High Court Of Karnataka
S. Thigarajan vs. Assistant Commissioner Of Income Tax & Ors.
Section 119(2)(b), 240, 244A
Asst. Year 1998-99, 1999-2000
Ram Mohan Reddy, J.
Writ Petn. No. 11044 of 2009
6th August, 2009
Counsel Appeared :
Smt. K.K. Chythanya & Raghu Raman Chythanya, for the Petitioners : M.V. Seshachala, for the Respondents
ORDER
Ram mohan reddy, j. :
Since common questions of law and that of fact arise for decision making, with the consent of the learned counsel for the parties, the petitions are clubbed together, finally heard and are disposed of by this common order.
The petitioners when granted certain number of stock at Re. 1 per stock, subject to certain conditions under the employees stock option scheme, by the employer M/s Infosys, did not amount to a taxable perquisite and the value of the shares were not disclosed as taxable income in the
The Dy. CIT (TDS) by order dt. 7th Oct., 1999 held that the shares being perquisites, their value required to be disclosed and failure of the employer M/s Infosys to deduct tax at source (TDS) from the salaries of its employees, initiated action against the employer, who in turn, on demand, without prejudice, deducted the tax and remitted the same to the Department, and issued to the petitioners revised Form No. 16 to claim credit for the deduction. This was followed by the petitioners filing revised returns, though beyond the time stipulated under s. 139 of the Act
The order of the Dy. CIT (TDS) when challenged in an appeal was dismissed by order dt. 12th Sept., 2000 of CIT(A)-IV, which when carried in a further appeal before the Tribunal, Bangalore, in ITA Nos. 818-820/ Bang/2000 [reported as Infosys Technologies Ltd. vs. Dy. CIT (2003) 78 TTJ (Bang) 598—Ed.] it was held that the allotting of shares to employees did not amount to a perquisite, a liability under the Act to deduct tax at source.
The Asstt. CIT (TDS), Circle-16(2), Bangalore, by order dt. 14th Aug., 2002 gave effect to the order of the Tribunal, by directing the petitioners to claim credit for the TDS by filing Form No. 16, as the employer was not entitled to the refund of TDS. Thus the petitioners filed a second revised return with a request to refund the TDS amount.
The Revenue unsuccessfully contested the order of the Tribunal, both before this Court as well as before the apex Court, in IT Appeal Nos. 430, 432 and 433 of 2002 dt. 15th Dec., 2006 [reported as CIT vs. Infosys Technologies Ltd. (2007) 207 CTR (Kar) 620—Ed.] and Civil Appeal No. 3725 of 2007 dt. 4th Jan., 2008 [reported as CIT vs. Infosys Technologies Ltd. (2008) 1 DTR (SC) 330 : (2008) 214 CTR (SC) 293—Ed.], respectively. The Revenue was thus obliged to comply with the orders of the Tribunal as confirmed by this Court and the apex Court as well as the order dt. 14th Aug., 2002 of the Asstt. CIT (TDS) directing refund of the TDS.
It appears that the petitioners filed applications to condone the delay in preferring the revised returns, which the Chief CIT, in exercise of the jurisdiction under s. 119(2)(b) of the Act, by order dt. 22nd July, 2008 condoned the delay but declined admissible interest, on the premise that the claims were belated and the petitioners had forgone their claims. This was followed by orders dt. 3rd Nov., 2008, 28th Jan., 2009 and 25th Feb., 2009, in each petition, respectively, giving effect to the order of the Chief CIT.
According to the learned counsel for the petitioners, as the declaration of law, that the stock option for employees was not a perquisite attracting TDS, the Revenue was obliged under s. 240 of the Act to refund the TDS, inclusive of interest at one-half per cent under s. 244A of the Act, as detailed under : original returns of income filed under the IT Act, 1961, for short ‘Act’, as follows : Sl. TDS (Rs.) Interest from TO Amount in No. Rs. 1 10,18,357 (a) 1.4.1999 to 30.11.2008 6,97,999 (b) 1.12.2008 to 31.7.2009 27,920 2 56,69,771 (a) 1.4.1999 to 30.6.1999 37,44,411 (b) 1.7.2008 to 31.7.2009 2,43,387 3 5,71,686 (a) 25.12.1999 to 30.11.2008 3,91,843 (b) 1.12.2008 to 31.7.2009 15,694
In addition it is contended that the first and second revised returns along with the application to condone the delay were rendered infructuous on the declaration of law, and as a consequence revived the original returns filed by the petitioners. Lastly it is contended that there was no necessity for the Chief CIT to pass orders on the applications to condone the delay.
Per contra learned counsel for the respondents seeks to sustain the orders impugned as being well merited, fully justified and not calling for interference.
Before proceeding to examine the contentions of the parties it is useful to extract s. 240 and s. 244A(1)(a) and (b) which reads thus : “240. Refund on appeal, etc.—Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the AO 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 the assessee.” “244A. Interest on refunds.—(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 s. 206C or paid by way of advance tax or treated as paid under s. 199, during the financial year immediately preceding the assessment year, 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 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 per cent of the tax as determined under sub-s. (i) of s. 143 or on regular assessment; (b) in any other case, such interest shall be calculated at the rate of two-third 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 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 s. 156 is paid in excess of such demand.”
12. An examination of the orders impugned discloses rejection of the Revenue’s contention that allotment of shares to the employees under the stock option offered by the employer was a perquisite, and as a consequence, the TDS remitted to the Revenue, by the employer M/s Infosys, by deducting from out of the salary of the petitioners, was to be refunded. This is axiomatic in the light of s. 240 of the Act, an obligation cast on the Revenue to effect the refund, without having to call upon the petitioners to apply for refund claim. So also in view of s. 244A of the Act, the Revenue is bound to pay interest at one-half per cent on the amount of refund, to the petitioners. Thus the first and second revised returns along with the application to condone the delay in filing the same, were rendered infructuous, by the law declared in the matter of allotment of shares to employees, not being a perquisite attracting TDS. The Chief CIT having noticed the said facts in the order impugned, very strangely took up for consideration the applications to condone the delay in filing the revised returns and termed the same as “claim for refund”. The question of exercise of jurisdiction under s. 119(2)(b) of the Act did not arise.
In the admitted factual matrix, the order of the Chief CIT is arbitrary, without jurisdiction and illegal and as a consequence the orders of the Asstt. CIT, giving effect to the orders of the Chief CIT are unsustainable.
It is no doubt true that the Revenue had the benefit of the monies belonging to the petitioners, upto the dates of refund, and there are a catena of decisions of the apex Court, over payment of compounded interest on refund, which the petitioners are entitled to press into service. Without, however going into the merit or demerits of the quantum of interest or compounding either quarterly or half-yearly, the request for interest at 18 per cent per annum compounded monthly, is kept open for consideration by the 1st respondent, to be decided within a period of four weeks from today and effect payment immediately thereafter. Writ petitions are allowed, the order dt. 22nd July, 2008 of the Chief CIT, insofar as it relates to the petitioners are quashed and as a consequence the orders of the Asstt. CIT giving effect to the order of the Chief CIT are also quashed. The relief of quashing Annex. C notification No. 13 of 2006, dt. 22nd Dec., 2006, stating that no interest is admissible on belated refund claim, is not pressed.
[Citation : 322 ITR 581]
