Addl. Commissioner of Income Tax, Madras vs Rajah Sir M.A. Muthiah Chettiar

P. Govindan Nair, C.J.—The short question arising for decision in this tax case for the years of assessment 1956-57, 1957-58 and 1958-

59 is whether the interest payable from September 28, 1964, to September 22, 1965, on the amount of tax that had to be refunded as a result of

the decision of the Appellate Assistant Commissioner for the year of assessment 1956-57 and the interest payable on the tax amount refundable as

a result of the appellate decision for the years of assessment 1957-58 and 1958-59 for the period from September 28, 1964, to October 6, 1965,

should be at 6 per cent per annum. The question arose because section 244 of the Income Tax Act, 1961, was amended by the Finance Act of

1965 by raising the rate of interest from 4 per cent to 6 per cent.

The submission on behalf of the revenue at whose instance the question has been referred to this court was that since the law has been charged

only from April 1, 1965, the interest at the enhanced rate will be payable only from April 1, 1965, on the amounts of tax that were to be refunded

pursuant to the order of the Appellate Assistant Commissioner and not from the expiry of six months from the date of the appellate order. Six

months period for refund was originally provided for and as a result of the amendment to section 244(1) of the Income Tax Act, it has been

reduced to three months. That apart, the only question is whether interest is to be allowed on the expiry of six months from the date of the

Appellate Assistant Commissioners order as far as this case is concerned. We shall now extract section 244(1) which is to the following effect :

Where a refund is due to the assessee in pursuance of an order referred to in section 240 and the Income Tax Officer does not grant the refund

within a period of six months from the date of such order, the Central Government shall pay to the assessee simple interest at 6 per cent per annum

on the amount of refund due from the date immediately following the expiry of the period of six months aforesaid to the date on which the refund is

granted.

Section 244(1) refers to section 240. Section 240 imposes an obligation on the Income Tax Officer to refund the excess tax that had been

collected as a result of an order of the Appellate Assistant Commissioner or as a result of any order passed in appeal or other proceedings under

this Act.

The section does not speak of any other order to be passed by the Income Tax Officer directing the refund. The obligation imposed by the

section on the Income Tax Officer is not to pass orders but to refund the amount of excess tax collected. Consistently with the provision in section

240, section 244 speaks of the order referred to in section 240 and, therefore, there is no point in trying to link the liability to interest on the basis

of any order passed by the Income Tax Officer. The question whether interest would be payable from any date anterior to April 1, 1965, will

normally depend upon the general principle of law that unless there is a clear indication to the contrary a statute will be prospective in operation

and not retrospective in operation. But this general principle can be changed by the legislature speaking in categorical terms that the new law shall

apply from an anterior date. A change of law by a correcting section by the mere wording of the section in which it is incorporated may have effect

from an anterior date. An example of this is provided in section 244. After the change that has been effected on April 1, 1965, if the section is read

without bearing the changes in mind, it is clear that interest at 6 per cent will be payable from the expiry of six months from the date of the order

referred to in section 240. By adverting to the fact that the change from 4 per cent to 6 per cent was effected from April 1, 1965, the plain

meaning conveyed by the wording of the section cannot be abrogated or nullified in order to give a different meaning than that given by the

legislature. We have, therefore, to think on the basis of the wording of the section from which alone normally one can glean the intention of the

legislature. So, ascertained, it is clear that the purpose and object is to provide for interest in all cases where refund had not been actually made

before April 1, 1965, from the date of expiry of six months from the date of the order referred to in section 240. So read, 6 per cent interest

would be payable for the periods September 28, 1964, to September 22, 1965, for the tax directed to be refunded for the assessment year 1956-

57 and for the period September 28, 1964, to October 6, 1965, for the tax due to be refunded for the assessment years 1957-58 and 1958-59.

We answer the question referred to us accordingly, i.e., in favour of the assessee and against the department. The assessee will be entitled to his

costs. Advocates fees Rs. 250.

A copy of this judgment under the seal of this court and the signature of the Registrar will be forwarded to the Income Tax Appellate Tribunal,

Madras Bench.