DELHI DEVELOPMENT AUTHORITY VS INCOME-TAX OFFICER
1999 P T P 3387
[230 I T R 9]
[Delhi High Court (India)]
Before R. C. Lahoti and J. K Mehra, JJ
DELHI DEVELOPMENT AUTHORITY
Versus
INCOME-TAX OFFICER
C. M. No .4990 of 1995 in C. W. P. No. 2996 of 1995, decided on 31/07/1997.
Income-tax---
----Refund---Interest---"Assessee"---"Assessee in default", "assessment", meanings of---Petitioner (Delhi Development Authority) not deducting tax at source from payment of interest made to buyers of flats and paying it to Government---Notice of demand issued and tax recovered---Tribunal finding that petitioner not obliged to deduct tax at source---Amount not refunded and petitioner filing writ petition---During pendency of writ petition I.T.O. refunding amount recovered from petitioner alongwith interest---Petitioner filing petition claiming interest under S.244(lA) for 1988-89 and 244A for 1989-90 and 1990-91---Order under which petitioner's liability was determined and recovery made treating petitioner as assessee in default was an order of assessment ---Assessee entitled to interest with reference to SS.244(IA) & 244A for relevant years---Indian Income Tax Act, 1961, Ss.2(7), 4(8), 244(lA) & 244A.
For the assessment years 1988-89, 1989-90 and 1990-91, the Income-tax Officer formed an opinion that the petitioner, the Delhi Development Authority, had committed a default in not deducting tax at source amounting to Rs.3,95,97,194 under section 194A of the Income Tax Act, 1961, on the amounts of interest paid by it to buyers of flats. The Income-tax Officer issued a notice of demand for the said amount and effected recovery of tax from the petitioner. The Tribunal; on appeal by the petitioner, held that the petitioner was not obliged to deduct tax- at source and hence the amount recovered from the petitioner was liable to be refunded to it. As the amount was not refunded by the Income-tax Officer as per the Tribunal's order, the petitioner filed a writ petition seeking a direction to the Income-tax Officer to refund the amount recovered alongwith interest. During the pendency of the writ petition, the Income-tax Officer passed an order under section 254(1) giving effect to the appellate order of the Tribunal and refunded the sum of Rs:3,95,97,194, alongwith interest of Rs.19,79,859 to the petitioner. Thereafter, a miscellaneous application was filed by the petitioner and it contended that the interest due and payable to the petitioner was not rightly calculated by the Income-tax Officer and appropriate directions deserved to be issued to him to calculate interest under section 244(lA) for the assessment year 1988-89 and under section 244A for the assessment years 1989-90 and 1990-9l. The Income-tax Officer opposed the prayer of the petitioner and contended that the principal amount alongwith interest had already been paid to the petitioner, that section 240 of the Act used the words "refund of any amount", that it applied only to refund of tax as the whole of Chapter XIX of the Act dealt with refund of "tax" only, but the amount refunded to the petitioner was not tax, that sections 244(lA) and 244A were not attracted as the, amount involved was neither any "advance tax' nor was it "tax paid by the assessee" and that even if any interest was liable to be paid, it was to be paid only to such persons from whom the amount was to be deducted by the Delhi Development Authority and then deposited with the Revenue and not to the Delhi Development Authority:
Held, allowing the application of the petitioner, (i) that the order under which the liability of the petitioner was determined to make payment and also the quantum thereof and whereunder recovery was made from the petitioner holding it to be an assessee in default, was an order of assessment and the petitioner was an assessee thereunder. The order having been set aside in appeal, the applicability of sections 244(lA) and 244A was clearly attracted.
(ii) That looking to the provisions of subsection (3) of section 244 and subsection (4) of section 244A, it was clear that the entitlement of the petitioner to interest for the period covered by the assessment year 1988-89 had to be determined by reference to subsection (1 A) of section 244 and for the subsequent years 1989-90 and 1990-91 it had to be determined under section 244A.
(iii) That the Income-tax Officer having failed in discharging his statutory obligation to pay interest, in spite of a demand having been made for the purpose, the petitioner was entitled to a writ of mandamus.
(The Income-tax Officer was directed to release the amount. of interest to the assessee subject to adjustment for the amount of interest already paid).
CIT v. Khemchand Ramdas (1938) 6 ITR 414 (PC); Commissioners for General Purposes of Income-tax for the City of London v. Gibbs (1942) AC 402 and Lakshman Shenoy (A.N.) v. I.T.O. (1958) 34 ITR 275 (SC) ref.
G. C. Sharma, Senior Advocate, Anoop Sharma and Rajan Malik for Petitioner.
Ms. Premlata Bansal for Respondent.
JUDGMENT
R. C. LAHOTI, J.---This petition under Article 226/227 of the Constitution of India seeks direction to the respondent for payment of interest on the amount refunded to the .petitioner in the background of the facts stated hereinafter. It appears that the petitioner-Delhi Development Authority undertook construction of flats and allotted the same to the buyers, having entered into contracts with each of them consistently with the scheme governing the allotment of flats. It also appears that the Delhi Development Authority was liable to payment of interest to the flat buyers on the amount paid by them, if the flats were not constructed and possession made over to the allottees in accordance with the terms agreed upon between the two. The Delhi Development Authority had to pay interest to the flat buyers for the period of delay in construction and delivery of possession. The Income-tax Officer (TDS) Ward No .8(6) formed an opinion that there was default on the part of the, Delhi Development Authority in not deducting tax at source which was required to be done under section 194A of the Act. A demand of Rs.3,95,97,194 relevant to the assessment years 1988-89, 1989-90 and 1990-91 was raised, vide order, dated January 31, 1991 (Annexure "A-1). Notice of demand was issued followed by coercive process consequent to which recovery was made.
The petitioner went in appeal. The Income-tax Appellate Tribunal, vide its order, dated January 24, 1995, passed in I.T.As. Nos.5762 to 5764 of 1991 held that the Delhi Development Authority was not obliged to deduct the tax at source and hence the amount recovered from the Delhi Development Authority was liable to be refunded to it. As the amount was not refunded, the petitioner filed Civil Writ Petition No.2996 of 1995 seeking direction to the respondent to refund the amount recovered from it alongwith interest.
During the pendency of the writ petition, the respondent passed an order under section 254(1) of the Act giving effect to the appellate order of the Tribunal to refund the amount of Rs.3,95,97,194. The respondent also calculated interest under section 244(1) of the Act at Rs.19,79,859 making the total amount refundable Rs.4,15,77,053. An income-tax refund order, dated September 4, 1995, was drawn up and delivered to the petitioner. When the writ petition came up for hearing on November 20, 1995, counsel for the respondent informed the Court that refund with interest had already been made. Counsel prosecuting the petition for the Delhi Development Authority was not present in the Court. The senior law officer of the Delhi Development Authority happened to be present. The Court directed the petition to be treated as disposed of in view of the statement made on behalf of the respondent.
On August 12, 1996, C.M. No.7216 of 1996 has been filed on behalf of the petitioner submitting that the interest due and payable to .the petitioner was not rightly calculated by the, respondent and appropriate direction deserved to be issued to the respondent to calculate interest under section 244(lA) for the assessment year 1988-89 and under section 244A for the assessment years 1989-90 and 1990-91. This application was preceded by a demands made by the petitioner to the respondent.
The prayer made by the petitioner has been opposed by the respondent. It is submitted that the principal amount together with interest due and payable as per law has already been paid to the petitioner. The claim made by the petitioner, has been contested by the respondent mainly on three pleas: firstly, that section 240 of the Act, uses the words "refund of any amount", it applies only to refund of tax as the whole of Chapter XIX deals with refund of "tax" only but the amount refunded to the petitioner was not tax; secondly, sections 244(1 A) and 244A are not attracted, as the amount involved is neither any "advance tax" nor is it tax paid by the assessee; and thirdly, even if any interest is liable to be paid, it is to be paid only to such persons from whom the amount was to be deducted by the Delhi Development Authority and then deposited with the Revenue and not to the Delhi Development Authority.
We have heard learned counsel for the parties. We are, of the opinion that the claim preferred by the petitioner finds support from the law and has to be sustained while the pleas raised on behalf of the respondent are liable to be rejected as untenable.
The following 'provisions which would be relevant for the purpose of this order are extracted and reproduced:
"244. (1) Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Assessing Officer does not grant the refund within a period of three months from the end of the month in which such order is passed, the Central Government shall pay to the assessee simple interest at fifteen per cent. per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund is granted.
(1A) Where the whole or any part of the refund referred to in subsection (.1) is due to the assessee, as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in subsection (1) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted:
Provided that, where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted:
Provided further that no interest under this subsection shall be payable for a period of one month froth the date of the passing of the order in appeal or other proceeding:
Provided also that where any interest is payable to an assessee under this subsection, no interest under subsection (1) shall be payable to him in respect of the amount so found to be in excess .....
(3) The provisions of this section shall not apply 'in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment years.
244A. (1) Where refund of any amount becomes due to the assessee under this Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely:---
(a) where the refund is out of any tax collected at source under section 206C or paid by way of advance tax or treated as paid under section 199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of one per cent. for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted:
Provided that no interest shall be payable if the amount of refund is less than ten percent of the tax as determined under subsection (1) of section 143 or on regular assessment;
(b) in any other case, such interest shall be calculated at the rate of one percent 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 of 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 section 156 is .paid in excess of such demand . . .
(4) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years."
The first question to be determined is whether the petitioner is an assessee and whether the amount recovered from it can be said to have been in pursuance of any order of assessment. It is not disputed that the respondent had determined the liability of the petitioner to deduct the tax at source and deposit. the same with the respondent under section 194A read with section 201 of the Act. Subsection (1) of section 201 clearly provides that failure on the part of the person who is required to deduct and pay the tax shall be deemed to be an assessee in default in respect of the tax. Clause (7) of the section 2 of the Act defines an assessee to include, inter alia, such person who is deemed to be an "assessee in default" under any provision of the Act. The petitioner was, therefore, an assessee. The word "assessment" is not defined under the Act. Clause (8) of the section 2 states merely that assessment includes reassessment. The definition is an inclusive one only.
In AX Lakshman Shenoy v. I.T.O. (1958) 34 ITR 275 (SC), their Lordships have held that the three expressions "levy", "assessment" and "collection" are of the widest significance and embrace in their sweep all such proceedings for raising money by the exercise of the power of taxation. Their Lordships have quoted with approval from the speech of Lord Simon in Commissioners for General Purposes of Income-tax for the City of London v. Gibbs (1942) AC 402, 406 pointing out that the word "assessment' is used in the English Income-tax Code in more than one sense---one meaning is the fixing of the sum taken to represent the actual profit, and the other, the actual sum in tax which the taxpayer is liable to pay. In CIT v. Khemchand Ramdas (1938) 6 ITR 414 (PC), their Lordships of the Privy Council have held that the word "assessment" is used in the income-tax Acts as meaning sometimes the computation of income, sometimes the determination of the amount of tax payable, and sometimes the procedure laid down in the Act for imposing liability upon the taxpayer.
We are, therefore, unhesitatingly of the opinion that the order dated January 31, 1991 (Annexure "IA"), which determined the liability of the petitioner to make payment and also the quantum thereof and whereunder recovery was made from the petitioner holding it to be an assessee in default, was an order of assessment and the petitioner was an "assessee" thereunder. The order having been set aside in appeal, the applicability of sections 244 and 244A is clearly attracted.
It was submitted by learned counsel for the respondent that it is only Chapter XIV of the Act which speaks of "procedure for assessment" wherein finds place section 143 entitled "assessment". An assessment falling within Chapter XIV only would be an order of assessment and any order passed under section 194A read with section 201 of the Act would not be an order of assessment. The contention has been stated, only to be rejected. We cannot put such a narrow construction on the meaning of the term assessment.
Looking at the provisions of subsection (3) of section 244 and subsection (4) of section 244A, it is clear that the entitlement of the petitioner to interest for the period covered by the assessment year 1988-89 shall be determined by reference to subsection (1 A) of section 244 and for the period thereafter shall be determined under section 244A.
The respondent having failed in discharging its statutory obligation to pay interest, in spite of a demand having been made for the purpose, the petitioner is entitled to a writ of mandamus.
The application is allowed. The respondents are directed to deal with and dispose of the petitioner's claim for interest consistently with the observations made in paragraph 12 above and release the amount of interest to the petitioner, subject to adjustment for the amount of interest already paid, within a period of four weeks from today, failing which the respondent shall remain liable to pay further interest calculated at 15 percent per annum on the amount found due and payable to the petitioner. No order as to costs.
M.B.A./3096/FC???????????????????????????????????????????????????????????????????? Application allowed.