REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4335 OF 2012 M/S. K.LAKSHMANYA AND COMPANY ... Petitioner(s) Versus COMMISSIONER OF INCOME TAX & ANR. ... Respondent(s) WITH CIVIL APPEAL NOS. 4357 OF 2012, 4358 OF 2012, 4359 OF 2012, 4356 OF 2012, 4346 OF 2012, 4349 OF 2012, 4355 OF 2012, 4353 OF 2012, 4339 OF 2012, 4343 OF 2012, 4348 OF 2012, 4345 OF 2012, 4350 OF 2012, 4351 OF 2012, 4347 OF 2012, 4336 OF 2012, 4340 OF 2012, 4338 OF 2012, 4337 OF 2012, 4354 OF 2012, 4352 OF 2012, 4344 OF 2012, 4342 OF 2012, 4341 OF 2012, 4361 OF 2012, 4362 OF 2012, 4360 OF 2012, 4365 OF 2012, 4363 OF 2012, 4366 OF 2012, 4364 OF 2012 AND 5478 OF 2013 JUDGMENT R.F.NARIMAN, J. question which this appeal raises is whether High Court of Karnataka at Bangalore was correct in holding that assessee in present case was not entitled to interest under Section 244 (A) of Income-Tax, 1961 Act, when refund arose to it on account of interest that was partially waived by order of Settlement Commission. We are concerned in present case Signature Not Verified with assessment years 1993-94 and 1994-95. Digitally signed by SHASHI SAREEN assessee, Date: 2017.11.08 13:50:02 IST Reason: being partnership firm, filed return for these years and once order of assessment was completed, interest under Sections 2 234(A) to (C) was levied. Aggrieved by this levy of interest, assessee filed application before Settlement Commission, requesting Commission to waive interest on ground that it caused hardship to it. Settlement Commission, by its order dated 22.03.2000, referred to circular of CBDT which gave it power to waive such interest; and by aforesaid order, interest was partially waived for assessment years in question. On application made by assessee, Assessing Officer, by his order dated 25.04.2000 refused to grant interest on refund that was payable, and was not paid, within three months from specified date. This was done on two grounds, namely, that provisions of Section 244(A) do not provide for payment of interest on refund due on account of waiver of interest that is charged under Sections 234(A)-(C) of Act and second, that power assumed by Settlement Commission for waiver of interest, by following CBDT circular referred to, does not enable Commission to provide for payment of interest under Section 244(A). appeal that was filed before C.I.T. (Appeals) was allowed. This was done by referring to judgment of Madras High Court in Commissioner of Income-Tax Vs. Needle Industries Pvt. Ltd. 233 ITR 370 and with reference to CBDT circular which enabled Settlement Commission to waive interest. appeal by Revenue to Income-Tax Appellate Tribunal (ITAT) 3 was dismissed. However, in appeal to High Court, by impugned judgment dated 09.12.2009, High Court of Karnataka held that, since waiver of interest was within discretion of Settlement Commission, no right flowed to assessee to claim refund as matter of right under law. In aforesaid circumstances, judgments of Tribunal and C.I.T. (Appeals) were set aside and Assessing Officer's order was restored. Mr. Preetesh Kapur, learned counsel appearing on behalf of appellant, has placed relevant statutory provisions before us and has relied upon Madras High Court judgment in Needle Industries (supra) and pointed out to us that this very judgment has been affirmed by this Court in Sandvik Asia Ltd. Vs. Commissioner of Income Tax I, Pune and Others 2006 (2) SCC 508. According to him, since Section 244(A) is wider than pre-existing Section 241, it is clear that all judgments which deal with Section 241 apply with all force to facts of this case. He also relied upon judgment of this Court in Commissioner of Income Tax, Mumbai Vs. Anjum M.H.Ghaswala and Ors. 2002 (1) SCC 633 para 34 in particular, to show that when power to waive interest payable under substantive provision of Act was given by circular of Board to Settlement Commission, interest could be so waived and that circular of Board gave such power which was exercised by Settlement Commission in present case. According to him, judgments of C.I.T. (Appeals) and Tribunal are, therefore, correct 4 and ought not to have been set aside by High Court. Mr. K.Radhakrishnan, learned senior counsel appearing for respondent-Revenue, emphasised expression due to which is present in Sections 240 and 244(A) and would, therefore, show that refund must be due i.e. assessee should be entitled, as matter of law to such refund or else interest would not become payable. He also referred to Sections 245(D)(4)and(6) to buttress aforesaid submission. According to him, judgment in Ghaswala's case (supra) would show, paragraphs 23 and 30 in particular, that Settlement Commission was given no power to waive interest, idea of Settlement Commission being that assessee pays tax promptly and that no concession can be given by said Commission. He referred to reasons given by Assessing Officer in support of his order and stated that both reasons were correct in law. He also referred to paragraph 12 of judgment under appeal and stated that High Court was right, in that there was no entitlement to refund in facts of present case. Having heard learned counsel for both sides, it is necessary for us to extract relevant statutory provisions. Section 240 occurs in Chapter which deals with refund, namely Chapter XIX of Income-Tax Act, 1961. Section 240 reads as follows: 240. Refund on appeal etc.--Where, as result of any order passed in appeal or other proceedings under this Act, refund of any amount becomes due to assessee, 5 Assessing Officer shall, except as otherwise provided in this Act, refund amount to assessee without his having to make any claim in that behalf: Provided that where, by order aforesaid,-- (a) assessment is set aside or cancelled and order of fresh assessment is directed to be made, refund, if nay, shall become due only on making of such fresh assessment; (b) assessment is annulled, refund shall become due only of amount, if any, of tax paid in excess of tax chargeable on total income returned by assessee. cursory reading of aforesaid section shows that refund may become due to assessee, either as result of order passed in appeal or other proceedings under this Act. It is clear that refund that arises as result of order passed under Section 245(D)(4) is order passed in other proceeding under this Act Thus, it is clear that assessee in present case is covered by Section 240 of Act. When it comes to interest on refund, Section 244, which applied to assessment years up to and including assessment year 1989-90, made it clear that it would apply where refund is due to assessee in pursuance of order referred to in Section 240. It is only if Assessing Officer does not grant refund within three months from end of month in which such order is passed, that Central Government shall pay to assessee simple interest on amount of refund due. 6 We are in this appeal directly concerned, however, with Section 244(A) of Act which reads as follows: Where refund of any amount becomes due to assessee under this Act], he shall, subject to provisions of this section, be entitled to receive, in addition to said amount, simple interest thereon calculated in following manner, namely : (a) where refund is out of any tax collected at source under Section 206C or paid by way of advance tax or treated as paid under Secttion 199, during financial year immedaitely preceding assessment year, such interest shall be calculated at rate of one-half percent for every month or part of month comprised in period,- i) from 1st day of April of assessment year to date on which refund is granted: if return of income has been furnished on or before due date specified under sub-section (1) of Section 139; or (ii) from date of furnishing of return of income to date on which refund is granted, in case not covered under sub-clause (I); (aa) where refund is out of any tax paid under section 140A, such interest shall be calculated at rate of one-half percent for every month or part of month comprised in period, from date of furnishing of return of income or payment of tax, whichever is later, to date on which refund is granted. Provided that no interest under clause (a) or clause (aa) shall be payable, if amount of refund is less than ten percent of tax as determined under sub-section (1) of section 143 or on regular assessment;) (b) in any other case, such interest shall be calculated at rate of (one half per cent) for every month or part of month comprised in period or periods from date or, as case may be, dates of payment of tax or penalty to date on which refund is 7 granted. Explanation:---For purpose of this clause, date of payment of tax or penalty means date on and from which amount of tax or penalty specified in notice of demand issued under section 156 is paid in excess of such demand. cursory look at aforesaid section shows that aforesaid section is even wider than section 244 and is not restricted to refund being issued to assessee in pursuance to order referred to in Section 240. Under this Section, it is enough that refund become due under Income-tax Act, in which case assessee shall, subject to provisions of this Section, be entitled to receive simple interest. objects and reasons for aforesaid amendment state: 11.2 Insertion of new section 244A in lieu of sections 214, 243 and 244,- Under provisions of section 214, interest was payable to assessee on any excess advance tax paid by him in financial year from 1st day of April next following said financial year to date of regular assessment. In case refund was not granted within three months from date of month in which regular assessment was completed, section 243 provided for further payment of interest. Under section 244, interest was payable to assessee for delay in payment of refund as result of order passed in appeal, etc., from date following after expiry of three months from end of month in which such order was passed to date on which refund was granted. rate of interest under all three sections was 15 per cent annum. 11.3. These provisions, apart from being complicated, left certain gaps for which 8 interest was not paid by Department to assessee for money remaining with Government. To remove this inequity, as also to simplify provisions in this regard, Amending Act, 1987, has inserted new Section 244A in Income Tax Act, applicable from assessment year 1989-90 and onwards which contains all provisions for payment of interest by Department for delay in grant of refunds. rate of interest has been increased from earlier 15 per cent annum to 1.5% per month or part of month, comprised in period of delay in grant of refund. Amending Act, 1987, has also amended sections 214, 243 and 244 to provide that provisions of these sections shall not apply to assessment year 1989-90 or any subsequent assessment years. (emphasis supplied) present case would fall outside sub-clauses and aa of this provision and, therefore, fall within residuary clause, namely sub-clause (b) of Section 244(A). Madras High Court in Needle Industries Pvt. Ltd. (supra) concerned itself with position prior to advent of Section 244A. It found that expression refund of any amount used by Section 240 and 244 would include not only tax and penalty but interest also. It was, therefore, held that clear intention of Parliament is that right to interest will compensate assessee for excess payment during intervening period when assessee did not have benefit of use of such money paid in whatsoever character. Court held that result would be that asssessee would be entitled to interest on refund also. This 9 Court in Sandvik Asia Ltd. (supra) set out several questions of law which arose on facts of that case. We are concerned with questions C and E which read as follows: (C). Whether on proper interpretation of various provisions of Act assessee was entitled to be compensated for delay in paying to it any 'amount' due to it even if such 'amount' comprised of interest, as had been held by Delhi and Madras High Courts and hence impugned judgment was erroneous and ought to be reversed ? E. Whether High Court ought to have held that sections 240 and 244 of Act refer to 'refund of any amount', which phrase clearly includes any amount (including interest) due by Income Tax department to assessee, and hence appellant was entitled to interest on delay in payment of amounts due from Income-tax Department ? After setting out relevant statutory provisions, which at that time covered Section 244 and not Section 244(A), and after referring to number of decisions, Court ultimately referred to Needle Industries (supra) and expressly approved same. It concluded aforesaid questions in favour of assessee as follows: In present appeal, respondents have argued that compensation claimed by appellant is for delay by Revenue in paying of interest, and this does fall within meaning of refund as set out in Section 237 of Act. relevant provision is Setion 240 of Act which clearly lays down that what is relevant is whether any amount has become due to assessee, and further phrase any amount will also encompass interest. This view has been accepted by various High Courts such as Delhi, Madras, Kerala High Courts etc. 10 In Commissioner of Income-Tax, Bhopal Vs. H.E.G.Limited 2010 (15) SCC 349, this Court was squarely confronted with meaning of expression where refund of any amount become due to assessee in Section 244(A)(1). This question was answered as follows: 5.In present case, as stated above, there are two components of tax paid by assessee for which assessee was granted refund, namely TDS of Rs. 45,73,528 and tax paid after original assessment of Rs. 1,71,00,320. Department contends that words any amount will not include interest which accrued to respondent for not refunding Rs. 45,73,528 for 57 months. We see no merit in this argument. interest component will partake of character of amount due under Section 244-A. It becomes integral part of R. 45,73,528 which is not paid for 57 months after said amount became due and payable. As can be seen from facts narrated above, this is case of short payment by Department and it is in this way that assessee claims interest under Section 244-A of Income Tax Act. Therefore, on both aforestated grounds, we are of the view that assessee was entitled to interest for 57 months on Rs. 45,73,5289. principal amount of Rs. 45,73,528 has been paid on 31.12.1997 but not of interest which, as stated above, partook character of 'amount due under Section 244-A. In Union of India Vs. Tata Chemicals Ltd. 2014 (6) SCC 335, this Court after going into object for enactment of Section 244(A), held: Interest payment is statutory obligation and non- discretionary in nature to assessee. In tune with aforesaid 11 general principle, Section 244A is drafted and enacted. language employed in Section 244A of Act is clear and plain. It grants substantive right of interest and is not procedural. principles for grant of interest are same as under provisions of Section 244 applicable to assessments before 01.04.1989, albeit with clarity of application as contained in Section 244A. 31. Department has also issued Circular clarifying purpose and object of introducing Section 244A of Act to replace Sections 214, 243 and 244 of Act. It is clarified therein, that, since there was some lacunae in earlier provisions with regard to non-payment of interest by Revenue to assessee for money remaining with Government, said section is introduced for payment of interest by Department for delay in grant of refunds. general right exists in State to refund any tax collected for its purpose, and corresponding right exists to refund to individuals any sum paid by them as taxes which are found to have been wrongfully exacted or are believed to be, for any reason, inequitable. statutory obligation to refund carried with it right to interest also. This is true in case of assessee under Act. above extract would clearly show that corresponding right exists, to refund to individuals any sum paid by them as taxes which are found to have been wrongfully exasted or believed to be, for any reason, inequitable. statutory obligation to refund, being non discretionary, carries with it right to interest, also making it clear that right to interest is parasitical. right to claim refund is automatic once statutory provisions have been complied with. However, Mr. K.Radhakrishnan, learned senior counsel appearing 12 for respondent-Revenue, has strongly relied upon decision of this Court in Ghaswala's case (supra). In this judgment, this Court held that Settlement Commission was introduced into Income-tax Act for purpose of quick settlement of cases before it, so that the tax due to Revenue gets collected at earliest. object of this exercise is not to assist tax evaders. In so holding, this Court held that Section 245(D)(6) being procedural in nature, cannot be used to locate any power to waive interest, if it is not otherwise waived under some other substantive provision in Income-Tax Act. Ultimately, this Court arrived at conclusion that Commission cannot either waive or reduce interest which is statutorily payable unless there is express power to do so in that behalf. However, while so saying, Court went on to clarify that circulars issued pursuant to powers under Section 119 of Act, which empower authorities under Act to waive or reduce interest, may be availed by Settlement Commission to waive interest. We are of view that expression due only means that refund becomes due if there is order under Act which either reduces or waives tax or interest. It is of no matter that interest that is waived is discretionary in nature, for moment that discretion is exercised, concomitant right springs into being in favour of assessee. We are, therefore of view that C.I.T. (Appeals) and ITAT were correct in their view 13 and that consequently, High Court was incorrect in its view that since discretionary power has been exercised, no concomitant right was found for refund of interest to assessee. appeals are accordingly allowed and impugned judgment is set aside. ....................J. (ROHINTON FALI NARIMAN) ....................J. (SANJAY KISHAN KAUL) New Delhi, Dated: 1st November, 2017. 14 IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 17541 OF 2017 (Arising out of SLP(C) No. 21851 of 2012 DIRECTOR OF INCOME TAX (INTERNATIONAL ... Petitioner(s) TAXATION) Versus M/S SET SATELLITE (SINGAPORE) PTE. LTD. ... Respondent(s) O R D E R Leave granted. Heard learned counsel for parties. It is clear that appeal of department deserves to be dismissed as matter is covered by judgment of this Court dated 26.11.2014 in Union of India Through Director of Income Tax Vs. Tata Chemicals Limited 2014 (6) SCC 335. In this view of matter, this appeal stands dismissed. ....................J. (ROHINTON FALI NARIMAN) ....................J. (SANJAY KISHAN KAUL) New Delhi, Dated: 1st November, 2017. 15 ITEM NO.101 COURT NO.12 SECTION IV-A S U P R E M E C O U R T O F I N D I RECORD OF PROCEEDINGS Civil Appeal No(s). 4335/2012 M/S K LAKSHMANYA AND COMPANY Appellant(s) VERSUS COMMISSIONER OF INCOME TAX & ANR. Respondent(s) (FOR 31.10.2017 AT TOP) WITH C.A. No. 4357/2012 (IV-A) C.A. No. 4358/2012 (IV-A) C.A. No. 4359/2012 (IV-A) C.A. No. 4356/2012 (IV-A) C.A. No. 4346/2012 (IV-A) C.A. No. 4349/2012 (IV-A) C.A. No. 4355/2012 (IV-A) C.A. No. 4353/2012 (IV-A) C.A. No. 4339/2012 (IV-A) C.A. No. 4343/2012 (IV-A) C.A. No. 4348/2012 (IV-A) C.A. No. 4345/2012 (IV-A) C.A. No. 4350/2012 (IV-A) C.A. No. 4351/2012 (IV-A) C.A. No. 4347/2012 (IV-A) C.A. No. 4336/2012 (IV-A) C.A. No. 4340/2012 (IV-A) C.A. No. 4338/2012 (IV-A) C.A. No. 4337/2012 (IV-A) C.A. No. 4354/2012 (IV-A) C.A. No. 4352/2012 (IV-A) C.A. No. 4344/2012 (IV-A) C.A. No. 4342/2012 (IV-A) C.A. No. 4341/2012 (IV-A) C.A. No. 5478/2013 (III) SLP(C) No. 21851/2012 (IX) C.A. No. 4361/2012 (IV-A) C.A. No. 4362/2012 (IV-A) C.A. No. 4360/2012 (IV-A) C.A. No. 4365/2012 (IV-A) C.A. No. 4363/2012 (IV-A) C.A. No. 4366/2012 (IV-A) C.A. No. 4364/2012 (IV-A) Date : 01-11-2017 These appeals were called on for hearing today. 16 CORAM : HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN HON'BLE MR. JUSTICE SANJAY KISHAN KAUL For Appellant(s) Mr. Preetesh Kapur, Adv. Mr. Mohit chaudhary, Adv. Mr. Ashok A.Kulkarni, Adv. Ms. Puja Sharma, Adv. MR. Kunal Sachdeva, Adv. Mr. Balwinder Singh Suri, Adv. Ms. Garima Sharma, Adv. Mr. Ranjit B.Raut, Adv. Mrs. Bina Gupta, AOR Ms. Puja Sharma, AOR Mrs. Anil Katiyar, AOR For Respondent(s) Mr. K.Radhakrishnan, Sr. Adv. Mr. Arijit Prasad, Adv. Ms. Rashmi Malhotra, Adv. Mrs. Anil Katiyar, AOR Mr. B. V. Balaram Das, AOR Mr. M.S.Syali, Sr. Adv. Mr. Rustom B. Hathikhanawala, AOR Mr. Mayank Nagi, Adv. Mr. Vikrant A.Maheshwari, Adv. Mr. Tarun Singh, Adv. UPON hearing counsel Court made following O R D E R SLP(C) No. 21851 of 2012: Leave granted. appeal is dismissed in terms of signed order. Civil Appeal No. 4335 of 2012 etc. etc.: appeals are allowed in terms of signed reportable judgment. Pending applications, if any, shall stand disposed of. (SHASHI SAREEN) (SAROJ KUMARI GAUR) AR CUM PS BRANCH OFFICER (one signed order and one reportable judgment are placed on file) K. Lakshmanya and Company v. Commissioner of Income-tax & Anr