, is required to be refunded with interest. Clause (c) of Circular No. 768 refers to the tax deducted at source is found to be in excess of the tax deductible for any other reason. Though it is stated to be the tax deducted at source, in real sense, it is not the tax deducted at source. In absence of the approval, the petitioner had to make such payment to the Central Government and once such approval is received and conditions are satisfied, the said amount is required to be refunded to the petitioner irrespective of any Circular.
22. In view of the above discussion, the Court hereby holds that the petitioner is entitled to the refund of Rs. 10,70,660/- with interest @ 12% p.a from the date of the first application for refund made by the petitioner to the Central Government i.e 18.06.1997 till the date on which such payment is made to the petitioner by the Central Government. It is, however, open for the revenue to adjust this amount against any outstanding tax liability of the petitioner after giving an intimation to the petitioner in this regard.
23. With this direction, this petition is accordingly allowed. Rule is made absolute to the above extent without any order as to costs.
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