Anup Engineering Ltd. vs Income Tax Officer, Companies Circle-II, Ahmedabad

R.C. Mankad, J.—The question which arises for our consideration in this petition filed under art. 226 of the Constitution of India is, whether

the petitioner is entitled to claim interest u/s. 214 of the I.T. Act, 1961 (hereinafter referred to as ""the Act""), on the excess amount paid during the

relevant financial year on the dates subsequent to the date u/s. 211 of the Act for payment of instalments of advance tax.

Petitioner, a limited company registered under the Companies Act, was served with a notice under s. 212(3) of the Act and was required to pay

advance tax in three equal instalments for the assessment year 1975-76. Petitioner''s year of account was calendar year 1974 and, therefore, it

was required to pay advance tax in three equal instalments on the following dates under s. 211 of the Act, namely, 15th June, 1974, 15th

September, 1974, and 15th December, 1974. There is no dispute as regards the payment of the first two instalments which were paid on the due

dates. The third and the last instalment of Rs. 1,88,103 was payable on 15th December, 1974. Before this last instalment became due, petitioner''s

Income Tax assessment for the assessment year 1973-74 was completed and as a result of this assessment, the petitioner became entitled to a

refund of Rs. 2,20,000. Petitioner, therefore, addressed a letter dated December 12, 1974, to the ITO, Companies Circle-II, Ahmedabad, who

had jurisdiction to assess the petitioner to Income Tax and who is respondent herein, requestion him to adjust the refund of Rs. 2,20,000 due to it

as stated above against the last and third instalment of Rs. 1,88,103 payable for the assessment year 1975-76. On December 21, 1974, the

respondent wrote a letter to the petitioner rejecting its request for adjustment of the refund of Rs. 2,20,000 as stated above, and calling upon it to

pay up the last instalment within three days from the receipt of the letter. It was stated in the letter that if the instalment was paid within three days

from the receipt of the letter, the petitioner would not be considered in default. Petitioner received this letter on December 24, 1974, and paid the

last and third instalment of Rs. 1,88,103 on December 25, 1974. Petitioner''s assessment to Income Tax for the assessment year 1975-76 was

completed on September 13, 1976. As a result of the assessment order passed on September 13, 1976, the petitioner was entitled to refund of

excess tax paid by it. The respondent, however, did not award any interest on the amount refundable under s. 214 of the Act on the ground that

the last instalment which was not paid on the due date, namely, December 15, 1974, could not be treated as advance tax. Petitioner thereafter

addressed a letter dated October 20, 1976, to the respondent demanding interest on the refund of Rs. 1,20,507 u/s. 214 of the Act. The

respondent, however, by his letter dated November 11, 1976, rejected the petitioner''s demand. Petitioner thereafter approached the CBDT

claiming interest on the amount refunded, but it appears that the CBDT also rejected the petitioner''s demand. The decision of the Board was

communicated by the Commissioner of Income Tax, Gujarat-I, vide his letter dated October 10, 1978. Petitioner has, therefore, approached this

court praying for a writ of certiorari or a writ in the nature of certiorari, or any other appropriate writ, direction and/or order under art. 226 of the

Constitution of India, quashing and/or setting aside the decision of the ITO, refusing to pay interest u/s. 214 of the Act as stated above and

directing the respondent to pay Rs. 20,485 by way of interest at the rate of 12 per cent. per annum from April 1, 1975, till September 13, 1976,

the date of regular assessment. The petition is resisted by the respondent contending that since the last instalment of Rs. 1,88,103, which was more

than the amount ordered to be refunded, was not paid on the due date, that is, December 15, 1974, such payment could not be treated as

payment of advance tax and consequently no interest on the amount refused was awarded u/s. 214 of the Act.

The controversy in this petition is directly covered by a decision of the Division Bench of this court in Chandrakant Damodardas Vs. Income

Tax Officer Ward, ""A"" (Company), Rajkot, , wherein it was held by this court that there is no indication in s. 214 that the dates of instalments are

strictly to be adhered to and, if they are not adhered to, interest will not be payable. It was observed that in view of the language used in s. 214

particularly with reference to the 1st day of April and not with reference to the dates on which the instalments are actually paid by the assessee, it is

clear that the Legislature intended to provide that irrespective of the dates on which the instalments of advance tax are paid, interest will be payable

on the excess tax if two conditions are satisfied : (i) the entire amount of advance tax is paid up, and (ii) it is paid up before the end of the financial

year. There is no further condition that the instalments of advance tax must have been paid on or before the due dates mentioned in s. 211. Failure

to pay the instalments on the due dates might involve an assessee in payment of penalty if the other conditions regarding penalty are satisfied, but

the concept u/s. 214 being totally unconnected with deprivation of interest where penalty is incurred, the interest on excess advance tax must be

paid if the two conditions are satisfied. We are in respectful agreement with the view taken by the Division Bench. In the present case, the two

conditions referred to above are satisfied and, therefore, the petitioner is entitled to claim interest on the amount refunded to him u/s. 214 of the

Act.

Mr. S. N. Shelat, learned counsel for the respondent, however, strongly relied upon the decision of the Andhra Pradesh High Court in Kangundi

Industrial Works (P.) Ltd. Vs. Income Tax Officer, A-Ward, , and the decision of the Kerala High Court in A. Sethumadhavan Vs. Commissioner

of Income Tax and Another, , wherein a contrary view has been taken. We do not consider it necessary to refer to these two decisions in detail, as

in our view, we are bound by the aforesaid decision of the Division Bench of this court in the case of Chandrakant Damodardas Vs. Income Tax

Officer Ward, ""A"" (Company), Rajkot, , which, in our opinion, lays down the correct law. With respect, we do not agree with the view taken by

the Andhra Pradesh and Kerala High Courts in the aforesaid decisions. In the view which we are taking, the decision of the ITO and the CBDT

not to allow interest to the petitioner on the excess amount ordered to be refunded to it for the assessment year 1975-76 must be held to be

erroneous and contrary to law. We, therefore, allow this petition and quash and set aside the order, annex. H, dated November 11, 1976, passed

by the respondent and the order of the CBDT contained in letter, annex. I, dated October 10, 1978, of the Commissioner of Income Tax,

Gujarat-I, by which the petitioner''s request for awarding interest u/s. 214 of the Act was rejected. We direct the respondent to pay interest at the

rate of 12 per cent. per annum on the excess amount referred to in s. 214 from 1st April, 1975, till the date of regular assessment. Respondent will

pay costs of this special civil application to the petitioner.

Rule made absolute accordingly.