- (1.) The petitioner in this writ petition has prayed for a writ in the nature of mandamus commanding the respondents to cancel the order dated 9th September, 1997 by which the Commissioner refused to grant interest on interest and to issue a mandate and/or a writ in the nature of mandamus directing the respondents to grant interest for such period during which the payment of interest was delayed. The order dated 9th September, 1977 reads as follows: "The Appellant Company is engaged in the business of manufacturing certain engineering goods for the above mentioned assessment years. It has claimed interest under section 241(1A) for assessment year (1982-83) and under section 214 and 244(1A) for assessment year 1985-86 and other years on the amount of interest that it had earned on the refund and for late payment of the said refund interest on the interest amount. The details regarding quantum of interest on interest etc. are not furnished because they are on record and considered not necessary to state again. The A/R vehemently argues stating that as per the decision of the Hon'ble Gujarat High Court in D.J. Works v. DCIT (1992) 195 ITR 227 & Chamanlal S. Patel v. CIT & Anr. (1994) 210 ITR 419, where the High Court has held that interest should be allpwable on the delayed payment of interest. With utmost respect, I would state that I beg to differ from the decision of the learned High Court. The provisions of the Act both in section 214 as well as any other section, which either charges or allows interest to the assessee, states that "simple interest" should be charged/allowed. If interest on interest is allowed then it will result in a compound interest, which is not within the scheme of the Act. Apart from that there has to be equity both for charging or allowing interest. The Department does not charge interest from the assessee on the interest due to default, likewise, charging interest on late payment of refund and interest cannot be allowed to the assessee. The assessee has no basis for such a claim and petition under section 264 does not lie, as there is no order prejudicial to the interest of the assessee. The petition is rejected."
(2.) Mr.Khaitan, learned Sr. Advocate appearing in support of this writ petition made the following submissions:- (a)That the right of the assessee to recover interest on excess payment has been recognised by section 214 and 244 of the Income Tax Act. He submitted that under section 244(1A) interest is payable in the event refund is not made within a period of three months. According to him, the intention of the legislature was that the excess money paid by the assessee should be refunded to him as early as possible and not later than 90 days and in order to secure the interest of the assessee as also for the sake of fairness legislature has provided that in the event the refund is delayed, the assessee is entitled to recover interest at the rate of 15% per annum. According to him, the intention is that the excess payment should be refunded together with interest. But the revenue has sought to sabotage that intention of the legislature by refunding only the principle amount and the interest thereon has been refunded after a very long time. He submitted that there is no reason why the revenue should have withheld payment of interest which is in lakhs of rupees for an inordinately long period. If the revenue has chosen to retain the amount which is not authorised by the statute then the authority is also liable to pay interest on that and it is no answer to the claim for interest that this would amount to paying interest upon interest. Colour of money whether it is on account of interest or on account of principal is not different. The fact that the money has been withheld for no reason whatsoever is enought reason to attract payability of interest and interest should be payable on the basis of same rationale which led to the enactment of section 244(1A) and 214. In support of his submission he relied on a Division Bench Judgment of the Gujarat High Court in the case of D.J. Works v. Deputy Commissioner of Income Tax, reported in 195 ITR 227. He also relied on a Judgment of the Delhi High Court in the case of Commissioner of Income Tax v. Goodyear India Limited, reported in 249 ITR 527 and finally he relied on a Judgment of the Apex Court in the case of Commissioner of Income Tax v. Narendra Doshi, reported in 254 ITR 606 wherein the Judgment of the Gujarat High Court was upheld. He, accordingly, submitted that the right of the petitioner to recover interest has wrongfully been denied. Therefore, a writ in the nature of mandamus should be issued. (b) He drew attention of this Court to the provisions contained in section 156 of the Income Tax Act which provides that when any amount is due to the revenue be it on account of tax or interest a demand shall be made which is payable within 30 days and in case such payment is not made within 30 days then interest is payable under section 220 of the Income Tax Act. He submitted that if a demand based on interest can attract further interest and the revenue can thus recover interest on interest it would be violative of Article 14 to say that such a right to recover interest on interest is open to the revenue but the same right is not open to the citizen. He, therefore, submitted that an order as prayed for should be passed. Mr.Mallick, learned senior advocate appearing for the revenue made the following submissions:- (a) Neither section 214 nor section 244 of the Income Tax Act does contain any provision for payment of interest upon interest. (b) A writ in the nature of mandamus can only be issued for the purpose of complying with a provision of law. If there is no provision of law directing the revenue to pay interest on interest, he submitted, which provision shall the Court direct the revenue to follow? After all mandamus can be issued to perform an obligation which has either statutorily or constitutionally been laid down. Constitution does not provide anything to take care of the situation, which is before the Court. Therefore, the only thing left is the Income Tax Act. The Income Tax Act is also silent on the point. How can then a writ in the nature of mandamus be issued?
(3.) In support of his submission he also relied on a Judgment of the Apex Court in the case of Union of India v. Kirloskar Pneumatic Company. In the aforesaid judgment their Lordships expressed the following view: "The power conferred by Articles 226/227 is designed to effectuate the law, to enforce the Rule of law and to ensure that the several authorities and organs of the State Act in accordance with law. It cannot be invoked for directing the authorities to act contrary to law. In particular, the Custom authorities, who are the cratures of the Customs Act, cannot be directed to ignore or act contrary to section 27, whether before or after amendment. May be the High Court or a Civil Court is not bound by the said provisions but the authorities under the Act are. Nor can there be any question of the High Court clothing the authorities with its power under Article 226 or the power of a Civil Court. No such delegation or conferment can ever be conceived.";