AR.LAKSHMANAN, J. - (1.) THESE appeals raise substantial and important questions of law of great general public importance as well as under the Income-tax Act, 1961 pertaining to assessment years 1977-78, 1978-79, 1981-82 and 1982-83 requiring consideration of this Court. Since common questions of law and facts arise in all these appeals, they were heard together and are being disposed of by this common judgment. The impugned common judgment was passed by the High Court of Bombay rejecting the appellant's claim on interest holding that no such interest on interest is payable under any of the provisions of the Income tax Act, 1961 (for short 'the Act').
(2.) THE main issue raised in these appeals is whether an assessee is entitled to be compensated by the Income-tax Department for the delay in paying to the assessee amounts admittedly due to it? THE delay in the instant case was for various periods ranging from 12 to 17 years. The following facts are not in dispute:- Assessment Year 197/-78: Notice of demand was issued to the appellant by respondent No.2 for advance tax payable of Rs.2,74,31,250/-. The appellant paid a sum of Rs. 1,86,04,450/-. Assessment order was passed by respondent No.2 determining income of Rs.3,88,37,630/-. Respondent No.2, after rectifying his assessment order, determined the income of Rs.3,45,91,830/- and tax thereon at Rs. 1,99,76,781/- and raised a demand for further tax payable of Rs. 13,72,331/-. The appellant paid the said sum. Commissioner of Income-tax (Appeals) disposed of the appellant's appeal substantially allowing the same. Respondent No.2 gave effect to the appellate order determining income at Rs.2,68,88,220/- and tax thereon at Rs.1,47,88,521. The appellant on 30-4-1986. received a refund of Rs.42,38,260/- and became entitled to receive interest on the refund and requested respondent No.2 to grant interest on refund under Sections 214 and 244 of the Act for the period from 01-4-1977 to 31-03-1986. Assessment Year 1978-79: Notice of demand was issued to the appellant by respondent No.2 for payment of advance tax on Rs.2,14,56,853/-. The appellant submitted its estimate of advance tax and paid instalments thereon at Rs. 1,11,81,844/-. An assessment order determining income of Rs. 1,54,17,090/- and tax payable thereon at Rs.89,03,368/- after adjusting the advance tax paid against the tax payable a refund of Rs.22,78,476 was determined. However, respondent No.2, declined to grant interest on refund to the appellant. The appellant filed a revision petition with Respondent No.1 under Section 264 of the Act against the second respondent's refusal to grant interest under Section 214 of the Act. Respondent No.1 rejected the same. Commissioner of Income-tax disposed of the appellant's appeal against the Assessment Order substantially allowing the same. Respondent No.2 gave effect to the appellate order determining income at Rs.93,93,180/- and tax payable thereon at Rs.54,24,561/- Respondent No.2 granted a refund of Rs.34,78,807/- and the appellant also became entitled to receive interest on the said refund. Assessment Year 1981-82: The appellant submitted its estimate of advance tax and paid instalments thereon amounting to Rs. 1,49,62,292/-. Respondent No.2 passed a provisional Assessment Order determining the tax payable at Rs. 1,29,54,736/- and, therefore, granted a refund of Rs.20,07,556/-. Respondent No.2 passed an Assessment Order determining the total income of Rs. 1,79,84,200/- and tax payable thereon at Rs. 1,06,33,157/- and hence granted a further refund on Rs.23,20,051/-. Along with the said refund, a sum of Rs. 10,06,464/- was also paid as interest under Section 214 of the Act. The Commissioner of Income-tax (Appeals) disposed of the appellant's appeal substantially allowing the same. Respondent No.2 gave effect to the appellate order determining income of Rs.89,02,070/- and tax payable thereon at Rs.52,63,348/-. The appellant received a refund of Rs.53,69,809/- and became entitled to receive interest on the refund. The appellant requested to grant interest on refund under Sections 214 and 244 of the Act was for the period from 01-04-1981 to 31-03-1986. Respondent No.2 rectified its order and granted further interest of Rs. 1,87,203/- under Section 214 of the Act but refused to grant interest under Sections 214(1A) and 244 (1A) of the Act. Assessment Year 1982-83: The appellant submitted its estimate of advance tax and paid instalments thereon of Rs. 1,45,48,006/- a provisional Assessment Order determining the tax payable at Rs. 1,28,46,079/- and, therefore, granted a refund of Rs. 17,01,927/-. He passed an Assessment Order determining the total income of Rs.2,43,41,780/- and tax payable thereon at Rs. 1,37,22,678/- and raised demand for further tax of Rs.8,76,600/- which was paid by the appellant on 30-03-1985. The Commissioner of Income-tax (Appeals) disposed of the appellant's appeal substantially allowing the same. Respondent No. 2 gave effect to the appellate order determining income of Rs. 2,05,91,450/- and tax payable thereon at Rs. 1,16,07,670/-. The appellant received a refund of Rs. 21,15,008/- and became entitled to receive interest on the refund. The appellant requested respondent No. 2 to grant interest on refund under Sections 214 and 244 of the Act for the period from 01-04-1982 to 31-03-1986. Respondent No.2 granted interest of Rs. 1,20,533/-. FOR ALL FOUR ASSESSMENT YEARS 02-01-1987 Appellant asked for further interest on the advance tax paid for the Assessment Years 197/-78, 1978-79, 1981-82 and 1982-83 12-01-1987 Appellant asked for further interest on the advance tax paid which was rejected by Respondent No.2 holding that interest under Section 244 (1A) of the Act was admissible only on post assessment taxes. 2/-02-1987 Appellant filed four Revision Petitions under Section 264 of the Act before the 1st respondent for grant of interest under Sections 214 and 244 of the Act for the following periods : JUDGEMENT_468_AIR(SCW)_2006Html1.htm 28-02-1990 Respondent No. 1 rejected the revision petitions. 30-04-1997 Being aggrieved by the 1 st Respondent's Order, appellant moved this Court which by its common order passed in Civil Appe'al No. 1887 of 1992 with Civil Appeal Nos. 2649 of 1992 etc. directed respondent No.1 to consider the revision petitions in light of its decision in the case of Modi Industries Ltd. v. CIT reported in 216ITR 759. The order of this Court dated 30-04-1997 is reproduced hereunder:- CIVIL APPEAL NO. 1887 OF 1992 Sandvik Asia Ltd. ...Appellant versus S.M. Soni and Ors. (With C.A. Nos. 2649/92, 2550/92, 2687/92 and 1471/96) ORDER These appeals are covered against the revenue by the decision of this Court in Modi Industries Ltd. and Ors. v. Commissioner of Income-tax 216 ITR 759. For the reasons given in the said judgment these appeals are allowed, the impugned order passed by Respondent No. 1 are set aside and the matter is remitted to him for considering the revision petitions filed by the appellant claiming interest under Section 214 of the Income tax Act, 1961 in accordance with the principles laid down in Modi Industries Ltd. Case (supra). No order as to costs. Sd/- (S.CAgarwal) Sd/- (D.P.Wadhwa) New Delhi, April 30, 1997" 2/-03-1998 Pursuant to the 1 st Respondent's direction, the 2nd Respondent passed an Order paying amounts under Sections 214 and 244(1A) of the Act up to the date of refund of tax. The refund order has been marked as Annexure P-16 (Colly). For the sake of brevity, the working of interest under Sections 214 and 244 (1A) is reproduced hereunder:- "WORKING OF INTEREST U/S 214/244 (1A) I) Interest u/s 214(1) of the Act at 12% on Rs. 22,78,400 for the period 1-4-1978 to 28-2-1981 7,97,440 ii) Interest u/s 214(1) of the Act at 12% p.a. on Rs. 34,78,800/- for the period 1-4-1978 to 2/-3-1981 (u/s 143(3) 12,17,580 iii) Int. u/s 244(1A) on Rs. 34,78,800/-(R.O. issued on 23/4/1986) From 1-4-1981 to 30-9-1984 @ 12% From 1-10-1984 to 31-3-1986 @ 15% 14,61,096 42,38,846 Interest granted on 28-11-1986 1.73.940 Interest payable to the assessee 27/3/1998 40,84,906 Sd/- (Surinder Jit Singh) Dy. Commissioner of Income Tax Spl.Rg.2, Pune" 25-09-2000 Appellant's revision petition dated 03-0/-1998 asking for interest on the delayed payment of interest up to the date of payment of the same was rejected by the 1st respondent on the ground that as the monies were refunded to the assessee only after the direction of this Court, the question of granting of interest for the period the matter was sub judice, does not really arise. 0/-06-2001 Appellant filed four writ petitions in the High Court at Bombay challenging the aforesaid orders of Respondent No. 1. 16-01-2004 Impugned common judgment and order passed by the High Court. Aggrieved by the above common judgment, the appellant has filed the above civil appeals. We heard Mr. Jehangir D. Mistri, learned counsel assisted by Mr. Rustom B. Hathikhanawala, for the appellant and Mr. Mohan Parasaran, learned ASG assisted by Mr. Manish Tiwari and Others for the respondents.
(3.) THE order rejecting the claim for interest on interest is sought to be challenged on the ground that the appellant's were entitled to be paid for interest @ 15% p.a. on the total amount of refund including the interest accrued thereon from the day such refund amount became due and payable till the date of actual payment in terms of Sections 214(1), 214(1A) and 244(1A) read with Section 240 and Section 244(1) of the Income Tax Act, 1961 and in the alternative, assuming that no such interest on interest is payable under any of the provisions of the Act then the same shall be ordered to be paid in exercise of writ jurisdiction since the amount of interest payable under Section 214(1) read with Sections 214(1A) and 244(1A) of the said Act was illegally and wrongfully withheld by the respondents for a very long period as stated in the writ petition. Mr. Jehangir D. Mistri, learned counsel for the appellant, submitted that: 1) In view of the express provisions of the Act, the High Court ought to have held that an assessee is entitled to compensation by way of interest on the delay in the payment of amounts lawfully due to the appellant which were withheld wrongly and contrary to law by the Income-tax Department for an inordinately long period of up to 17 years; 2) The appellant being undisputedly entitled in law to receive certain amounts from the Department in view of excess taxes paid by/collected from it (which amounts included interest) and payment of these amounts having been admittedly delayed by the respondents contrary to law, the appellant was entitled to receive interest on the said amount; 3) The High Court is not right in holding that interest under Sections 214 and 244 of the Act is not a refund under Section 240 and hence Department is not liable to pay interest under Section 244 in respect of delay in payment of the aforesaid interest; 4) Admittedly there was a delay on the part of the Department in paying the interest under Sections 214 and 244 of the Act. The High Court has failed to appreciate that during the intervening period, the Department had enjoyed the benefit of these funds while the appellant was deprived of the same; 5) The High Court failed to appreciate that the appellant's monies had been withheld by the department contrary to law, that interest on delayed payment of refund was not paid to the appellant on 27th March, 1981 and 30th April, 1986 due to the erroneous view that had been taken by the respondents, that this Court in the appellant's own case had passed Order dated 30-04-1997 which finally resulted in the respondents granting interest on the delayed payment of refund, that the said Order of this Court is a declaration of law as it always was, that interest on refund was granted to the appellant after a substantial lapse of time and hence it should be entitled to interest for this period of delay; 6) The High Court has committed an error in basing its interpretation of the provisions of the Act very largely upon other statutory provisions which were not even enacted during the relevant time and which contentions were never urged or put to counsel appearing in the matter; 7) The High Court has also erred in purporting to distinguish/explain the decision of this Court based on various decisions (about 20) which were never cited during the course of the hearing which were never put to counsel appearing and which, therefore, the appellant had no opportunity of dealing with; 8) The decision of the High Court was erroneous as it rejected the appellant's claim on the sole ground that as the "amount due" to the appellant was of interest, no compensation could be paid to it, even when gross delay in payment was admittedly made by the Income-tax Department contrary to law; 9) That the High Court erred in holding that an assessee was entitled to interest only on the amounts paid by him in excess of amounts chargeable under the Act. It ought to have held that interest is also payable by the Income-tax Department under Section 244 or otherwise on any amount that becomes "due" to an assessee and which has not been paid within the time allowed by the Act. 10) The High Court has erred in relying on the proviso to Section 240 of the Act for reaching the conclusion that interest is payable only on the amounts paid by the assessee in excess of that chargeable under the Act. The High Court has miserably failed to appreciate that the proviso was inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1st April, 1989 and hence was not applicable to the present case. In any event, it failed to appreciate that proviso to Section 240 was inserted to overcome the difficulty caused by the view that if any assessment had been annulled for any reason the department was not permitted to retain even the tax due on the basis of the returned income.;