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M/S Multiscreen Medi... v. The Asst. Commr. Of ...
Structured Summary of the Tribunal Opinion (Appeal relating to AY 1999-2000)
Factual and Procedural Background
This appeal, filed by the assessee against the order dated 13.8.2008 of the CIT(A)-XI, Mumbai (assessment year 1999-2000), arises from a sequence of events following an ITAT order dated 4 March 2004. The Assessing Officer (AO) gave effect to that ITAT order on 23.4.2004 and determined a refund of Rs. 3,08,25,735 and interest of Rs. 18,22,490 under section 244A (total Rs. 3,26,48,225). Part of the refund (Rs. 1,91,77,502) was adjusted against a demand for AY 2001-2002 in July 2004, and the assessee received the balance of Rs. 1,34,70,662 in August 2004.
The assessee claimed that the computation of interest under section 244A was short by approximately Rs. 42 lakhs and filed an application under section 154 on 21.9.2004. The AO passed a section 154 order on 26.9.2006 determining a further refund of Rs. 42,15,279 and an additional refund of Rs. 13,16,576 on account of MAT credit — total additional refund Rs. 55,31,855. Portions of these amounts were adjusted against outstanding demands for later assessment years (small adjustment to AY 2001-2002 and a larger adjustment on 4.12.2006 against AY 2003-2004).
The assessee requested correction and also sought interest on the delayed payment of the additional interest amounts. The AO rejected the request on 3.1.2007, stating that the law did not provide for interest on delayed payment of interest. The CIT(A) upheld the AO's position and treated the decision in Sandvik Asia Ltd. (280 ITR 643) as an exceptional case not applicable here. The assessee appealed to the Tribunal challenging (inter alia) the refusal to grant interest on the delayed payment of interest and the non-admission/adjudication of additional legal grounds relating to interest on refunds arising from MAT credit.
Legal Issues Presented
- Whether the assessee is entitled to interest under section 244A on the delayed payment of interest (i.e., "interest on interest") calculated on Rs. 42,15,279 for the period September 2004 to December 2006, and additionally for the period thereafter until actual grant of refund.
- Whether an additional legal ground raised by the assessee (concerning interest on refund arising out of set off of MAT credit) should have been admitted and adjudicated by the CIT(A).
- Whether the refund amount of Rs. 13,16,576 arising from MAT credit is eligible for interest under section 244A (and if so, the determination/adjudication of that entitlement by the appellate authority).
Arguments of the Parties
Appellant's (Assessee's) Arguments
- The assessee contended that interest under section 244A should be paid on the sum of Rs. 42,15,279 for the period from September 2004 to December 2006 (and beyond until actual payment), relying on the Supreme Court decisions in Sandvik Asia Ltd. (280 ITR 643) and Narendra Doshi (254 ITR 606), as well as various Tribunal and High Court decisions.
- The assessee argued that the delay in granting the balance interest (claimed under section 154) justified payment of compensation by way of interest for the delay, and that the principle recognizing departmental liability to pay interest where excess tax was retained should extend to situations where interest itself was retained.
- With respect to the additional ground concerning interest on MAT-credit-related refund, the assessee submitted that purely legal grounds can be raised at the appellate stage if the facts are on record, relying on National Thermal Power Co. Ltd. v. CIT (299 ITR 383), Jute Corporation of India Ltd. (187 ITR 688), and Ahmedabad Electricity Co. Ltd. (199 ITR 351 Bom/FB).
Respondent's (Revenue's) Arguments
- The Department (represented by the ld. DR) sought to distinguish Sandvik Asia Ltd., submitting that interest-on-interest could be ordered only in cases of "inordinate delay" and that Sandvik Asia was an exceptional decision applicable to such exceptional facts.
- The AO had earlier taken the position that the statute contains no provision expressly allowing interest on delayed payment of interest; that position underpinned the rejection communicated on 3.1.2007.
- As to the additional ground on MAT-related interest, the CIT(A) had considered it a purely legal matter pending before AO by way of rectification and an "afterthought" not raised earlier; the DR supported that approach at the CIT(A) stage.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sandvik Asia Ltd. (280 ITR 643) | The Supreme Court held that the Income-tax Act recognizes the liability of the department to pay compensation by way of interest for delay in payment of amounts lawfully due; the expression "amount" in section 244(1A) includes not only tax but also interest; there is no justification for delay even if the revenue takes an erroneous view of the law. | The Tribunal applied Sandvik Asia to hold that the assessee was entitled to interest under section 244A on the delayed refund of Rs. 42,15,279 for the period Sept 2004 to Dec 2006 and rejected the CIT(A)'s view that Sandvik Asia was an "exceptional" case limited in its application. |
| Narendra Doshi (254 ITR 606) | This case was cited by the parties. The opinion does not elaborate the principle from the case within the body of the Tribunal's reasoning. | It was relied upon by the assessee in support of entitlement to interest; the Tribunal's detailed reasoning is founded primarily on Sandvik Asia as described in the opinion. |
| National Thermal Power Co. Ltd. v. CIT (299 ITR 383, SC) | Authority cited for the proposition that a purely legal issue can be taken as an additional ground at the appellate stage where facts are on record. | The Tribunal relied on this decision (along with the two below) to hold that the assessee could raise a legal ground as an additional ground and therefore directed the CIT(A) to admit and adjudicate the additional ground. |
| Jute Corporation of India Ltd. (187 ITR 688, SC) | Authority supporting the admission of legal grounds at appellate stage when appropriate facts are on record. | Used by the Tribunal as part of the precedent basis to remit the MAT-related additional ground to the CIT(A) for admission and adjudication. |
| Ahmedabad Electricity Co. Ltd. (199 ITR 351, Bom/FB) | Authority cited for the same proposition about admission of legal grounds on appeal when facts exist on record. | Cited by the Tribunal in support of the direction to the CIT(A) to admit and decide the additional ground concerning interest on MAT-credit-related refund. |
Court's Reasoning and Analysis
The Tribunal examined the factual sequence and the authorities cited by the parties. It set out the Supreme Court's reasoning in Sandvik Asia Ltd., emphasizing three points from that decision that were reproduced in the opinion:
- The Income-tax Act, 1961 recognizes the liability of the department to pay interest as compensation for delay in payment of amounts lawfully due to an assessee; this principle extends to cases where interest itself is retained by the department.
- The term "amount" in section 244(1A) is neutral and includes both tax and interest; therefore interest payable under an appellate order is itself subject to interest if payment of that interest is delayed.
- Delay is not rendered justifiable merely because the revenue took an erroneous view of the law; such withholding remains wrongful for purposes of awarding compensation.
Applying these principles to the facts (the delayed determination and payment of the additional interest sum of Rs. 42,15,279, with effective payment only after a long interval), the Tribunal concluded that the assessee was entitled to interest under section 244A for the period from September 2004 to December 2006 on that sum. The Tribunal expressly disagreed with the CIT(A)'s characterization of Sandvik Asia as confined to "exceptional" circumstances, holding instead that the Sandvik principle applies whenever there is delay in granting a refund lawfully due.
With respect to the additional ground concerning interest on refunds arising from MAT credit, the Tribunal noted that authoritative Supreme Court and High Court decisions permit raising purely legal issues as additional grounds on appeal where the facts are on record. Because the CIT(A) had not adjudicated the additional ground (having rejected its admission), the Tribunal deemed it appropriate in the interests of justice to remit the matter to the CIT(A) with directions to admit and decide the additional ground after affording the assessee an opportunity of being heard.
Holding and Implications
Core Ruling: The Tribunal held that the assessee is entitled to interest under section 244A on the delayed refund of Rs. 42,15,279 for the period from September 2004 to December 2006, and directed the Assessing Officer to pay interest as per law. The Tribunal also directed that the additional ground relating to interest on refund arising from MAT credit be admitted and adjudicated by the CIT(A), restoring that issue to the file of the CIT(A).
Direct consequences for the parties:
- The AO is directed to pay interest under section 244A to the assessee in respect of the delayed refund (Rs. 42,15,279) as per law (the Tribunal explicitly identified the period Sept 2004 to Dec 2006 in its reasoning).
- The question of interest on the MAT-credit-related refund (refund of Rs. 13,16,576 and related entries) was remitted to the CIT(A) for admission and adjudication of the additional legal ground after giving the assessee an opportunity to be heard.
- The appeal was allowed for statistical purposes to the extent noted above (the Tribunal allowed the relevant grounds and remitted other issues to the CIT(A)).
Broader implications: The opinion does not purport to lay down a novel legal principle beyond applying and following the Supreme Court's holding in Sandvik Asia Ltd.; it declines the characterization of Sandvik as restricted to exceptional cases and applies its principle to the facts at hand. The decision's direct effect is remedial relief to the assessee; the opinion does not state that it is establishing a new precedent beyond its application of existing Supreme Court authority.
Note: This summary is strictly confined to, and derived from, the text of the provided opinion. No facts or legal points have been added beyond those appearing in that opinion.
R.K Panda, A.M:— This appeal filed by the assessee is directed against the order dated 13.8.2008 of the CIT(A)-XI, Mumbai relating to assessment year 1999-2000.
2. Grounds of appeal no. 1 & 2 taken by the assessee read as under:
1 On the facts and circumstances of the case, ldd CIT(A) erred in confirming the action of the AO in not granting internet due on delayed payment of interest u/s. 244A without appreciating that interest u/s. 244A needs to be granted for delay in issue of refund to the assessee.
2 Should have further directed to grant interest on such delayed payment of interest, claimed but not granted by the Assessing Officer.
3. Facts of the case, in brief, are that the assessee has filed an appeal before the IT AT which passed the order on 4 March, 2004 giving certain reliefs to the assessee. The Assessing Officer passed the order giving effect to the ITAT's order on 23.4.2004 where refund of 3,08,25,735/- and interest of 18,22,490/- u/s. 244A aggregating to Rs. 3,26,48,225/- was determined to the assessee. Out of above refund, an amount of 1,91,77,502/- was adjusted against the demand for Assessment Year 2001-2002 in July 2004 and the assessee received the balance amount of 1,34,70,662/- in August 2004.
3.1 The assessee vide letter dated 21.9.2004 had moved a petition u/s. 154 before the Assessing Officer on the ground that computation of interest u/s. 244A was erroneous and there was a short grant of interest to the extent of approximately 42 lacs. The Assessing Officer, according to the assessee, however, delayed the grant of balance interest to the assessee for more than two years until he passed an order dated 26 Sept 2006 u/s. 154 of the IT Act wherein he determined the balance refund due to the assessee at 42,15,279/-. Further, a refund of Rs. 13,16,576/- was determined due to the assessee on account of MAT credit brought forward from AY 1998-1999, thereby the total refund due to the assessee to be at 55,31,855/-. Out of the above an amount of Rs. 1,77,531/- was adjusted against the demand for Assessment Year 2001-2002 and the balance amount of 53,54,324/- was adjusted on 4.12.2006 against the demand for Assessment Year 2003-2004
3.2 Vide letter dated 9.11.2006, the assessee made a request to the Assessing Officer to rectify the mistake of short grant of interest on refund and grant further interest on delayed payment of interest. However, the Assessing Officer, vide letter dated 3.1.2007 rejected the above contention of the assessee on the ground that granting of interest on delayed payment of interest cannot be allowed as there is no provision in the Act.
3.3 In appeal, the CIT(A) rejected the contention of the assessee by holding as under:
“3. The appellant had originally come up with three grounds of appeal. During appeal hearing, an additional ground of appeal has been filed. The first set of grounds of appeal are inter-connected and are disposed of in a consolidated manner. The refund was delayed and interest was paid upto the date of refund. The appellant now desires interest on interest essentially relying on the decision of the Hon'ble Suprmee court in the case of Sandvik Asia Ltd. (280 ITR 643) and the Narendra Dos hi case (254 ITR 606). In Sandvik Asia case there was an inordinate delay and the Hon'ble Supreme Court had taken serious exceptions to such delay. An interest of 9% p.a was imposed and the Hon'ble Finance Minister was also requested to take appropriate action.
3.1 In such view of the matter, I am of the opinion that Sandvik Asia is an exceptional case and the ratio of the said decision would apply only to such exceptional cases. The present case does not fall within the category of the Sandvik Asia case. Therefore, the first set of appeals desires to be rejected.”
4. Aggrieved with such order of the CIT(A), the assessee is in appeal here before the Tribunal.
5. The ld counsel for the assessee referring to the decisions of the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. reported in 280 ITR 643 and in the case of Narednra Doshi reported in 254 ITR 606 submitted that the assessee should be granted interest u/s. 244A on the sum of 42,15,279/- for the period Sept 2004 to Dec 2006. He also relied on various decisions of the Tribunal as well as High Courts and submitted that the Assessing Officer should be directed to grant further interest u/s. 244A of the Act for the period from Jan 2007 till the date of grant of refund in view of the ratio laid down by the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. (supra).
5.1 The ld DR, on the other hand, while supporting the order of the CIT(A) tried to distinguish the decision of the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. (supra) and submitted that only when there is inordinate delay, the assessee is entitled to interest on interest.
5.2 The ld counsel for the assessee in his rejoinder drew the attention of the Bench to the following observations given by the Hon'ble Supreme Court in the said decision:
“Even assuming that there is no provision for payment of compensation, compensation for delay is required to be paid as the Act itself recognizes in principle the liability of the department to pay interest when excess tax was retained and the same principle should be extended to cases where interest was retained.”
6. We have considered the rival submissions made by both the parties, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. (supra) has held that “in view of the express provisions of the IT Act, 1961, an assessee is entitled to compensation by way of interest for the delay in the payment of amounts lawfully due to the assessee which are withheld wrongly and contrary to law.” In the said decision, the Hon'ble Supreme Court has further held that “interest is payment on the amount to be refunded u/s. 244(1) within three months from the decision of the appellate or other authority specified in section 240. The expression “amount” in the earlier part of section 244(1A) refers not only to the tax but also to the interest; it is a neutral expression and it cannot be limited to the tax paid in pursuance of the order of assessment”. The Hon'ble Supreme Court has further held that “even assuming that there is no provision for payment of compensation, compensation for delay is required to be paid as the Act itself recognizes in principle the liability of the department to pay interest when excess tax was retained and the same principle should be extended to cases where interest was retained.” The Hon'ble Supreme Court has also held that “there is no question of the delay being “justifiable” and even if the revenue takes an erroneous view of the law that cannot mean that the withholding of monies is justifiable” or “not wrongful” There is no exception to the principle for an allegedly justifiable” withholding.
7. Considering the totality of the facts of the case and in view of the decision of the Hon'ble Apex Court cited supra, we are of the considered opinion that the assessee is entitled to interest u/s. 244A on delayed refund of 42,15,279 for the period from Sept 2004 to Dec. 2006. We do not find any merit on the observations made by the CIT(A) that the decision in the case of Sandvik Asia Ltd. (supra) is an exceptional case and the said decision would apply to such exceptional cases. In our opinion, whenever there is a delay in granting refund to the assessee, in the view of the decision of the Hon'ble Supreme Court in the case of Sandvik Asia Ltd. (supra), the department has to pay compensation by way of interest for the delay in payment of amount lawfully due to the assessee, which are withheld wrongly and contrary to law.
8. In this view of the matter, we set aside the order of the CIT(A) and direct the Assessing Officer to pay interest u/s. 244A to the assessee as per law. This ground by the assessee is accordingly allowed.
9. Grounds of appeal no. 3 by the assessee reads as under:
“CIT(A) erred in not admitting the additional ground filed by the appellant on the ground that the issue is debatable, without appreciating that all the facts respect of the said issues were on records and disregarding ratio laid down by various Courts and Tribunals.
10. After hearing both the parties, we find the assessee has filed an additional ground before the CIT(A) regarding interest on refund arising out of set off of MAT credit. The CIT(A) rejected the additional ground raised by the assessee on the ground that it is purely legal matter and the assessee has moved rectification application before the Assessing Officer and it is also pending before the Assessing Officer. Further, the issue of interest of interest never arose during the assessment hearing and is only an afterthought by the assessee. He accordingly rejected the additional ground raised by the assessee.
11. Aggrieved with such order of the CIT(A), the assessee is in appeal here before us.
12. The ld counsel for the assessee submitted that additional ground being purely a legal ground can be raised at the appellate stage, if the facts are on record. In support of this contention, he relied on the following decisions:
i) National thermal Power Co. ltd. v. CIT (299 ITR 383 (SC))
ii) Jute Corporation of India Ltd. (187 ITR 688 (SC))
iii) Ahmedabad Electricity Co. Ltd. (199 ITR 351 (Bom/FB))
He submitted that in the instant case the only issue was a legal issue that once refund out of TDS/Advance tax has gone up due to set off of MAT credit against tax payable, such refund is eligible for interest u/s. 244A.
12.1 The ld DR, on the other hand, supported the order of the CIT(A).
13. After hearing both the parties, we are of the considered opinion that the assessee can always raise a legal ground in the shape of additional ground before the appellate authorities in view of the decisions of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd.; Jute Corporation of India Ltd. and Ahmedabad Electricity Co. Ltd., cited supra. Since the CIT(A) has not adjudicated the additional ground raised by the assessee; therefore, we, in the interest of justice deem it proper to restore this matter back to the file of the CIT(A) with a direction to admit the additional ground and adjudicate the same. The CIT(A) shall give due opportunity of being heard to the assessee and decide the issue in accordance with law. We hold and direct accordingly. This ground raised by the assessee is accordingly allowed for statistical purpose.
14. Grounds of appeal no. 4 by the assessee reads as under:
“CIT(A) erred in not granted interest u/s. 244A on refund of 1,316,576/- arising out of MAT credit, without appreciating the fact that the said refund had arisen out of Tax Deducted at Source Advanced Tax and Self Assessment Tax paid.
15. After hearing both the parties, we find this ground is correlated to the additional ground raised by the assessee before the CIT(A). Since the CIT(A) did not adjudicate the additional ground, we restored the issue to his file. Therefore, we restore this issue also to the file of the CIT(A) for fresh adjudication in accordance with law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. This ground is accordingly allowed for statistical purpose.
16. In the result, the appeal filed by the assessee is allowed for statistical purpose.
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