Wipro Limited vs The Joint Commissioner of Income Tax
Writ Petition 20040 of 2019 decided on 25 August 2021.
Judgment Link: http://judgmenthck.kar.nic.in/judgmentsdsp/bitstream/123456789/404200/1/WP20040-19-25-08-2021.pdf
The tone for this judgment may be set by quoting what Richard Brinsley Sheridan, an acclaimed Irish dramatist of 18th century, on being asked by his tailor for at least the interest of his bill had retorted:
“It is not my interest to pay the principal, nor my principle to pay the interest”.
- Petitioner Assessee inter alia engaged in the business of manufacture of computer software & providing IT enabled services, is knocking at the doors of Writ Court for assailing the order dated 29.03.2019, a copy whereof is at Annexure-A whereby the second respondent-DCIT having negatived its application dated 22.03.2019 filed u/s 244A(1A) of the Income Tax Act, 1961 (hereafter ‘1961 Act’) has denied additional 3% interest on the allegedly delayed refund of amount relatable to Assessment Year 2008-09.
I. Some legal principles & morals which are to animate levy of tax and refund of un-taxable:
(i) A great Indian poet Kalidasa (500 CE) in his epic poem “Raghuvamsham” (1-18) states: “The King Dilip collects from his subjects only 1/6th of their income as tax for the welfare of State, indeed like the sun taking earthly water drops, only to indemnify her with multiples of rain-drops…” Chanakya in his acclaimed work “Arthashastr” advises the Rulers: “Collect taxes from the citizens as honeybees collect nectar from the flowers, gently and without inflicting pain…”;
(ii) A renowned jurist of yester-decades late Mr. Nani Palkhivala, in the concluding paragraph of Preface to the Eighth Edition of “The Law and Practice of Income Tax” said “Every Government has a right to levy taxes. But no Government has the right, in the process of extracting tax, to cause misery and harassment to the taxpayer and the gnawing feeling that he is made the victim of palpable injustice.”; the function of the Assessing Officer is to administer the statute with solicitude for the Public Exchequer with an inbuilt idea of fairness to tax payers; this view finds expression in the decision of the Apex Court in ACIT vs. Rajesh Jhaveri Stock Brokers P. Ltd. (2007) 291 ITR 500 (SC).
(iii) Walton J. had observed in Vestey v. Inland Revenue Commissioners [1979] Ch 177 (197 – 198) “I conceive it to be in the national interest, in the interest not only of all individual tax payers – which includes most of the nation – but also in the interests of the Revenue authorities themselves, that the tax system should be fair… One should be taxed by law, and not be untaxed by concession … A tax system which enshrines obvious injustices is brought into disrepute with all tax-payers accordingly, whereas one in which injustices, when discovered, are put right (and with retrospective effect when necessary) will command respect and support…”.
(iv) A Welfare State like ours is constitutionally expected to be fair & reasonable in dealing with the subjects and it must avoid any harassment to the assessee public, without causing any loss to the Exchequer (see Nokia Corporation v. Director of Income-tax [2007] 292 ITR 22 (Delhi HC); the State as constitutionally ordained, needs to conduct itself as a virtuous litigant and should meet honest claims; this view finds resonance in the decision of the Apex Court in State of U.P. v. Manohar [2005] 2 SCC 126; the maxim actus curiae neminem gravabit, i.e., an act of court shall prejudice none, is equally applicable to the quasi- judicial functions of Tax Authorities, as well.
(v) Article 265 of the Constitution of India mandates that no tax shall be levied or collected except by authority of law; if a tax has been paid in excess of the tax specified, the same has to be refunded; in Tata Chemicals 363 ITR 658 (SC), the Apex Court reasoned out why State should pay interest for holding tax payers’ money; a “tax refund” is a refund of taxes when the tax liability is less than the tax paid; when the said amount is refunded, it should carry interest as a matter of course, since it is a kind of recompense for the ‘unauthorized use or retention’ of money; refund due & payable to an assessee is a debt owed; Parliament has enacted this principle in Section 244A of the 1961 Act; in Aluminium Corporation of India Ltd. v UOI 1978 (2) ELT 452 (SC) the Apex Court observed that a good government involves not only diligent collection of taxes, but also ready refunds of excess levies.
VII. Payment of interest on delayed refunds u/s. 244A(1A):
(i) This provision has been brought on the statute book vide Finance Act, 2016 w.e.f. 01.06.2016; entitlement of an assessee to the interest on delayed refund as envisaged under this provision to some extent brings a sort of parity in the converse situation where he is liable to pay interest for delayed payment of taxes in terms of section 234B; it may be pertinent to note that it was inserted and brought into effect from the same time as section 153 was substituted by Finance Act, 2016; similarly, section 153(5) was substituted by Finance Act, 2016 prescribing the time limit to give effect to the orders passed under the sections mentioned therein, wholly or partly, otherwise than by making a fresh assessment or reassessment; prior to such amendment, no time limit was prescribed for passing of OGE; it may be noted that the requirement of paying interest u/s 244A(1A) has been brought in for the cases covered u/s 153(5).
(ii) The legislative intention in enacting section 244A(1A) can be discerned from the Memorandum explaining the provisions of the Finance Bill, 2016
(iii) Interest u/s 244A(1A) would not accrue in cases of fresh assessment or reassessment; use of words ‘wholly or partly’ therein would again indicate that the bar of interest accrual is confined only to that part of the assessment that are occasioned by remittance/remand and would not extend to other concluded issues that give rise to refund u/s 153(5); employment of identical language in section 153(5) and section 244(1A) too supports this analogy; it is clear that section 244A(1A) would apply to cases covered u/s 153(5); thus where, in respect of certain issues, order giving effect to be passed u/s 153(5), otherwise than by making a fresh assessment or reassessment is passed beyond the prescribed time-limit, interest u/s 244A(1A) has to be granted in respect of refund arising on such issues that are concluded and that the pendency of consideration on remitted issues does not interdict the statutory accrual of interest; an argument to the contrary cannot be countenanced without straining the text & context of the provision.
(iii) The vehement contention of the Revenue essentially structured on the text of section 4 of the 1961 Act that any order giving effect to the order of the ITAT will result in re- determination of the assessee’s total income and therefore will constitute a fresh assessment, if accepted, would inexorably lead to the result that the Revenue can invariably retain the refund determined, without the liability to pay the additional interest in terms of Sec.244A(1A) for the delayed period; that would also lead to an absurd conclusion that every OGE has to be considered as a fresh assessment or reassessment and therefore would be outside the purview of Sec.153(5) and consequently any delay in granting actual refund would also be outside the ambit of Sec.244A(1A); this would defeat the very object for which this provision has been brought on the statute book.
i) A Writ of Certiorari issues quashing the impugned order; petitioner-Assessee is permitted to submit the fresh claim for additional interest at the rate of 3% per annum for the period envisaged in section 153(5) r/w section 244A(1A), within eight weeks.
ii) A Writ of Mandamus issues to the respondents to compute the interest amount till date and pay it to the petitioner- Assessee within eight weeks next following.
iii) If delay is brooked in complying the above direction, the Revenue shall pay to the petitioner – Assessee an extra interest, at the rate of 1.5 % per month and this amount, after payment, may be recovered personally from the erring officials of the Department.
Now, no costs.
Daksha Legal 