COMMISSIONER OF INCOME-TAX versus CHITTOR ELECTRIC SUPPLY CORPORATION AND ANR.

Citation: [1995] 1 S.C.R. 231 · Decided: 13-01-1995 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

Judgment (excerpt)

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COMMISSIONER OF INCOME-TAX 
A 
v. 
CHITTOR ELECTRIC SUPPLY CORPORATION AND ANR. 
JANUARY 13, 1995 
[B.P. JEEVAN REDDY, N.P. SINGH AND SUHAS C. SEN, JJ.) 
B 
Income Tax Act, 1961-Section 244(1)-lnterest on refund-Where a 
refund is due to assessee-Assessment made in 1966-Tax detennined 
paid-Appea~Assessment set aside-Fresh Assessment directed on different C 
basis-Excess amount refunded immediately-Claim of interest u/s 
244(1)-Whether any amount became due as a result of Appellate Assistant 
Commissioner's orde~eld, No-Proviso to Sec. 240 was merely 
clarificatary. 
The assessee-respondent, a limited company was taken over by the D 
Government. The company received compensation therefor, which amount 
was brought to tax. Original assessment was completed on January 31, 
1966. On appeal, the appellate Assistant Commissioner set aside the 
assessment and directed the Income-Tax Officer to complete the assess-
ment afresh u/s 12-B of the Income Tax Act, 1922 and not u/s 10(2) (vii) of 
the Act. Assessee filed an appeal before the Tribunal but it was dismissed. E 
Fresh assessment was completed in 1973. Excess amount was refunded to 
the assessee in the same month. The assessee laid a claim for interest u/s 
244(1) of the Income Tax Act, 1961 from the date of Appellant Assistant 
Commissioner's order to the month in which the assessment was finalised 
pursuant to the remand order and the refund made. The claim was F 
rejected by the Income Tax Officer. Revision filed before the Commissioner 
was also dismissed. It was held that the respondent having delayed fur-
nishing the particulars called for, was not justified in asking for interest. 
The assessee filed a Writ Petition before the High Court which was allowed. 
The revenue was directed to pay to the respondent intere!!t on the amount G 
refunded. Hence this appeal. 
The appellant challenged the correctness of the view taken by the 
High Court while submitting that the proviso to Section 240 added by 
Direct Tax Laws (Amendment) Act, 1987 w.e.f. April 1, 1989, was merely 
clarificatory of the pre-existing position. 
231 
H 
232 
SUPREME COURT REPORTS 
[1995) 1 S.C.R. 
A 
For determining claim made u/s 244(1), the question raised fo1· 
consideration was whether refund of any amount had become due to the 
assessee as a result of the appellate order in this case. 
Allowing the appeal, this Court 
B 
HELD : Section 244(1) of the Income Tax Act, 1961, applied where 
a refund is due to the assessee pursuant to an order referred to in Section 
240. According to Section 237, a refund becomes due when the amount paid 
by the assessee is in excess of 'the amount with which he is properly 
chargeable under this Act for that year'. Unless a fresh assessment is 
C _ made, it would not be possible to say what amount is properly chargeable 
and until that is determined, question of refund may not arise. In this case, 
Appellate Assistant Commissioner merely directed a fresh assessment on 
a different basis. The Commissioner's order did not determined the tax 
payable by the assessee. The amount due or the amount refundable to the 
assessee was ascertained only on the making of a fresh assessment in 
D August 1973. The Appellate Assistant Commissioner's order had the effect 
of reviving the assessment proceedings which had yet to be completed and 
which proceedings were in fact completed in August, 1973. When the 
assessment proceedings are still pending, there cannot be any amount or 
E 
F 
any refund becoming due to the assessee in respect of that assessment year, 
particularly in the light of Section 237. In this sense, Clause (a) of the 
proviso to Section 240, added with effect from 1-4-1989, is merely 
clarificatory. The said clause says that where an assessment is set aside 
or cancelled and an order of fresh assessment is directed to be made, the 
refund if any shall become due only on the making of such fresh assess-
ment. [236-C-D, 238-B-D] 
Purshottam Dayal Varshney andAnr. v. Commissioner of Income Tax, 
U.P. and Ors., (94) ITR 187 (All) and New Woodlands Hotel v. Commis-
sioner of Income Tax and Ors., (188) ITR 137 (Ker) (DB), overruled. 
G 
New Woodlands v. Commissioner of Income Tax (Central), Madras, 
(138) ITR 795 (Ker.), affirmed. 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1413 of 
1977. 
H 
From the Judgement and Order dated 7.9.76 of the Andhra Pradesh 
COMMR. OFl.T. v. CHIITOR ELECTRICCORPN.IJEEVAN REDDY,J.)233 
High Court in W.P. No. 5167 of 197

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