Case Note & Summary
The appeal by the revenue under section 260A of the Income Tax Act, 1961 challenged an order dated 24/11/2010 of the Income Tax Appellate Tribunal in ITA No.2201/Mum./2006 relating to assessment year 2002-03. The respondent-assessee, M/s. Indian Oil Corporation Ltd., filed its return of income on 30/10/2002 declaring an income of Rs.2620,22,91,100 Crores and claimed a refund of Rs.22,88,82,482/-. The return was processed under section 143(1) on 28/2/2003 and refund was determined at Rs.40,52,96,970/-. However, on 13/3/2003, the Assessing Officer rectified the refund to Rs.22,88,82,482/- under section 154, and a refund cheque was issued on 25/3/2003. Subsequently, on 10/3/2005, a regular assessment was completed under section 143(3) determining the total income at Rs.2620,22,91,100 Crores and raising a demand of Rs.1,13,49,72,000/-. The Assessing Officer also charged interest under section 234D of the Act. The Commissioner of Income Tax (Appeals) confirmed the levy of interest under section 234D. On further appeal, the Tribunal held that interest under section 234D is chargeable only from assessment year 2004-05 and not for earlier years. The revenue appealed to the High Court. The court admitted the appeal on the question of law whether the Tribunal was right in holding that interest under section 234D is chargeable from assessment year 2004-05 only and could not be charged for earlier assessment years, even though regular assessments for such earlier assessment years are framed after 1/6/2003. The court held that section 234D was inserted by the Finance Act, 2003 with effect from 1/6/2003 and is prospective in nature. The legislature did not intend to give retrospective operation to the provision. Therefore, interest under section 234D can be charged only from assessment year 2004-05 onwards and not for assessment year 2002-03. The appeal was dismissed.
Headnote
A) Income Tax - Interest under Section 234D - Prospective Application - Section 234D of the Income Tax Act, 1961 - The issue was whether interest under section 234D can be charged for assessment year 2002-03 when the regular assessment was framed after 1/6/2003. The court held that section 234D is prospective and applies only from assessment year 2004-05, as the provision was inserted by the Finance Act, 2003 with effect from 1/6/2003 and the legislature did not intend retrospective operation. (Paras 2-4)
Issue of Consideration
Whether interest under section 234D of the Income Tax Act, 1961 is chargeable from assessment year 2004-05 only and could not be charged for earlier assessment years, even though regular assessments for such earlier assessment years are framed after 1/6/2003
Final Decision
Appeal dismissed. The Tribunal was right in holding that interest under section 234D is chargeable from assessment year 2004-05 only and could not be charged for earlier assessment years.
Law Points
- Section 234D of the Income Tax Act
- 1961 is prospective and applies only from assessment year 2004-05
- interest cannot be charged for earlier assessment years even if regular assessment is framed after 1/6/2003
