UNION OF INDIA THROUGH DIRECTOR OF INCOME TAXversusM/S TATA CHEMICALS LTD.

                        [2014] 3 S.C.R 298


A     UNION OF INDIA THROUGH DIRECTOR OF INCOME
                          TAX
                                  v.
                    M/S TATA CHEMICALS LTD.
                (Civil Appeal No. 6301 of 2011 etc.)
B                      FEBRUARY 26, 2014
               [H.L. DATTU AND S.A. BOBDE, JJ.]

        INCOME TAX ACT, 1961:
c
        s.244-A - Liability of Revenue for payment of interest on
  refund of tax made to resident/deductor uls 240 - Held: The
  language of s. 244-A is precise, clear and unambiguous -
  Sub-s. (1) of s.244A speaks of interest on refund of the
D amounts due to an assessee under the Act - Assessee is
  entitled for the said amount of refund with interest thereon as
  calculated in accordance with clauses (a) and (b) of sub-s. (1)
  of s.244A - In calculating the interest payable, the Section
  provides for different dates from which the interest is to be
  calculated - Interest payment to assessee is a statutory
E obligation and non-discretionary in nature - s. 244-A grants
  substantive right of interest and is not procedural - The
  principles for grant of interest are the same as under the
  provisions of s.244 applicable to assessments before
  01.04.1989, albeit with clarity of application as contained in
F s. 244A - Department has also issued Circular clarifying the
  purpose and object of introducing s.244A to replace ss.214,
  243 and 244 - It is clarified therein that since there were some
  lacunae in the earlier provisions with regard to non-payment
  of interest by revenue to assessee for the money remaining
G with Government, the said Section is introduced for payment
  of interest by the Department for delay in grant of refunds -
  The statutory obligation to refund carried with it the right to
  interest also - This is true in the case of assessee under the
  Act.
H                               298
 UNION OF INDIA THROUGH DIRECTOR OF INCOME 299
        TAX v. MIS TATA CHEMICALS LTD.
     s.244-A - Entitlement of residentldeductor to interest on A
refund of excess deduction or erroneous deduction of tax at
source u/s 195 - Held: The object behind insertion of s.244A,
is that an assessee is entitled to payment of interest for
money remaining with the Government which would be
refunded - There is no reason to restrict the same to an B
assessee only without extending the similar benefit to a
resident! deductor who has deducted tax at source and
deposited the same before remitting the amount payable to
a non-resident! foreign company - The obligation to refund
money received and retained without right implies and carries c
with it the right to interest - In the instant case, it is not in doubt
that the payment of tax made by resident! depositor is in
excess and the department chooses to refund the excess
payment of tax to the depositor - The catechize is from what
date interest is payable, since the case does not fall either D
under clause (a) or (b) of s.244A - In the absence of an
express provision as contained in clause (a}, it cannot be said
that the interest is payable from the 1st of April of the
assessment year - Simultaneously, since the said payment
is not made pursuant to a notice issued u/s 156, Explanation
to clause (b) has no application - In such cases, as the E
opening words of clause (b) specifically referred to "as in any
other case''. the interest is payable from the date of payment
of tax - Thus, the residentldeductor is entitled not only the
refund of tax deposited u/s t 95(2), but has to be refunded with
interest from the date of payment of such tax.                          F

        Circulars issued by Central Board of Direct Taxes - Held:
  Circulars issued by the Board in exercise of its powers u/s 119
, of the Act would be binding on the income tax authorities even
  if they deviate from the provisions of the Act, so long as they      G
  seek to mitigate the rigour of a particular Section for the
  benefit of the assessee.

     Tax refund - Held: A "tax refund" is a refund of taxes when
the tax liability is less than the tax paid - In the instant case,
                                                                       H
    300      SUPREME COURT REPORTS                 [2014) 3 S.C.R.

A the deductor/assessee had paid taxes pursuant to a special
  order passed by the assessing officer/Income Tax Officer - In
  the appeal filed against the said order the assessee has
  succeeded and a direction is issued by the appellate authority
  to refund the tax paid - The amount paid by the resident/
s deductor was retained by Government till a direction was
  issued by appellate authority to refund the same - When the
  said amount is refunded it should carry interest in the matter
  of course - Awarding interest is a kind of compensation of use
  and retention of the money collected unauthorizedly by
C Department - When the collection is illegal, there is
  corresponding obligation on the revenue to refund such
  amount with interest in as much as they have retained and
  enjoyed the money deposited.

    Interpretation of Statues:
D
       Golden rule - Held: It is cardinal principle of interpretation
  of statutes that the words of a statute must be understood in
  their natural, ordinary or popular sense and construed
  according to their grammatical meaning unless such
E construc;tion leads to some absurdity or unless there is
  something in the context or in the object of the Statute to the
  contr~ry - The golden rule is that the words of a statute must
  prima facie be given their ordinary meaning - It is yet another
  rule of construction that when the words of a statute are clear,
F plain and unambiguous, then courts are bound to give effect
  to that meaning iffespective of the consequences.

          UCO Bank v. CIT 237 ITR 889 • relied on.

       Gurudevdatta VKSSS Maryadit v. State of Maharashtra
                       =
G 2001(2) SCR 654 [2001] 4 SCC 534; and Shyam Sunder
                                                   =
  vs. Ram Kumar 2001 (1) Suppl. SCR 115 (2001) 8 SCC
  24 - referred to.

                           Case Law Reference:

H         2001 (2) SCR 654             referred to       para 22
UNION OF INDIA THROUGH DIRECTOR OF INCOME 301
       TAX v. M/S TATA CHEMICALS LTD.

     2001 (1) Suppl. SCR 115 referred to         para 24      A
    237 ITR 889                  relied on       para 35
    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
6301 of 2011.
                                                              B
    From the Judgment and Order dated 18.06.2009 of the
High Court of Judicature at Bombay in Tax Appeal No. 881 of
2008.
                             WITH
Civil Appeal No. 2534 of 2012.                                c
Civil Appeal No. 2535 of 2012.
Civil Appeal No. 2536 of 2012.

Civil Appeal No. 2537 of 2012.                                D
Civil Appeal No. 2539 of 2012.
Civil Appeal No. 2540 of 2012.

Civil Appeal No. 2541 of 2012.
                                                              E
Civil Appeal No. 2542 of 2012.
Civil Appeal No. 2543 of 2012.

Civil Appeal No. 2944 of 2012.
                                                              F
Civil Appeal No. 2945 of 2012.

Civil Appeal No. 3445 of 2012.
Civil Appeal No. 3446 of 2012.
Civil Appeal No. 3508 of 2014.                                G

Civil Appeal No. 3509 of 2014.
Civil Appeal No. 3510 of 2014.
Civil Appeal No. 3511 of 2014.                                H
    302     SUPREME COURT REPORTS               [2014] 3 S.C.R.


A   Civil Appeal No. 3512 of 2014.

    Civil Appeal No. 5408 of 2012

    Civil Appeal No. 3513 of 2014.

    Civil Appeal No. 3514 of 2014.
B
    Civil Appeal No. 3515 of 2014.

    Civil Appeal No. 3516 of 2014.

    Civil Appeal No. 3517 of 2014.
c   Civil Appeal No. 3518 of 2014.

    Civil Appeal No. 3519 of 2014.

    Civil Appeal No. 3520 of 2014.
D Civil Appeal No. 3521 of 2014.

    Civil Appeal No. 3522 of 2014.

    Civil Appeal No. 3523 of 2014.

E   Civil Appeal No. 3524 of 2014.

    Civil Appeal No. 7596 of 2012.

    Civil Appeal No. 2589 of 2013.

    Civil Appeal No. 3525 of 2014.
F
    Civil Appeal No. 3526 of 2014.

                    .
    Civil Appeal No. 3527 of 2014 .
    Civil Appeal No. 7772 of 2012.
G Civil Appeal No. 3436 of 2012.

    Civil Appeal No. 3437 of 2012.

        Rajiv Dutta, K. Radhakrishnan, Arijit Prasad, Gargi
H   Khanna, Sriparana Chatterjee, Tanushri Sinha, Rahul Kaushik,
UNION OF INDIA THROUGH DIRECTOR OF INCOME 303
      TAX v. M/S TATA CHEMICALS LTD.
Sadhana Sandhu, B.V. Balaram Das, S.A. Habeeb, S.W.A.                 A
Qadri, Anil Katiyar, Akshat Shrivastava, Manjeet Kirpal, Pritesh
Kapur, Ashok Kulkarni, Mohit Chaudhary, lmran Ali, Damini,
Harsh Sharma, Pragya Sharma, Puja Sharma, Priteesh Kapur,
S.K. Kulkarni, Abhay A. Jena, Bina Gupta, Ranjit Raut, Vijay
Ranjan, Bhargava V. Desai, Shreyas Mehrotra for the                   B
Appellant.

    Gopal Jain, M.S. Syali, Ashish Wad, Jayashree Wad,
Kanika Baweja (for J.S. Wad & Co.), Ruby Singh Ahuja, Neha
Gupta, Pallav Mongia (for Karanjawala & Co.) G.C. Srivastava,
Preeti Bhardwaj, Shiv Kumar Suri, Sunil Kumar Jain, Vijay             C
Kumar, Aditya Panda, Manoneet Dalal, Rustom B.
Hathikhanawala, Ajay Vohra, Kavita Jha, Vijay Ranjan,
Bhargava V. Desai, Shreyas Malhotra for the Respondents.

    The following Order of the Court was delivered                    D

                             ORDER

     1. Leave granted.

      2. The issue that arise for our consideration and decision      E
in this batch of appeals is, whether the revenue is legally
responsible under Section 244A of the Income Tax Act, 1961
(for short, "the Act") for payment of interest on the refund of tax
made to the resident/deductor under Section 240 of the Act.
                                                                      F
     3. At the outset, it is relevant to notice that the assessment
years in all these appeals are on and after 01.04.1989, that is
after the admittance of Section 244A of the Act by Direct Tax
Laws (Amendment) Act, 1987 (4 of 1988) with effect from
01.04.1989, whereby provision for interest on refunds on any          G
amount due to the assessee under the Act was introduced.
FACTS:-

    4. We would refer to the facts in Civil Appeal No. 6301 of
2011. The respondent is a company incorporated under the              H
    304     SUPREME COURT REPORTS                 [2014] 3 S.C.R.


A provisions of Companies Act, 1956. It is engaged in the
  manufacture of nitrogenous fertilizer. During the assessment
  year 1997-98, the respondent-company had commissioned its
  naptha desulphurization plant and to oversee the operation of
  the said plant it had sought the assistance of two technicians
8 from M/s. Haldor Topsoe, Denmark. M/s. Haldor Topsoe had
  raised an invoice aggregating to US$ 43,290,06/- as service
  charges for services of the technicians (US$ 38,500/-) and
  reimbursements of expenses (US$ 4,790/-).

       5. The resident/deductor had approached the Income Tax
C Officer under Section 195 (2) of the Act inter alia requesting
   him. to provide information/ determination as to what
  percentage of tax should be withheld from the amounts payable
  to the foreign company, namely, Mis. Haldor Topsoe, Denmark.
  On the request so made, the Assessing Officer/ Income Tax
D Officer had determined and passed Special order under
  Section 195 (2) of the Act directing the resident/ deductor to
  deduct/ withhold tax at the rate of 20% before remitting
  aforesaid amounts to M/s.Haldor Topsoe. Accordingly, the
  resident/ deductor had deducted tax of Rs.1,98,878/- on the
E entire amount of US$ 43,290.00/- and credited the same in
  favour of the Revenue.

       6. After such deposit, the resident/ deductor had preferred
  an appeal before the Commissioner of Income Tax (Appeals)
F against the aforesaid order passed by the Assessing Officer/
  Income Tax Officer under Section 195 (2) of the Act. The
  appellate authority while allowing the appeal so filed by the
  resident/ deductor, had concluded, that, the reimbursement of
  expenses is not a part of the income for deduction of tax at
G source under Section 195 of the Act and accordingly, directed
  the refund of the tax that was deducted and paid over to the
  Revenue on the amount of US$ 4790.06/- representing
  reimbursement of expenses by order dated 12.07.2002.

       7. After disposal of the appeal, the resident/ deductor had
H claimed the refund of tax on US$ 4790/- (amounting to
UNION OF INDIA THROUGH DIRECTOR OF INCOME 305
       TAX v. M/S TATA CHEMICALS LTD.
Rs.22,005/-) with the interest thereon as provided under             A
Section 244A(1) of the Act by its letter dated 09.12.2002.

     8. The Assessing Officer/ Income Tax Officer while
declining the claim made, has observed, that, Section 244A
provides for interest only on refunds due to the assessee under      B
the Act and not to the deductor and since the refund in the
instant case is in view of the circulars viz. Circular No. 769 and
790 issued by the Central Board of Direct Taxes (for short "the
Board") and not under the statutory provisions of the Act, no
interest would accrue on the refunds under Section 244A of the
Act. Therefore, the Assessing Officer/Income Tax Officer while       C
granting refund of the tax paid on the aforesaid amount has
refused to entertain the claim for interest on the amount so
refunded by order dated 29.07.2003.

      9. Since the Assessing Officer/Income Tax Officer had D
declined to grant the interest on the amount so refunded, the
resident/ deductor had carried the matter by way of an appeal
before the Commissioner of Income Tax (Appeals). The First
Appellate Authority by its order dated 28.03.2005 has approved
the orders passed by the Assessing Officer/ Income Tax Officer E
and declined the claim of the deductor/resident on two counts
: (a) that the refund in the instant case would fall under two
circulars viz. Circular No. 769 and 790 issued by the Board
which specifically provide that the benefit of interest under
Section 244A of the Act on such refunds-would not be available F
to the deductor/ resident and (b) that a conjoint reading of
Section 156 and the explanation appended to Section· 244A
(1 )(b) of the Act would indicate that the amount refunded to the
deductor/resident cannot be equated to the refund of the
amount(s) envisaged under Section 244A(1)(b) of the Act, G
wherein only the interest on refund of excess payment made
under Section 156 of the Act pursuant to a notice of demand
issued on account of post-assessment tax is contemplated and
not the interest on refund of tax deposited under self-
assessment as in the instant case.
                                                                  H
    306      SUPREME COURT REPORTS                   [2014] 3 S.C.R.


A        10. The deductor/resident, aggrieved by the aforesaid
    order, had carried the matter before the Income Tax Appellate
    Tribunal (for short, "the Tribunal"). The Tribunal while reversing
    the judgment and order passed by the Commissioner of
    Income Tax (Appeals) has opined, that. the tax was paid by the
,9 deductor/ resident pursuant to an order passed under Section
    195 (2) of the Act and the refund was ordered under Section
    240 of the Act, therefore, the provisions of Section 244A( 1)(b)
    are clearly attracted and the revenue is accountable for
    payment of interest on the aforesaid refund amount.
 C Accordingly, the Tribunal has allowed the appeal of the
    deductor/ resident and directed the Assessing Officer/ Income
   Jax Officer to acknowledge the claim and allow the interest as
   'provided under Section 244A(1 )(b) of the Act on the aforesaid
    amount of refund, by order dated 28.06.2008.

D      11. The Revenue being of the view that they are treated
  unfairly by the Tribunal had carried the matter by way of Income
  Tax Appeal before the High Court. The High Court has refused
  to accept the appeal filed by the Revenue by the impugned
  judgment and order, dated 18.06.2009. That is how the
E Revenue is before us in these appeals.

         12. We have heard the learned counsel appearing for the
    Revenue and the respondent-assessee in these appeals and
    also carefully perused the orders passed by the forums below.

F RELEVANT PROVISIONS:-

       13. To appreciate the view point of the learned counsel for
  the Revenue, we require to notice certain provisions of the Act
  prior to the insertion of Section 244A of the Act. The sections
G that require to be noticed are; Sections 156, 195(2), 240 and
  244 of the Act. A perusal of these sections essentially would
  indicate the procedure whereby the tax amount is paid and the
  refund of excess amount is claimed by the assessee. The
  relevant part of the said sections is sequentially reproduced:
H
UNION OF INDIA THROUGH DIRECTOR OF INCOME 307
       TAX v. MIS TATA CHEMICALS LTD.
    "Section 156. Notice of demand                                 A
    When any tax, interest, penalty, fine or any other sum is
    payable in consequence of any order passed under this
    Act, the Assessing Officer shall serve upon the assessee
    a notice of demand in the prescribed form specifying the
                                                                   8
    sum so payable.

    *** *** ***

    Section 195. Other sums-

(1) Any person responsible for paying to a non-resident, not       C
being a company, or to a foreign company, any interest or any
other sum chargeable under the provisions of this Act (not being
income chargeable under the head 'Salaries') shall, at the time
of credit of such income to the account of the payee or at the
time of payment thereof in cash or by the issue of a cheque or     D
draft or by any other mode, whichever is earlier, deduct income-
tax thereon at the rates in force:

    Provided that in the case of interest payable by the
    Government or a public section bank within the meaning         E
    of clause (230) of Section 10 or a public financial
    institution within the meaning of that clause, deduction of
    tax shall be made only at the time of payment thereof in
    cash or by the issue of chaque or draft or by any other
    mode:                                                          F

    Provided further that no such deduction shall be made in
    respect of any dividends referred to in Section 115-0.

           Explanation.- For the purpose of this section, where
    any interest or other sum as aforesaid is credited to any      G
    account, whether called 'Interest payable account' or
    'Suspense account' or by any other name, in the books of
    account of the person liable to pay such income, such
    crediting shall be deemed to be credit of such income to
    the account of the payee and the provisions of this section    H
    308       SUPREME COURT REPORTS                 [2014] 3 S.CR.


A         shall apply accordingly.

          (2) Where the person responsible for paying any such sum
          chargeable under this Act other than salary to a non-
          resident considers that the whole of such sum would not
          be income chargeable in the case of the recipient, he may
B
          make an application to the Assessing Officer to
          determine, by general or special order, the appropriate
          proportion of such sum so chargeable, and upon such
          determination, tax shall be deducted under sub-section (1)
          only on that proportion of the sum which is so chargeable.
c
          *** *** ***
          Section 240. Refund on appeal, etc.

          Where, as a result of any order passed in appeal or other
D         proceeding under this Act, refund of any amount becomes
          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..
E
          *** *** ***
          Section 244. Interest on refund where no claim is needed

          (1) Where a refund is due to the assessee in pursuance
F         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
G         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 sub-section (1) is due to the assessee, as a result of
H
UNION OF INDIA THROUGH DIRECTOR OF INCOME 309
       TAX v. MIS TATA CHEMICALS LTD.
    any amount having been paid by him after the 31st day of A
    March, 1975, in pursuance of any order of assessment or
    penalty and such amount or any part thereof having be_en
    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, B
    the Central Government shall pay to such assessee simple
    interest at the rate specified in sub-section (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:                                                   c
    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        0
    is granted:

    Provided further that no interest under this sub-section shall
    be payable for a period of one month from the date of the
    passing of the order in appeal or other proceeding:            · E

    Provided also that where any interest is payable to an
    assessee under this subsection, no interest under sub-
    section (1) shall be payable to him in respect of the amount
    so found to be in excess.                                       F
    (2) * * *

    (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 G
    assessment years.
     14. Section 156 of the Act talks about payment of tax,
interest, penalty, fine or any other sum payable in consequence
of any order passed under the Act on service of notice of H
    310      SUPREME COURT REPORTS                 [2014] 3 S C.R


A demand issued by the assessing officer to the assessee
  specifying the said amounts.

         15. Section 195(1) casts an obligation upon every person
   in this Country to deduct tax at the prevailing rates from out of
8 any sum which is remitted to a non resident/Foreign Company.
  Sub Section (2) of Section 195 provides that where a person
  responsible for paying any such sum chargeable under the Act
  to a non resident/Foreign Company considers that the whole
  of such sum would not be the income chargeable in the case
C of recipient, he may make an application to the assessing
  officer/income tax officer to determine, by general or special
  order, the appropriate proportion of such sum so chargeable.
  The assessing officer is expected to determine such sum/tax
  which are deductible out of remittance to be sent to the
  recipient and only after deduction and payment of such sum/
D tax, the balance amount is to be remitted to the non-resident.
  We clarify here that it is the statutory obligation of the person
  responsible for paying such sum to deduct tax thereon before
  making payment, if such application is not filed.

E       16. Section 240 of the Act provides for refund on appeal
  etc. The Section envisages that if an amount becomes due to
  the assessee by virtue of an order passed in appeal, reference,
  revision, rectification or amendment proceedings, the assessing
  officer is bound to refund the amount to the assessee without
F the assessee being required to make any claim in that ~ehalf.
  The expression 'other proceedings under the Act' used in
  Section 240 of the Act, are wide enough to include any order
  passed in proceedings other than the appeals under the Act.
       17. Section 244 of the Act provides for interest on refunds
G where no claim is made or required to be made by the
  assessee. The said section envisages that where a refund is
  due to the assessee in pursuance of an order passed under
  Section 240 of the Act, and the assessing officer does not grant
  the refund within a period of three months from the end of the
H month in which such order is passed,- the Central Government
UNION OF INDIA THROUGH DIRECTOR OF INCOME 311
       TAX v. M/S TATA CHEMICALS LTD.

shall pay to the assessee a simple interest of 15% per annum            A
on the amount of refund due from the date immediately following
the expiry of the period of three months as aforesaid to the date
on which the refund is granted.

     18. Since there was disconcert in the minds of both the            B
assessee and the Revenue regarding the cases where
payment of interest was required to be made to the assessee
by the Revenue, the Parliament has thought it fit to insert a new
Section 244A in the place of Sections 214, 243 and 244 in
respect of assessments for the assessment year 1989-90 and              C
onwards. The Section is extracted:

     "244A. Interest on refunds.

     (1 )Where refund of any amount becomes due to the
     assessee under this Act, he shall, subject to the provisions       o
     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 paid under section          E
     115WJ or 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-half per cent for every month or part of a month
     comprised in the period from the 1st day of April of the           F
     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          G
     under sub-section (1) of section 115WE or sub-section (1)
     of section 143 or on regular assessment;

     (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         H
    312       SUPREME COURT REPORTS                    [2014] 3 S.C.R.


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 purpose of this clause, "date of
          payment of tax or penalty" means the date on and from
B
          which the amount of tax or penalty specified in the notice
          of demand issued under section 156 is paid in excess of
          such demand.

          (2) * * *
c
          (3) * * *

          (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 yea~·
D
                                                  (emphasis supplied)

       19. The objects and reasons for introduction of the
  af&resaid Section is clarified by the Board in its Circular No.
E 549, dated 31.10.1989. Relevant paragraphs of which are as
  under:

          "11.2 Insertion of a new section 244A in lieu of sections
          214, 243 and 244,- Under the provisions of section 214,
          interest was payable to the assessess on any excess
F         advance tax paid by him in a financial year from the 1st
          day of April next following the said financial year to the date
          of regular assessment. In case the refund was not granted
          within three months from the date of the month in which the
          regular assessment was completed, section 243 provided
G         for further payment of interest. Under section 244, interest
          was payable to the assessee for delay in payment of
          rt::fund as a result of an order passed in appeal, etc., from
          the date following after the expiry of three months from the
          end of the month in which such order was passed to the
H         date on which refund was granted. The rate of interest
UNION OF INDIA THROUGH DIRECTOR OF INCOME 313
       TAX v. M/S TATA CHEMICALS LTD.

    under all the three sections was 15 per cent annum.             A

    11.3. These provisions, apart from being complicated left
    certain gaps for which interest was not paid by the
    Department to the assessee for money remaining with the
    Government. To remove this inequity, as also to simplify
                                                                    8
    the provisions in this regard.the Amending Act, 1987, has
    inserted a new Section 244A in the Income Tax Act,
    applicable from the assessment year 1989-90 and
    onwards which contains all the provisions for payment of
    interest by the Department for delay in the grant of refunds.
    The rate of interest has been increased from the earlier        C
    15 per cent annum to 1.5% per month or part of a month,
    comprised in the period of delay in the grant of refund. The
    Amending Act, 1987, has also amended sections 214, 243
    and 244 to provide that the provisions of these sections
    shall not apply to the assessment year 1989-90 or any           D
    subsequent assessment years."

                                           (emphasis supplied)

SUBMISSIONS:-
                                                                    E
     20. Shri Arijit Prasad, learned counsel appearing for the
Revenue would submit, that, if the tax is paid under Section
195(2) of the Act, then while refunding the amounts so paid,
the Revenue need not be burdened with payment of interest on
the amount so refunded. He would submit that while Section          F
244A(1 )(a) specifically provides for the four instances under
specific provisions where the interest would be payable on the
refund of tax paid, Section 244A(1)(b) does not provide for any
specific instance but mentions "any other cases" and the
explanation appended to the said Section requires payment of        G
refund to be made in cases where notice of demand was
issued under Section 156 of the Act and since no demand
notice was issued to the assessee under Section 156 of the
Act the assessee would not be covered even by the aforesaid
provision and hence, no interest is payable to the assessee by      H
    314      SUPREME COURT REPORTS                    [2014] 3 S.C.R.


A the Revenue. It is further submitted that interest under Section
  244A is to be granted in case where refund of any amount
  becomes due to an assessee under this Act and the refund of
  tax deducted at source made to the deductor/resident is not
  under any statutory provisions of the Act, the deductor/ resident
B is not entitled for interest on the amount of tax deducted and
  deposited with the revenue.

       21. Per contra, learned senior counsel appearing for the
  resident/deductor would submit that since the payment made
  under Section 195(2) is payment made under the Act pursuant
C to an order passed by the assessing officer which in turn would
  be sheltered under the provisions of Section 156 of the Act,
  by virtue of clause(b) of sub-Section(1) of Section 244A of the
  Act, the Revenue is obliged to refund the tax with interest.

D DISCUSSION:-

        22. It is cardinal principle of interpretation of Statutes that
  the words of a Statute must be understood in their natural,
  ordinary or popular sense and construed according to their
E grammatical meaning unless such construction leads to some
  absurdity or unless there is something in the context or in the
  object of the Statute to the contrary. The golden rule is that the
  words of a Statute must prima facie be given their ordinary
  meaning. It is yet another rule of construction that when the
  words of a Statute are clear, plain and unambiguous, then the
F Courts are bound to give effect to that meaning irrespective of
  the consequences. It is said that the words themselves best
  declare the intention of the law giver. The Courts have adhered
  to the principle that efforts should be made to give meaning to
  each and every word used by the legislature and it is not a
G sound principle of construction to brush aside words in a
  Statute as being inapposite surpluses, if they can have proper
  application in circumstances conceivable within the
  contemplation of the Statute (See Gurudevdatta VKSSS
  Maryadit v. State of Maharashtra (2001] 4 SCC 534).
H
UNION OF INDIA THROUGH DIRECTOR OF INCOME 315
       TAX v. MIS TATA CHEMICALS LTD.
     23. It is also well settled principle that the courts must     A
interpret the provisions of the Statute upon ascertaining the
object of the legislation through the medium or authoritative
forms in which it is expressed. It is well settled that the Court
should, while interpreting the provisions of the Statute, assign
its ordinary meaning.                                       '       B

    24. This Court in Shyam Sunder vs. Ram Kumar (2001) 8
sec 24 has observed that in relation to beneficent construction,
the basic rules of interpretation are not to be applied where (i)
the result would be re-legislation of a provision by addition, C
substitution or alteration of words and violence would be done
to the spirit of legislation, (ii) where the words of a Provision
are capable of being given only one meaning and (iii) where
there is no ambiguity in a provision, however, the Court may
apply the rule of beneficent construction in order to advance the
object of the Act.                                                D

      25. Before. the insertion of Section 244A as a composite
Section by the Direct Tax Laws (Amendment) Act, 1987, the
liability to pay interest on refund of pre-paid taxes was
contained in Sections 214, 243 read with Section 244 (1A) of        E
the Act. The Parliament has introduced a new Section in the
place of Sections 214, 243 and 244 in respect of assessment
for the assessment year 1989-90 and onwards.

     26. The language of the Section is precise, clear and
unambiguous. Sub-Section (1) of Section 244A speaks of F
interest on refund of the amounts due to an assessee under
the Act. The.assessee is entitled for the said amount of refund
with interest thereon as calculated in accordance with clause
(a) & (b) of sub-Section (1) of Section 244A. In calculatmg the
interest payable, the section provides for different dates from G
which the interest is to be calculated.
    27. Clause(a) of sub-Section(1) of Section 244A talks of
payment of interest on the amount of tax paid under Section
1SSWJ, tax collected at source under section 206C, taxes paid       H
    316      SUPREME COURT REPORTS                    [2014] 3 S.C.R.


A by way of advance tax, taxes treated as paid under Section 199
    during the financial year immediately preceding the
    assessment year. Under this clause, the interest shall be
    payable for the period starting from the first day of the
    assessment year to the date of the grant of refund. No interest
B is payable if the excess payment is less than 10% of the tax
    determined under Section 143(1) of the Act or on regular
    assessment. Clause(b) of Sub-Section(1) of Section 244A
    opens with the words "in any other case" that means in any case
    other than the amounts paid under Clause( a) of Sub-section(1)
c   of Section 244A. Under this clause, the rate of interest is to be
    calculated at the rate of one and a half per cent per month or a
    part of a month comprised in the period or the periods from
    the date or, as the case may be, either the dates of payment
    of the tax or the penalty to the date on which the refund is
'.) granted. An explanation is appended to clause(b) of the
    aforesaid sub-Section to explain the meaning of the expression
    "date of payment of tax or penalty". It clarifies that the "date of
    payment of tax or penalty" would mean the date on and from
    which the amount of tax or penalty specified in the notice of
E demand issued under section 156 is paid in excess of such
    demand.

         28. Having glanced through the relevant sections and the
    settled legal principles of interpretation of Statute, let us revert
    back to the factual situation placed before us in this appeal.
F
       29. In the present case, the resident/ deductor had
  approached the assessing authority inter alia requesting him
  to determine the tax that requires to be deducted at source
  before the payment is made to a non-resident/foreign company.
G On such a request the assessing officer had passed an order
  under Section 195(2) of the Act directing the resident/ deductor
  to deduct tax at a particular rate. The resident/ deductor had
  appealed against the said order, but had deposited the tax as
  directed by the assessing officer/Income Tax Officer by the
H aforesaid order in accordance with the provisions of Section
  UNION OF INDIA THROUGH DIRECTOR OF INCOME 317
        TAX v. MIS TATA CHEMICALS LTD.
  200 of the Act. When the resident/deductor succeeded in the A
  appeal, a direction was issued by the appellate authority for
  refund of tax so paid. In observance of the same, the assessing
  authority had granted the refund of the tax amount under Section
  240 of the Act, but declined to grant interest on the said refund
  amount. The conclusion arrived at by the assessing officer was B
  accepted by the first appellate authority on the ground, inter alia,
  that the conjoint reading of Section 156 and the explanation
  appended to Section 244A(1 )(b) of the Act would indicate that
  the amount refunded to the resident/ deductor cannot be
  equated to the refund contemplated under Section 244A(1)(b) c
  of the Act, whereunder only the interest on refund of excess
  payment made under Section 156 of the Act on account of post-
. assessment tax is contemplated and not the interest on refund
  of tax deposited under self-assessment. However, the Tribunal
  has rejected the aforesaid rationale of the assessing authority D
  as well as the first appellate authority and granted the claim of
  the resident/deductor. The High Court has endorsed the view
  of the· Tribunal and dismissed the appeals filed the Revenue.

        30. The refund becomes due when tax deducted at source,
  advance tax paid, self assessment tax paid and tax paid on          E
  regular assessment exceeds tax chargeable for the year as a
  result of an order passed in appeal or other proceedings under
  the Act. When refund is of any advance tax (including tax
  deducted/collected at source), interest is payable for the period
  starting from the first day of the assessment year to the date of   F
  grant of refund. No interest is, however, payable if the excess
  payment is less than 10 percent of tax determined under
  Section 143(1) or on regular assessment. No interest is
  payable for the period for which the proceedings resulting in
  the refund are delayed for the reasons attributable to the          G
. assessee (wholly or partly). The rate of interest and entitlement
  to interest on excess tax are determined by the statutory
  provisions of the Act. Interest payment is a statutory obligation
  and non-discretionary in nature to the assessee. In tune with the
  aforesaid general principle, Section 244A is drafted and            H.
    318        SUPREME COURT REPORTS                  [2014] 3 S.C.R.


A enacted. The language employed in Section 244A of the Act
  is clear and plain. It grants substantive right of interest and is
  not procedural. The principles for grant of interest are the same
  as under the provisions of Section 244 applicable to
  assessments before 01.04.1989, albeit with clarity of
B application as contained in Section 244A.

       31. The Department has also issued Circular clarifying the
  purpose and object of introducing Section 244A of the Act to
  replace Sections 214, 243 and 244 of the Act. It is clarified
  therein, that, since there was some lacunae in the earlier
C provisions with regard to non-payment of interest by the revenue
  to the assessee for the money remaining with the Government,
  the said section is introduced for payment of interest by the
  Department for delay in grant of refunds. A general right exists
  in the State to refund any tax collected for its purpose, and a
D corresponding right exists to refund to individuals any sum paid
  by them as taxes which are found to have been wrongfully
  exacted or are believed to be, for any reason, inequitable. The
  statutory obligation to refund carried with it the right to interest
  also. This is true in the case of assessee under the Act.
E
         32. The question before us is, whether the resident/
    deductor is also entitled to interest on refund of excess
    deduction or erroneous deduction of tax at source under
    Section 195 of the Act.
F        33. We would begin our discussion by referring to circular
    No. 790, dated 20.04.2000, issued by the Board. Omitting what
    is not necessary, the material portion of the circular is extracted:
          II



G
         6.     Refund to the person making payment under Section
         1'95 is being allowed as income does not accrue to the non-
       . resident. 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
H
UNION OF INDIA THROUGH DIRECTOR OF INCOME 319
       TAX v. M/S TATA CHEMICALS LTD.
     in accordance with this Circular or on the refunds already          A
     granted in accordance with Circular No. 769."

     34. What the deductor/ resident primarily contend is that,
what has been deposited by him is a tax, may be for and on
behalf of non-resident/ foreign company and when the beneficial          B
circular provides for refund of tax to the deductor under certain
circumstances, the refund of tax should carry interest.

     35. The circular issued by Central Board of Direct Taxes
("the Board" for short) is binding on the department. Binding
nature of the circular is explained by this Court in the case of         C
UCO Bank v. CIT237 ITR 889, wherein this Court has observed
that the circulars issued by the Board in exercise of its powers
under Section 119 of the Act would be binding on the income
tax authorities even if they deviate from the provisions of the
Act, so long as they seek to mitigate the rigour of a particular         D
Section for the benefit of the assessee. Therefore, we cannot
be taking exception to the reasoning and conclusion reached
by the authorities under the Act. However, the Tribunal and the.
High Court, have granted interest on the amount of tax
deposited by the resident/ deductor from the date of payment             E
on the ground, firstly, the refund of tax is directed by the first
appellate authority in the appeal filed by the deductor/ resident
under Section 240 of the Act and secondly, the Revenue for
having retained the sum by way of tax has to compensate the
person who had deposited the tax.                                        F

     36. Section 240 of the Act provides for refund of any
amount that becomes due to an assessee as a result of an order       1



in appeal or any other proceedings under the Act. The phrase
"other proceedings under the Act" is of wide amplitude. This
Court has observed, that, the other proceedings under the Act G
would include orders passed under Section 154 (rectification
proceedings), orders passed by the High Court or Supreme
Court under Section 260 (in reference), or order passed by the
Commissioner in revision applications under Section 263 or in
an application under Section 273A.                             H
     320     SUPREME COURT REPORTS                   [2014] 3 S.C.R.

I\       37. A "tax refund" is a refund of taxes when the tax liability
  is less than the tax paid. As per the old section an assessee
  was entitled for payment of interest on the amount of taxes
  refunded pursuant to an order passed under the Act, including
  the order passed in an appeal. In the present fact scenario, the
B deductor/assessee had paid taxes pursuant to a special order
  passed by the assessing officer/Income Tax Officer. In the
  appeal filed against the said order the assessee has
  succeeded and a direction is issued by the appellate authority
  to refund the tax paid. The amount paid by the resident/
c deductor was retained by the Government till a direction was
  issued by the appellate authority to refund the same. When the
  said amount is refunded it should carry interest in the matter
  of course. As held by the Courts while awarding interest, it is
  a kind of compensation of use and retention of the money
D collected unauthorizedly by the Department. When the collection
  is illegal, there is corresponding obligation on the revenue to
  refund such amount with interest in as much as they have
  retained and enjoyed the money deposited. Even the
  Department has understood the object behind insertion of
  Section 244A, as that, an assessee is entitled to payment of
E interest for money remaining with the Government which would
  be refunded. There is no reason to restrict the same to an
  assessee only without extending the similar benefit to a
  resident/ deductor who has deducted tax at source and
  deposited the same before remitting the amount payable to a
F non-resident/ foreign company.

       38. Providing for payment of interest in case of refund of
  amounts paid as tax or deemed tax or advance tax is a method
  now statutorily adopted by fiscal legislation to ensure that the
G aforesaid amount of tax which has been duly paid in prescribed
  time and provisions in that behalf form part of the recovery
  machinery provided in a taxing Statute. Refund due and payable
  to the assessee is debt-owed and payable by the Revenue. The
  Government, therebeing no express statutory provision for
H payment of interest on the refund of excess amount/tax
UNION OF INDIA THROUGH DIRECTOR OF INCOME 321
      TAX v. MIS TATA CHEMICALS LTD.
collected by the Revenue, cannot shrug off its apparent A
obligation to reimburse the deductors lawful monies with the
accrued interest for the period of undue retention of such
monies. The State having received the money without right, and
having retained and used it, is bound to make the party good,
just as an individual would be under like circumstances. The B
obligation to refund money received and retained without right
implies and carries with it the right to interest. Whenever riioney
has been received by a party which ex ae quo et bono: ought
to be refunded, the right to interest follows, as a matter of
course.                                                             c
      39. In the present case, it is not in doubt that the payment
of tax made by residenU depositor is in excess and the
department chooses to refund the excess payment of tax to the
depositor. We have held the interest requires to be paid on such
refunds. The catechize is from what date interest is payable, D
since the/present case does not fall either under clause (a) or
(b) of Section 244A of the Act. In the absence of an express
provision as contained in clause (a), it cannot be said that the
interest is payable from the 1st of April of the assessment year.
Simultaneously, since the said payment is not made pursuant E
to a notice issued under Section 156 of the Act, Explanation
to clause (b) has no application. In such cases, as the opening
words of clause (b) specifically referred to "as in any other
case", the interest is payable from the date of payment of tax.
The sequel of our discussion is the resident/deductor is entitled F
not only the refund of tax deposited under Section 195(2) of the
Act, but has to be refunded with interest from the date of
payment of such tax.

    40. In the result, the appeals fail. Accordingly, the appeals G
are dismissed. No order as to costs.
R.P.                                       Appeals dismissed.