1. The only issue in this appeal filed by the assessee relates to the question of allowing interest under s. 244A of the IT Act, 1961, in respect of refund arising to the assessee.
2. The CIT(A) states in his appellate order that the assessee-company filed its return of income for the asst. yr. 1994-95 on 30th August, 1995, declaring a total income of Rs. 75,92,260. The assessee claimed credit for tax deducted at source of Rs. 14,97,362 and self-assessment tax of Rs. 2,50,00,000. The CIT(A) states thereafter that the return was processed under s. 143(1)(a) of the Act and the income disclosed by the assessee was also accepted by the AO. The refund was determined by the AO at Rs. 2,21,03,624 after allowing credits of the abovementioned two items. However, no interest under s. 244A was allowed by the AO on the amount of refund.
3. In the first appeal also, the CIT(A) upheld the action of the AO in not allowing the interest as claimed by the assessee for the reasons given by her, to which we will advert later on.
4. At the time of hearing of the appeal before us, the learned counsel for the assessee contends that interest is allowable to the assessee, in the instant case, in accordance with the provisions of s.
244A(1)(b). This particular clause reads as below : "(b) in any other case, such interest shall be calculated at the rate of one per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted." "Explanation : For the purposes of this clause, 'date of payment of tax or penalty' means the date on and from which the amount of tax or penalty specified in the notice of demand issued under s. 156 is paid in excess of such demand." 6. During the course of hearing of the appeal, the learned counsel for the assessee has drawn our notice to cl. (1) of sub-s. (1) of s. 143 which reads as under : "if any tax or interest is found due on the basis of such return, after adjustment of any tax deducted at source, any advance tax paid, any tax paid on self-assessment and any amount paid otherwise by way of tax or interest, then, without prejudice to the provisions of sub-s. (2), an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under s. 156 and all the provisions of this Act shall apply accordingly;" 7. The learned counsel for the assessee contends that actually the intimation issued by the AO in this case on processing of the return filed by the assessee, under s. 143(1)(a) will have to be deemed as a notice of demand under s. 156, for the purpose of Expln. to s.
8. The CIT(A) also discussed this issue, most probably raised by the assessee before her also. She, however, says in this connection that no notice of demand was issued under s. 156 levying tax or penalty in the instant case. She furthermore states as follows : "The intimation under s. 143(1)(a) is only fictionally taken as a notice of demand under s. 156. Like all other fictions, to understand the meaning of this fiction so created here, one must look to its purpose.
The apparent purpose of the fiction is to make machinery provision for recovery of tax applicable to the recovery of tax assessed in terms of the s. 143(1)(a) and nothing more. Such being the limited purpose of the fiction, it is difficult to accept that the appellant is entitled to interest on refund of excess payment of self-assessment tax on the basis of intimation issued under s.
143(1)(a)." 9. On the above reasoning, the CIT(A) held that since the requirement of the Expln. to s. 244A(1)(b) was not satisfied in this case, the assessee would not be entitled to any interest under the abovementioned clause.
10. The learned counsel for the assessee has firstly relied on Circular No. 549, dt. 31st October, 1989, issued by the CBDT explaining the provisions of s. 244A and the purpose of enshrining the same in the statute books in lieu of ss. 214, 243 and 244. He has also relied on a judgment of the Tribunal, New Delhi, Special Bench in the case of A.K.Jain & Bros. (HUF) vs. ITO (1992) 42 TTJ (Del)(SB) 353 : (1992) 198 ITR 42 (AT). In that particular case also, it was held that interest is payable to the assessee on the refund of excess advance tax including such instalments and payments even made after the expiry of the financial year.
11. The Tribunal actually held in the abovementioned case that an instalment of advance tax even paid after the expiry of the financial year should also be considered as advance tax payment and should, therefore, be taken into reckoning for the purpose of allowing interest to the assessee. So far as, however, the present case is concerned, the assessee claims interest on excess payment of self-assessment tax along with TDS over the tax determinable in the processing under s.
143(1)(a). There cannot be any doubt above the facts that in accordance with cl. (b) of sub-s. (1) of s. 244A, such interest is clearly payable to the assessee. So far as, however, the Explanation to the said clause is concerned, we are not in a position to agree with the arguments of the CIT(A) with regard to the applicability of that Explanation to the present case. As pointed out by the learned counsel for the assessee, the intimation itself, on completion of processing under s. 143(1)(a), is to be deemed as the notice of demand under s. 156. The CIT(A) argues that the said deeming provision has got a limited purpose only viz.
making machinery provision for recovery of tax applicable to the recovery of tax determined in terms of s. 143(1)(a). Her argument, in this regard, cannot be accepted. It has been held by various Courts in a number of decisions that a deeming provision of the statute is required to be given its full effect. If such effect is not given in the instant case, it will lead to a very absurd situation inasmuch as had the assessment been completed under s. 143(3), in the instant case, the assessee would have been entitled to interest under s. 244A(1)(b), whereas it instead of making the assessment under s. 143(3) the AO merely processes the return under s. 143(1)(a) (which is the actual case here), no such interest would be available to the assessee. This sort of interpretation of the relevant Explanation is not only absurd but also discriminatory in nature. Hence, we are of the opinion that even for the purpose of Explanation under consideration, a notice of demand will have to be deemed as having been issued under s. 156 when the AO has issued an intimation after processing the return under s.
143(1)(a). The claim of the assessee is, therefore, clearly admissible and the Explanation cannot stand in the way of such claim.
12. The matter may be looked into from another angle also. Interest is required to be paid by the Government to the assessee for holding and utilising the excess money paid by the assessee over and above its tax dues. In the instant case, there cannot be any doubt about the fact that the assessee had paid much more self-assessment tax than was required under the relevant provisions of law. This is clear from the fact that asmuch as a refund of Rs. 2,12,03,624 arose in favour of the assessee even by accepting the returned income. Although, therefore, the payment of Rs. 2,50,00,000 has been claimed by the assessee and also considered by the Departmental authorities, to be self-assessment tax, actually the same is not exactly of the nature of self-assessment tax. The amount which the assessee was required to pay in addition to the tax deducted at source to meet up the tax liability arising out of the return should alone be considered as self-assessment tax. The balance amount of tax having no immediate connection with the return of income was enjoyed by the Government for a number of months. It is, therefore, fair and equitable on the part of the Government to pay interest on the same to the assessee when this excess amount is refunded to the assessee.
13. Ultimately, therefore, we reverse the order of the CIT(A) and direct the AO to pay interest under s. 244A to the assessee on the amount of refund granted to it, in terms of cl. (b) or sub-s. (1) of s.
244A, by taking into consideration the amount of Rs. 2,50,00,000 also as tax paid by the assessee.