LexSANDVIK ASIA LTD. versus COMMISSIONER OF INCOME TAX-I, PUNE AND ORS.
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y· I ' ' SANDVIK ASIA LTD. A V. COMMISSIONER OF INCOME TAX-I, PUNE AND ORS. JANUARY 27, 2006 [H.K. SEMA AND DR. AR. LAKSHMANAN, JJ.] B Income Tax Act, 1961: Section 240 (as it stood prior to 1.4.1989)-AYs 1977-78, 1978-79, 1981-82 and 1982-83-Refund on appeal-Interest on refund-Delayed C payment of interest-Compensation-Entitlement to-A notice of demand for payment of income tax was issued to the assessee-However, the appellate authority directed refund of a certain amount-The assessee, thus, became entitled to interest on the refund under Ss. 2 I 4 and 244-But the payment of interest was delayed for various periods ranging from 12 to 17 years-The D assessee filed a writ petition before the High Court claiming interest on the delayed payment of interest on refund-The High Court rejected the claim on the ground that interest under Ss. 214 and 244 was not refund under S. 240 and hence the Revenue was not liable to pay i:-:terest under S. 244 in respect of delay in payment of interest on refund-Correctness of-Held: The assessee was indisputably entitled to interest under Ss. 214 and 244-The award of E interes~ on the refunded amount is as per the statutory provisions of law-- There is no question of the delay being 'justifiable' _even if the Revenue takes an erroneous view of the law-A person should only be taxed in accordance with law and hence where excess amounts of tax are collected from an assessee or any amounts are wrongfully withheld from an assessee without F authority of law the Revenue must compensate the assessee-The revenue is solely held responsible for the delayed payment of interest on refund-Hence, the Revenue is directed to pay simple interest @ 9% on the interest on refund from the date it is due till it is actually paid. Words and Phrases: "Refund of any amount"-Meaning of-Jn the context of Section 240 (as it stood prior to 1.4. I 989) of the Income Tax Act, 1961. A notice of demand for payment of income tax for the Assessment years 811 G H 812 SUPREME COURT REPORTS [2006] I S.C.R. - A 1977-78, 1978-79, 1981-82 and 1982--83 was issued to the appellant-assessee by respondent No. 2. However, as a result of the appellate order passed by the Commissioner of income tax (Appeals) the appellant received a refund of a certain amount and became entitled to receive interest on the refund. • ' Therefore, the assessee requested respondent No. 2 to grant interest on the B said refund under Sections 214 and 244 of the Income Tax Act, 1961 for the period from 01.4.1977 to 31.03.1989. But the payment of interest on the said refund was delayed by respondent No. 2 and the delay was for various periods ranging from 12 to 17 years. • The appellant filed a writ petition before the High Court claiming c interest on the delayed payment of interest on refund. The High Court dismissed the writ petition holding that interest under Sections 214 and 244 of the Act was not a refund under Section 240 and hence the Revenue was not liable to pay interest under Section 244 in respect of delay in payment of the aforesaid interest on refund. Hence the appeal. D The following questions arose before the Court;- (1) Whether an assessee was entitled to be compensated for the delay in paying to it any 'amount' due to it even if such 'amount' comprised of interest? E (2) Whether an assessee was entitled to be compensated by the Income Tax Department for the delay in paying to the assessee amounts admittedly due to it? Allowing the appeals, the Court - F HELD: l. l. There is no question of the delay being 'justifiable' and in any event even if the Revenue takes an erroneous view of the law, which cannot mean that the withholding of monies is 'justifiable' or 'not wrongful'. There is no exception to the principle laid down for an allegedly 'justifiable' withholding and even if there was 17 (or 12) years delay has not been and G cannot in the circumstances be justified. [842-F] 1.2. The Income Tax Act, 1961 recognizes the principle that a person ... should only be taxed in accordance with law and hence where excess amounts of tax are collected from an assessee or any amounts are wrongfully withheld H from an assessee without authority of law the Revenue must compensate the assessee. [842-H; 843-A] - SANDVIK ASIA LTD. v. COMMR. OF INCOME TAX-1, PUNE 813 \ CITv. Narendra Doshi, 254 ITR 606 (SC) and Berger Paints Ltd. v. CIT, A 266 ITR 99 (SC), relied on. CITv.
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