INCOME TAX OFFICER VS DELHI DEVELOPMENT AUTHORITY
2002 P T D 1088
[251 I T R 772]
[Supreme Court of India]
Present: S.P. Bharucha C.J.1, Y.K. Sabharwal and Brijesh Kumar, JJ
INCOME TAX OFFICER
Versus
DELHI DEVELOPMENT AUTHORITY
Civil Appeal No. 3544 of 1998, decided on /01/.
th
November, 2001. (Appeal from the judgment and order, dated July 31, 1997, of the Delhi High Court in C.M. No. 4990 of 1995 in C.W.P. No. 2996 of 1995):
(a) Income-tax---
----Refund---Interest---Deduction of tax at source---Development Authority constructing flats and allotting them to buyers---Interest paid to buyers for period of delay---Failure to deduct tax at source---Notice of demand for tax and recovery---Development Authority an "assessee"-- Appellate Tribunal---Finding Development Authority not liable to deduct tax---Refund of tax recovered---Interest---Provision applicable to assessee applies---Indian Income Tax Act, 1961, Ss:2(7), (28A), 194A, 201, 240, 244(lA), (3) & 244A.
(b) Words and phrases---
----"Assessee"---Meaning of.
The respondent development authority, which constructed flats and allotted them to buyers, on failure to allot the flats within the time stipulated in the agreements had to pay interest on the amount paid by the allottees for the period of delay. The concerned Officer raised demands against the respondent for the assessment years 1988-89, 1989-90 and 1990-91 on the basis that it had failed to deduct income-tax at source .on the payment of interest as provided under section 194A of the Income Tax Act, 1961. The Appellate Tribunal held that the amounts credited to the accounts of the allottees were not in the nature of interest within the meaning of section 2(28A) and set aside the order and directed refund of the amount recovered from the respondent. As the amount was not refunded, the respondent filed a writ petition. Pending the writ petition, the amount paid by the respondent was refunded with interest calculated under section 244(1). Thereafter, the respondent filed a miscellaneous petition claiming that interest should have been calculated for the assessment year 1988-89 as provided in section 244(1A), and for the assessment years 1989-90 and 1990-91 under section 244A. The High Court allowed the petition holding that the order where under the respondent was held to be an assessee in default and recovery was made was an order of assessment and the respondent was an assessee there under. That order having been set aside, sections 244(1A) and 244A were clearly attracted and the entitlement of the respondent to interest had to be determined with reference to section 244(1A) for the assess ment year 1988-89 and for the subsequent period under section 244A. The Department preferred an appeal to the Supreme Court:
Held, affirming the decision of the High Court, (i) that the direction to refund the amount had been made in appellate proceedings before the Appellate Tribunal attracting section 240. It could not be said that the "refundee" would not be an assessee only for the reason that actually no assessment proceeding had taken place. Section 201 clearly provided that if the principal officer of the company liable to deduct the income-tax at source failed to do so, he shall be deemed to be an assessee in default in respect of the tax.
(ii) That the High Court was right in applying section 244(1A) for determining interest for the period covered by the assessment year 1988-89.
From the definition of "assessee" in section 2(7) of the Income Tax Act, 1961, it is clear that the term "assessee" includes actual assessees as well as deemed assessees. It is not correct to say that unless there are actual assessment proceedings pertaining 'to any person, he cannot be considered to be an assessee.
Delhi Development Authority v: ITO. (1998) 230 ITR 9 affirmed.
M.L. Verma, Senior Advocate (P.S. Narasimha, P. Sridhar, B.V.B. Das and Ms. Sushma Suri, Advocates with him) for Appellant.
G.C. Stharma, Senior Advocate (V.B. Saharya, Anoop Sharma and R.K. Raghavan, Advocates with him) for Respondent.
JUDGMENT
BRIJESH KUMAR, J.---This civil appeal arises out of judgment and order passed by the Delhi High Court, dated July 31, 1997 (see (1998) 230 ITR 9), directing the appellant, namely, the Revenue to dispose of the claim of interest preferred by the respondent, viz., D.D.A. on the amount of refund and to release the amount thereof, in their favour.
The facts which admit of no dispute are that the Delhi Development Authority (for short "the D.D.A."), was to construct and allot flats to the buyers within the time stipulated in their agreements. On failure to do so, the D.D.A. was liable to pay interest to the buyers on the amount paid by them for the period of delay. The D.D.A. defaulted as a consequence whereof it made payment of interest to the buyers. The concerned Income-tax Officer (IDS) found that the D.D.A. faded to deduct income-tax at source on the payment of interest made to the buyers as provided under section 194A of the Income Tax Act, 1961. Accordingly, demand was raised for the assessment years 1987-88, 1988-89 and 1989-90, An appeal to the Commissioner of Income-tax failed and it was found that the Assessing Officer had rightly levied tax under section 201(1) of the Act and the interest under subsection (1A) of section 201 of the Act. The D.D.A. preferred an appeal before the Income-tax Appellate Tribunal. The appeal was allowed by order, dated January 24, 1995, passed by the Income-tax Appellate Tribunal holding that the amounts credited to the accounts of the allottees were not in the nature of interest within the meaning of section 2(28A) of the Act. The orders passed by the Income-tax Authorities were quashed. It was further provided that the amounts, if recovered from the D.D.A. be refunded immediately.
It also transpires that the Department moved the Income-tax Appellate Tribunal under section 256(1) of the Income Tax Act for making reference to the High Court and by order, dated December 13, 1995, the Income-tax Appellate Tribunal referred the questions. In the meantime the order of the Appellate Tribunal was given effect to by the concerned Authorities refunding the amount with interest calculated under section 244(1) of the Act.
The D.D.A. filed a writ petition before the Delhi High Court raising a grievance that the Interest as calculated by the Income-tax Department was not correct. According to the D.D.A. interest under section 244(1A) of the Act should have been paid for the year 1987-88 and under the provisions of section 244A for the years 1988-89 and 1989-90. The Income-tax Department resisted the claim on the ground that the amount refunded to the D.D.A. was not the amount taxed nor involved any advance tax or the tax paid by the D.D.A, so as to attract section 244A. The High Court negatived the plea of the Income-tax Department. While allowing the writ petition the High courts gave direction to the Income-tax Department to dispose of the claim of the D.D.A. for interest in the light of para. 12 of the judgment and to release the amount of interest to the D.D.A. Paragraph 12 of the judgment is quoted below (page 15):
"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 (I A) of section 244 and for the period thereafter shall be determined under section 244A.
As indicated earlier the Revenue had refunded the amount with interest calculating it in accordance with section 244(1) of the Act. It is only to be seen as to whether the interest was rightly calculated or it is to be paid under sections 244(1A) and 244A of the Act. In this connection reference to section 244(3) may be made which reads as under-----
244. (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."
On the basis of the above provision it has not been dispute before us that up to April 1, 1989, the interest shall be payable in accordance with section 244 of the Income-tax Act and for the period beyond that, according to section 244A of the Income-tax Act. So far as the period prior to April 1, 1989, is concerned, the appellant's case is that interest has been rightly calculated under section 244(1) of the Act. It is submitted that subsection (IA) of section 244 will not be applicable since the payment of tax was not made in pursuance of any order or assessment. This contention in our view has no force. It would not be necessary that in all cases, before payment is made, there must always be an actual order of assessment. Tax is payable in advance as will. It is deducted at source also, as in the present case. On a perusal of section 244 what seems to be important is that the amount incomes refundable to the assessee by virtue of in order passed in appeal ')r any proceedings under the Act. Section 240 of the Income-tax Act dells with refund as a result of any order passed in appeal or proceedings under the Act. It reads as under:---
"240. Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount become due to the assessee, the Assessing Officer shall except as otherwise provided in this Act, refund the amount to the assessee without his having to make any claim in that behalf:
Provided that where, by the order aforesaid,--
(a)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 assessment;
(b)the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the total income returned by he assessee."
It will also beneficial to peruse section 244 of the Income-tax Act. It is as follows:
"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 percent 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 proceedings 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
In the case in hand, as indicated earlier, the direction to refund the amount has been made in appellate proceedings before the Tribunal. `The amount is to be refunded to the assessee. It cannot be said that the "refundee" will not be an assessee only for the reason that actually no assessment proceeding had taken place. It would be pertinent to refer to the provision contained under section 201 of the Income-tax Act which clearly provides that if the principal officer or the company liable to deduct the income-tax at source fails to do so he shall be deemed to be assessee in default in respect of the tax. The definition of the word "assessee' as contained under clause (7) of section 2 of the Act reads as under: '
"2. (7) `assessee' means a person by whom any tax or any other sum of money is payable under this Act, and includes---
(a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount refund due to him or to such other person;
(b) every person who is deemed to be an assessee under any provision of this Act;
(c) every person who is deemed to be an assessee in default under any provision of this Act."
From the above provision, it is clear that term "assessee" includes actual assessee as well as deemed assessees under the provision of the Act. It is, therefore, not correct to contend that unless there are actual assessment proceedings pertaining to any person, he cannot be considered to be an assessee. In the present case the D.D.A. was considered to be liable to deduct the tax at source. It failed to do so. Hence, the order under sections 201(1) and 201(1 A) was passed raising the demand and the amount of tax was paid. The order of refund was passed in appellate proceedings under the Act attracting section 240 of the Act. Certain decisions were cited at the Bar to show the meaning of the words "assessee" and. "assessment" and different stages of the assessment proceedings, need not be dealt with in view of the clear definition of the word "assessee" under the Act as quoted above.
The High Court has rightly provided in para. 12 of its judgment quoted earlier for applying subsection (1A) of section 244 of the Act for determining interest for the period covered by the assessment year 1988 89. It is so also for the reason that the amount was paid by way of deductions after March 31, 1975, as provided under subsection (1A) of section 244 of the Act.
For the discussion held above, we find no force in the appeal. It is accordingly dismissed. No order as to costs.
M.B.A./1065/FC Appeal dismissed.