Commissioner of Income Tax vs Hynoup Food and Oil Industries Ltd.

K.A. Puj, J.—The Revenue has filed these five tax appeals u/s 260A of the Income Tax Act, 1961 for the assessment year 1989-90 to 1992-93 and 1994-95 proposing to formulate the following substantial questions of law.

(A) Whether the Appellate Tribunal is right in law and on facts in dismissing the appeal filed by the Revenue without adjudicating the same on the merits on the ground that since in the appeal, the effect was below Rs. 1 lakh, the Revenue could not have preferred the same in view of the instructions of the Central Board of Direct Taxes, thereby entitling the hon''ble Tribunal not to decide the same on the merits?

(B) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by the Commissioner of Income Tax (Appeals) directing the Assessing Officer to grant interest on interest withheld for the period claimed by the assessee?

This court has admitted all the five appeals on August 6, 2007 and formulated the same questions of law.

The brief facts of the case are that the assessee-company filed an application u/s 154 of the Act wherein the company has contended that it was granted a combined refund of Rs. 2,73,23,200 for the assessment years 1989-90 to 1992-93 and 1994-95 after appeal effect which was stayed up to September 30, 2001 by the learned Commissioner of Income Tax and refund of Rs. 2,37,23,200 was issued in November, 2001 wherein interest u/s 244A was calculated only up to December 31, 2000, as a result of which the assessee had not received interest up to the date of issue of refund. The assessee, therefore, requested to issue the balance interest u/s 244A for 10 months from January 1, 2001 to October 31, 2001 for the assessment years 1989-90 to 1992-93 and 1994-95. This claim was not accepted by the Assessing Officer.

Being aggrieved by the said order the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) and the Commissioner of Income Tax (Appeals) vide its order dated November 27, 2002, directed the Assessing Officer to give interest on interest withheld for the period claimed. Following the decision of this court in the case of D.J. Works Vs. Deputy Commissioner of Income Tax, the learned Commissioner of Income Tax (Appeals) observed that the interest was payable on refund arising due to appellate order. The interest was also determined and quantified by the order giving effect to the appellate order. Thus what was withheld included both the tax and the interest payable by the Government. The interest which was payable on the refund cannot be retained without payment of interest thereon and accordingly direction was given to the Assessing Officer to grant such interest.

Being aggrieved by the said order of the learned Commissioner of Income Tax (Appeals) the Revenue took up the matter before the Income Tax Appellate Tribunal, Ahmedabad and the Tribunal vide its order dated March 30, 2006, confirmed the order of the learned Commissioner of Income Tax (Appeals) and the appeals filed by the Revenue were dismissed both on the basis of preliminary objection as well as on the merits.

Before the Tribunal a preliminary objection was raised on behalf of the assessee that there being low tax effect the Revenue''s appeals are not maintainable. The Tribunal has, however, observed that apart from the low tax effect the issue is squarely covered by the decision of the hon''ble Supreme Court in the case of Sandvik Asia Ltd. Vs. Commissioner of Income Tax-I, Pune and Others, wherein the hon''ble Supreme Court has observed that the assessee was entitled to interest on the amount of interest paid u/s 214 and/or Section 244 of the Act and the Department was bound to grant interest which had accrued for those periods.

We have heard Mr. Manish Bhatt, learned senior standing Counsel for the Revenue. Despite service of rule nobody appears on behalf of the assessee. We have also perused the order passed by the authorities below. The question regarding low tax effect was heard at great length and we have decided the said issue in favour of the assessee. Question No. (A) formulated by this court is, therefore, answered in the affirmative, in favour of the assessee and against the Revenue. We have also taken the same view in other group matters.

So far as question No. (B) is concerned, the Tribunal has followed the decision of the hon''ble Supreme Court. Since the issue is concluded by the decision of the hon''ble Supreme Court, we decide the said issue regarding grant of interest on interest in favour of the assessee and against the Revenue. Question No. (B) is, therefore, answered in the affirmative and the Tribunal is right in confirming the order of the learned Commissioner of Income Tax (Appeals) directing the Assessing Officer to give interest on interest withheld for the period claimed by the assessee.

In the above view of the matter, all the five tax appeals stand dismissed without any order as to costs.