Interest on refunds

The assessee was entitled to interest under s 244A in respect of the excess payment of tax in response to the order passed under s 201 read with s 195, 201(1A) and 250, as held by MumTrib in ADIT (IT), Circle 2(2) v Taj TV Ltd — In favour of: The assessee: ITA No 413 (Mum) of 2008: (AYs 2003–2004 and 2004–2005).

The term “assessee” includes a deemed assessee and, thus, a “deemed assessee in default”, as held under s 201(1), falls under the definition of an assessee and the provisions of s 244A were applicable to it.

ADIT (IT), Circle 2(2) v Taj TV Ltd.

ITAT BENCH ‘L’, MUMBAI

ITA No. 413 (MUM.) of 2008

Assessment Years: 2003-04 and 2004-05

J. Sudhakar Reddy, AM and Vijay Pal Rao, JM

Decided on: 28 January 2011

Counsel appeared:

Narender Singh for the appellant

Madhur Agarwal for the respondent

Order

Vijay Pal Rao, JM

This appeal by the revenue is directed against the order dated 17-10-2007 of CIT(A) -XXXI,

Mumbai arising from the giving effect order passed by the Assessing Officer under section 250

for the assessment year 2003-04 only.

2. Only ground raised by the revenue in this appeal is that the CIT(A) erred in holding that the

assessee is entitled to interest under section 244A of the Act in respect of excess payment of tax

in response to the order of the Assessing Officer under section 201 read with sections 195,

201(1A) and 250 of the Act and directing to grant interest under section 244A.

 

3.1 Facts recorded by the lower authorities are that the assessee is a company registered in

Mauritius and engaged in the business of telecasting sports channel known as "Ten Sports". The

assessee is a tax resident of Mauritius in terms of Article 4 of the India-Mauritius tax Treaty

(treaty).

3.2 The assessee had entered into agreements with various non-residents for acquiring

programming rights for telecasting sports events taking place outside India on Ten Sports

channel. For some events, the rights acquired were for live telecasting while for some events the

same were for delayed telecasting in India. The assessee contended that both, the events and

parties with whom assessee has entered into agreements for telecasting sports events were outside

India. The assessee considered the residential status in India of the parties with whom the

assessee entered into agreement under the Act as "non-resident".

3.3 The Assessing Officer held that the payments made by the assessee to the non-residents were

in the nature of "Royalty" and attracts the provisions of Explanation 2 to section 9(1)(vi) of the

Act which were deemed to arise in India and hence taxable in India. Therefore, the Assessing

Officer was of the view that the assessee failed to deduct the tax under section 195 and was thus

deemed to be a assessee in default under section 201(1). The Assessing Officer initiated the

proceedings under section 201 against the assessee for non-deduction of tax at source from the

payments made to the non-residents and passed an order under section 201(1)/201(1A) of the Act

dated 17-3-2004. Accordingly, the Assessing Officer issued notice of demand on the assessee

under section 156 of the Act for Rs. 37,464,215 under section 201(1) and interest of Rs.

1,766,064 under section 201(1A) of the Act total amounting to Rs. 39,230,279 for non-deduction

of tax at source from the payments made to the non-residents.

3.4 Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the

CIT(A) and also paid the entire demand raised by the Assessing Officer which are as under :

S. No. Particulars Date of payment Amount (Rs.)

1. Payments for the year ended 31 March,

2003.

27 March, 2004 5,44,150

2. Interest under section 201(1A) 27 March, 2004 1,766,064

3. Payments for the year ended 31 March,

2003.

27 March, 2004 5,000,000

4. Payments for the year ended 31 March,

2003.

31 March, 2004 27,020,065

Total 39,230,279

3.5 The ld. CIT(A) held that the provisions of the section 195 are not applicable to the assessee,

therefore the assessee was not a defaulter under section 201(1) of the Act. The ld. CIT(A) also

held that the amount paid to various non-resident content providers will not be taxed in India if

the same is being paid for acquiring rights for live telecast. He further held that for programming

rights for delayed telecast is not liable to tax in the hands of non-resident content provider unless

they have permanent establishment in India. Accordingly he directed the Assessing Officer to

verify the tax residency certificate (TRC) of those non-resident content providers in respect of

whom the assessee has not submitted tax residency certificate, and to allow the benefit of Double

Tax Avoidance Agreement between India and the countries of non-residents content providers.

3.6 The assessee submitted the TRC certificates to the Assessing Officer except for few cases

where the aggregate tax instances comes to Rs. 220,433. The assessee has recovered the tax

amount from some of the non-resident content providers and issued them withholding tax

certificates for Rs. 5,425,177.

3.7 The Assessing Officer has passed giving effect order dated 27-5-2005 to the order passed

under section 250 and determined the refund due to the assessee as under:

Particulars Amount in Rs.

Total taxes collected under section 201 39,230,279

Less: withholding tax certificates issued World

wrestling federation entertainment inc. British Sky

Broadcasting Ltd.

4,850,166

575,011

5,425,177

Less : tax under section 201(1) in respect of content

providers in respect of whom TRC’s have not been

submitted’

213,028

For the year ended 31-3-2003 7,404 220,433

Refund due 33,584,669

3.8 The Assessing Officer has issued refund order dated 22-8-2005 with Income-tax computation

form. However the DDIT did not grant interest under section 244A while computing the amount

of final refund to be issued to the assessee and granted only the refund of Rs. 33,584,669 after

giving effect to the order of the CIT(A).

3.9 Aggrieved by the order of the Assessing Officer for non-granting the interest under section

244A, the assessee filed an appeal before the CIT(A), who allowed the claim of the assessee by

following the decision of the Hon’ble Supreme Court in the case of ITO v. Delhi Development

Authority [2001] 252 ITR 772 and the order of this Tribunal in the case of TATA Chemicals Ltd.

v. Dy. CIT [2007] 16 SOT 481 (Mum.) and held that the assessee is entitled for interest under

section 244A in respect of the excess payment of tax in response to the order passed under section

201 read with sections 195, 201(1A) and 250 of the Act.

3.10 Before us, the learned DR has submitted that the assessee is not the payer of the tax and

therefore, the provisions of section 244A are not applicable for grant of interest to the assessee.

The assessee has paid the tax on behalf of the recipient of the payments. Thus, there is no

provisions under the statute for refund of the tax as well as interest and the refund is made to the

deductor as per the circular of CBDT. Therefore, the provisions of section 244A are not

applicable when the refund is not payable under the provisions of the Act. He has referred to the

provisions of section 244A and submitted that as per Explanation to clause (b) of sub-section (1)

of section 244A, the interest is payable on the amount which is excess of the demand issued under

section 156. In the case in hand, the assessee paid taxes in pursuance to the order passed under

section 201(1), 201(1A) read with section 195 and therefore, the payment of tax was as per the

demand raised under section 156 not excess of the demand. The learned DR has forcefully

contended that when there was no payment of tax in excess of the demand raised under section

156 then no interest is liable to be paid to the assessee for refund of the said tax. The next line of

argument of the learned DR is that the interest under section 244A is payable only in respect of

the assessment for the assessment year commencing on 1-4-1989 and subsequent years. He has

referred the provisions of sub-section (4) of the section 244A and submitted that when there is no

assessment on the assessee in respect of the tax paid in pursuance to the order passed under

sections 201 and 201(1A), then no interest shall be payable under section 244A. The learned DR

has thus submitted that the Explanation to clause (b) of sub-section (1) has not been considered in

the decision relied upon by the Assessee as well as by the CIT(A). Thus, the learned DR has

submitted that in view of the language of the Explanation to clause (b) of sub-section (1), the

interest on the refund is payable only on the amount which is excess of the demand under section

156. He has attempted to distinguish the decision in the case of Delhi Development Authority

(supra) and TATA Chemicals Ltd.’s case (supra) and submitted that in those decisions the aspect

of excess of demand under section 156 as well as sub-section (4) of section 244A have not been

considered and therefore, these decisions are not applicable in the case of the assessee when the

assessee is not a payee of the money but only the deemed assessee under section 201, 201(1A)

and the payment of tax was not in excess of demand issued under section 156. Moreover, there

was no assessment on the assessee resulting the demand under section 156 and payment of tax.

The learned DR has forcefully contended that the Legislature their wisdom has provided under

the Explanation that the interest is payable on the refund of the amount which is excess of the

demand under section 156 and only in respect of the assessment for the assessment commencing

on 1-4-1989 and subsequent years.

3.11 On the other hand, the learned AR has submitted that the Explanation to clause (b) to subsection

(1) of section 244A is not for determining the amount on which the interest is payable but

clarifies the date from which the interest is payable. Further, the term used in the Explanation as

excess of such demand refers to the amount which becomes excess in pursuance to the

subsequent orders. The learned AR has referred the clause (b) as well as Explanation and

submitted that clause (b) and Explanation is only regarding the period for which the interest is

payable on refund.

3.12 The learned AR has tried to explain that if the assessee paid the demand in instalments then

only that part of the payment of the tax which is found as excess will be considered and the date

on which such part of demand is paid is relevant for the calculation of interest and not from the

any other date on which the assessee has paid the tax but which was not in excess. He has relied

upon the decision of the Hon’ble Supreme Court in the case of Delhi Development Authority

(supra) and submitted that the order under section 201(1A) is an order of assessment. He has

further contended that section 2(7) of the Income-tax Act defines the term ‘assessee’ which

includes actual assessee as well as the deemed assessee. Therefore, the assessee was treated as

deemed assessee while passing the order under section 201, 201(1A) and demand was raised

under section 156. Thus, there was an assessment on the assessee as per sub-section (4) of section

244A of Act. He has also relied upon the decision of this Tribunal in the case of TATA Chemicals

Ltd.’s case (supra) and submitted that the case of the assessee is covered by the decisions of the

Hon’ble Supreme Court in the case of Delhi Development Authority (supra) and TATA Chemicals

Ltd.’s case (supra).

3.13 We have considered the rival contentions and relevant record. We have also given our

thought to the various case laws relied upon by either parties as well as the relevant provisions of

the Act. We find that the assessee company made payments during the financial years relevant to

the assessment years under consideration. At the threshold we note that in the earlier year i.e., for

the assessment year 2003-04, the assessee was treated as assessee in default for deduction of TDS

by an order dated 19-2-2004 passed under section 201(1) and 201(1A) of the Act and the said

issue for the assessment years 2003-04, 2006-07 and 2008-09 was subsequently decided by this

Tribunal in favour of the assessee vide order dated 25-6-2010 in Set Satellite (Singapore) Pte.

Ltd. v. Addl. DIT (International Taxation) [2010] 132 TTJ (Mum.) 459. Therefore, in the mean

time, the assessee moved an application under section 195(2) before the Assessing Officer for

certificate in respect of payment to be made to the GCC is not taxable in India. The Asstt.

Directors of Income-tax (International Taxation) vide its order dated 27-4-2007 passed under

section 195 of the Income-tax Act directed the assessee to withhold tax at the rate of 10.96 per

cent on the payment to GCC. Accordingly, the assessee withheld the payment not voluntarily but

in pursuance to the order of the ADIT of Income-tax (International Taxation) under section 195.

So far as the circulars referred by the learned DR are concerned the Board has clarified the refund

to be made to the person responsible for deducting the tax at source in the cases where (a ) after

the deposit of tax deducted at source under section 195, the contract is cancelled and no

remittance is required to be made to the foreign collaborator, (b) the remittance is duly made to

the foreign collaborator, but the contract is cancelled and the foreign collaborator returns the

remitted amount to the person responsible for deduction tax at sources, (c ) the tax deducted at

source is found to be in excess of tax deductible for any other reason; and (d) in the cases where

the tax is deducted at sources under section 195 and paid in one assessment year and remittance

to the foreign collaborator is made and/or refunded to the Indian company following cancellation

of the contract in another assessment year. Thus, in the cases where the income does not accrued

to the non-resident the amount deducted as tax under section 195 and paid to the credit of the

Government belongs to the deductor. Under these circumstances, the Board has found that since

the refund was to be given only on a claim being made by the non-residence whereas the income

were not income as accrued to the non-residence due to the cancellation of the contract, the

amount deposited to the credit of the Government account under section 195 cannot be said to be

taxed and accordingly decided that this amount can be refunded to the deductor of the tax with

the prior approval of the Chief Commissioner of Income-tax concerned. Thus, the circular

referred and relied upon by the learned DR deals with the situation where the tax deducted on the

remittance made to the non-resident but finally no income has accrued to the non-residence due to

the cancellation of the contract.

3.14 In this case, the assessee paid the taxes in pursuance to the orders under section 201,

201(1A) whereby the assessee was treated as the assessee is in default. The assessee challenged

the said order before the CIT(A), who held vide order dated 25-1-2005 that the provisions of

section 195 of the Act were not applicable to the assessee, therefore, the assessee was not in

default under section 201, 201(1A) of the Act. The said order of the CIT(A) has been accepted by

the revenue and was not challenged. Thus, the refund became due to the assessee as a result of the

order passed by the CIT(A) dated 25-1-2005. The dispute arises regarding the payment of interest

under section 244A. The learned DR has assailed the impugned order of the CIT(A) on three

counts (i) that the assessee has not paid any tax and the tax has been paid on behalf of the payee,

(ii) he has stressed the term used in the Explanation to clause ( b) of sub-section (1) of section

244A as "tax paid in excess of such (demand)" and submitted that the assessee paid the tax only

as per the demand under section 156, therefore no interest is payable under section 244A and (iii)

the learned DR contended that there was no assessment in the case of the present assessee

resulting the payment of tax; and consequently the refund.

3.15 As far as the first contention of the learned DR that the appellant before us is not an assessee

in respect of the tax paid and he has paid tax on behalf of the other assessee is concerned. The

Hon’ble Supreme Court in the case of Delhi Development Authority (supra) has considered this

contention of the department at page 775 and then page 776 of the report:

"It is submitted that sub-section (1A) 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 well"

"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 assessees 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 section 201(1) and 201(1A)

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."

Thus it is clear from the decision of the Hon’ble Supreme Court (supra) that the term assessee

includes deemed assessee. Therefore, "deemed assessee in default" held under section 201(1) of

the Act falls under the definition of assessee and provisions of section 244A are applicable. As

per section 240 the refund of any amount due to the assessee as a result of any order passed in an

appeal or other proceedings under this Act, the refund of the said amount is the amount which

becomes due to the assessee under this Act. Therefore, the refund resulted by the order passed by

the CIT(A) is very much covered under the provisions of section 244A.

3.16 As regards the Explanation to clause (b) of sub-section (1) is concerned we deem fit and

proper to quote clause (b) and Explanation as under:

"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 :—

) ** ** **

(b)in any other case, such interest shall be calculated at the rate of one-half per cent 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 on 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."

Clause (b) provides that the interest on the excess payment of tax in the case which are not

covered under (a). In other words clause (b) deals with the cases where refund does not becomes

due out of any amount collected under section 206C or paid by way of Advance Tax under

section 199 but the cases where the tax is paid as per the order of the revenue authority and

demand raised accordingly. Thus, if the contention of the learned DR is accepted and

interpretation to Explanation to clause (b) is given in the manner as contended by the learned DR

then no interest shall be payable in any of the cases falling under clause (b) sub-section (1)

because in the cases where the tax is paid as per the original demand raised under section 156

then even the said demand is reduced by subsequent order(s) as prescribed under sub-section (3)

of section 244A and consequently refund becomes due as the demand was not found as per law,

no interest shall be payable. Thus if the contention of the learned DR is accepted then despite the

refund of the amount in pursuance to the subsequent orders no interest shall be payable under

section 244A which in our view is not the intention of the Legislature under section 244A. The

expression "excess of such demand" as contained in Explanation to clause (b) means and includes

the demand as reduced or increased as a result of subsequent order under this Act. Therefore, the

payment of tax or penalty becomes excess or short as a result of any order passed in an appeal or

other proceedings under this Act as referred in section 240 of the Act or an order inter alia

section 250 or 254 as per sub-section (3) of section 244A, the interest shall be increased or

reduced accordingly. In a case, where the interest is reduced, the Assessing Officer shall serve a

notice of demand on the assessee in a prescribed form specifying the amount of excess interest

paid and requiring him to pay such amount. Such notice of demand shall be deemed to be a notice

under section 156. We quote sub-section (3) of section 244A as under:

"244A. Interest on refunds.—(1)** ** **

** ** **

(3) Where, as a result of an order under sub-section (3) of section 115WE or section 11SWF

or section 115WG or sub-section (3) of section 143 or section 144 or section 147 or section

154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263

or section 264 or an order of the Settlement Commission under sub-section (4) of section

245D, the amount on which interest was payable under sub-section (1) has been increased or

reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a

case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice

of demand in the prescribed form specifying the amount of the excess interest paid and

requiring him to pay such amount; and such notice of demand shall be deemed to be a notice

under section 156 and the provisions of this Act shall apply accordingly"

Therefore, if the interpretation sought by the learned DR if given to clause (b) and Explanation

thereto, it will lead to absurdity.

3.17 As regards the assessment referred in sub-section (4) of section 244A is concerned, the

hon’ble Supreme Court in the case of Delhi Development Authority (supra) held that 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 term "assessee" includes actual assessees 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. Thus once the order under section 201 has been passed against the assessee, the

department cannot take the plea of no assessment. Accordingly, we do not find any merit in the

contention of ld. D.R.

3.18 In the case of TATA Chemicals Ltd. (supra) in paragraphs from 20 to 26 the Mumbai

Benches of this Tribunal has held as under:

"20. In the facts and circumstances of the present case; the refund becomes due to the

assessee pursuant to the order of CIT(A) wherein it was held that ‘assessee was not to deduct

tax at source on the amounts remitted to the recipient outside India. The refund of money paid

by the assessee becomes due to it on the passing of the appellate order in appeal as per the

provisions of section 240 of the Income-tax Act. The assessee is not to make any claim in this

regard for the issue of refund as per the provisions of section 240 of the Act, which provides

that refund is automatically due to the assessee after the order is passed in appeal or any other

proceedings under the Act. Section 244A(1) of the Act further provides that in addition to

refund of any amount becoming due to the assessee under the Act, the assessee is also entitled

to receive interest on such refunds which have become due to the assessee under the Act. The

refund in the present case was determined on account of the order giving effect to the appeal

order passed by the CIT(A).

21. Clause (a) to section 244A(1) covers the instances of payment of sums of money by way

of advance tax or TDS. Clause (b) to section 244A(1) of the Act covers all other cases

wherein refund has become due to the assessee. The phrase used in clause (b) to section

244A(1) of the Act is in any other case. The Explanation to clause (b) to section 244A(1)

further provides that ‘date of payment of tax or penalty’ means the date on which the amount

of tax or penalty specified in the Notice of Demand issued under section 156 is paid. The

Explanation attached to the main section does not in any way obliterate the meaning of the

section. A reference was made to the decision of Hon’ble Supreme Court in S. Sundaram

Pillai v. V.R. Pattabiraman AIR 1985 SC 582 in Grindwell Norton Ltd.’s case (supra), which

in turn had held that "the word ‘itself’ shows that it is". Applying the principles of Hon’ble

Supreme Court in S. Sundaram Pillai’s case (supra) it was held in Grindwell Norton Ltd.’s

case (supra), that ‘where the assessee had claimed interest on excess payment of selfassessment

tax under section 140A of the Income-tax Act, the interest on such refunds due to

the assessee was payable’.

22. In the facts of the present case, the payment of tax is made pursuant to order under section

195(2) of the Act passed by the Assessing Officer. Section 156 of the Act talks of service of a

notice of demand in the prescribed form, where any tax, interest, penalty, fine or any other

sum is payable in consequence of any order passed under this Act. The order in the present

case has been passed under section 195(2) of the Act for which notice of demand is to be

issued under section 156 of the Act, which very categorically provides that where any tax,

interest, penalty or any other sum is payable, because of ‘any order passed under the Act’.

The order under section 195(2) of the Act has been passed under the provisions of the Act and

any notice of demand for the said amount due pursuant to order passed under section 195(2)

is bound to be issued under section 156 of the Income-tax Act.

23. The provisions of clause (b) of section 244A(1) of the Act very categorically provides that

interest on any refund arising because of payment of tax ‘in any other case’, which shall

include the payment made by the assessee pursuant to order under section 195(2) of the

Income-tax Act by which the Assessing Officer requisitioned the assessee to deduct the tax

and deposit the same in treasury before remitting the amounts due to the recipients outside

India. Accordingly, the assessee is entitled to receive interest under section 244A(1)(b) of the

Income-tax Act deposited pursuant to order passed under section 195(2) of the Act which in

turn have become due to the assessee because of the order passed in appeal against the said

order under section 195(2) of the Income-tax Act.

24. Reference was made to the Circulars issued by the Board wherein approval was sought for

grant of refund of excess deduction or erroneous deduction of tax at source under section 195

of the Act. The cases under consideration related to circumstances where:

(i)after the deposit of TDS under section 195,

(a)the contract is cancelled and no remittance is required to be made to the foreign

collaborator;

(b)the remittance is duly made to the foreign collaborator, but the contract is cancelled

and the foreign collaborator returns the remitted amount to the person responsible

for deducting tax at source;

(c)the TDS is found to be in excess of tax deductible for any other reason;

(ii)the tax is deducted at source under section 195 and paid in one assessment year and

remittance to the foreign collaborator is made and/or returned to the Indian company

following cancellation of the contract in another assessment year.

25. The Board by way of Circular No. 769, dt. 6th Aug., 1998 and Circular No. 790, dt. 20th

April, 2000 provided that the assessee shall be entitled to refund of such payments made

under section 195 of the Act, but, ‘the amount paid into the Government account in such

cases, is no longer tax’. In view of this, no interest under section 244A is admissible on

refunds to be granted in accordance with this circular or earlier circular.

26. The circumstances mentioned in the circular are different from the facts and

circumstances of the case before us. In the circumstances referred to in the Circular, the tax

was deposited by the persons on their own and voluntarily, without any demand being made

by the Assessing Officer or any other authority under the Act. But, in the facts of the present

case, the amount was paid pursuant to an order passed by Assessing Officer under the

provisions of section 195(2) of the Income-tax Act, against which the assessee filed an appeal

before the CIT(A). In the order giving appeal effect to the order of CIT(A), refund became

due to the assessee which in fact arises because of the provisions of section 240 of the

Income-tax Act. The provisions of the Act prevail over the instructions issued by the Board

by way of CBDT circulars, which in any case are not applicable to the facts of the present

case. Their Lordships of Hon’ble Supreme Court in Sandvik Asia Ltd.’s case (supra) had held

that where excess amount of tax is collected from assessee, the revenue must compensate

assessee and the compensation in this case is by way of interest under section 244A of the Act

for the period when the amount was withheld. Accordingly, we direct the Assessing Officer to

allow the interest under section 244A(1)(b) of the Income-tax Act on the amount due to the

assessee pursuant to the order passed giving effect to CIT(A)’s order appeal. Thus, the ground

Nos. 1, 2 and 3 raised by the assessee are allowed".

3.19 In view of the decisions of the Hon’ble Supreme Court in the case of Delhi Development

Authority (supra) and the decision of a co-ordinate Bench of this Tribunal in the case of Tata

Chemicals Ltd. (supra), we hold that once the refund becomes due as per the provisions of this

Act, the interest is payable as per the provisions of section 244A and accordingly, the assessee is

entitled for the interest. Hence, we do not find any error or illegality in the order of the learned

CIT(A). We confirm the same.

4. The appeal of the revenue is dismissed.