UNION OF INDIA THROUGH DIRECTOR OF INCOME TAX versus M/S TATA CHEMICALS LTD.

Citation: [2014] 3 S.C.R. 298 · Decided: 26-02-2014 · Supreme Court of India · Bench: H.L. DATTU, S.A. BOBDE

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
[2014] 3 S.C.R 298 
UNION OF INDIA THROUGH DIRECTOR OF INCOME 
TAX 
v. 
M/S TATA CHEMICALS LTD. 
(Civil Appeal No. 6301 of 2011 etc.) 
FEBRUARY 26, 2014 
[H.L. DATTU AND S.A. BOBDE, JJ.] 
INCOME TAX ACT, 1961: 
s.244-A - Liability of Revenue for payment of interest on 
refund of tax made to resident/deductor uls 240 - Held: The 
language of s. 244-A is precise, clear and unambiguous -
Sub-s. (1) of s.244A speaks of interest on refund of the 
D amounts due to an assessee under the Act - Assessee is 
entitled for the said amount of refund with interest thereon as 
calculated in accordance with clauses (a) and (b) of sub-s. (1) 
of s.244A - In calculating the interest payable, the Section 
provides for different dates from which the interest is to be 
calculated - Interest payment to assessee is a statutory 
E obligation and non-discretionary in nature - s. 244-A grants 
substantive right of interest and is not procedural - The 
principles for grant of interest are the same as under the 
provisions of s.244 applicable to assessments before 
01.04.1989, albeit with clarity of application as contained in 
F s. 244A - Department has also issued Circular clarifying the 
purpose and object of introducing s.244A to replace ss.214, 
243 and 244 - It is clarified therein that since there were some 
lacunae in the earlier provisions with regard to non-payment 
of interest by revenue to assessee for the money remaining 
G with Government, the said Section is introduced for payment 
of interest by the Department for delay in grant of refunds -
The statutory obligation to refund carried with it the right to 
interest also - This is true in the case of assessee under the 
Act. 
H 
298 
UNION OF INDIA THROUGH DIRECTOR OF INCOME 299 
TAX v. MIS TATA CHEMICALS LTD. 
s.244-A - Entitlement of residentldeductor to interest on 
A 
refund of excess deduction or erroneous deduction of tax at 
source u/s 195 - Held: The object behind insertion of s.244A, 
is that an assessee is entitled to payment of interest for 
money remaining with the Government which would be 
refunded - There is no reason to restrict the same to an 
B 
assessee only without extending the similar benefit to a 
resident! deductor who has deducted tax at source and 
deposited the same before remitting the amount payable to 
a non-resident! foreign company - The obligation to refund 
money received and retained without right implies and carries c 
with it the right to interest - In the instant case, it is not in doubt 
that the payment of tax made by resident! depositor is in 
excess and the department chooses to refund the excess 
payment of tax to the depositor - The catechize is from what 
date interest is payable, since the case does not fall either D 
under clause (a) or (b) of s.244A - In the absence of an 
express provision as contained in clause (a}, it cannot be said 
that the interest is payable from the 1st of April of the 
assessment year - Simultaneously, since the said payment 
is not made pursuant to a notice issued u/s 156, Explanation 
to clause (b) has no application - In such cases, as the 
E 
opening words of clause (b) specifically referred to "as in any 
other case''. the interest is payable from the date of payment 
of tax - Thus, the residentldeductor is entitled not only the 
refund of tax deposited u/s t 95(2), but has to be refunded with 
interest from the date of payment of such tax. 
F 
Circulars issued by Central Board of Direct Taxes - Held: 
Circulars issued by the Board in exercise of its powers u/s 119 
, of the Act would be binding on the income tax authorities even 
if they deviate from the provisions of the Act, so long as they G 
seek to mitigate the rigour of a particular Section for the 
benefit of the assessee. 
Tax refund - Held: A "tax refund" is a refund of taxes when 
the tax liability is less than the tax paid - In the instant case, 
H 
300 
SUPREME COURT REPORTS 
[2014) 3 S.C.R. 
A the deductor/assessee had paid taxes pursuant to a special 
order passed by the assessing officer/Income Tax Officer - In 
the appeal filed against the said order the assessee has 
succeeded and a direction is issued by the appellate authority 
to refund the tax paid - The amount paid by the resident/ 
s deductor was retained by Government till a direction was 
issued by appellate authority to refund the same - When the 
said amount is refunded it should carry interest in the matter 
of course - Awarding interest is a kind of compensation of

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