COMMISSIONER OF INCOME TAX vs HINDUSTAN RADIATORS.

B. R. ARORA, J. :

The Tribunal, Jaipur Bench, Jaipur, has referred the following question of law under s. 256(1) of the IT Act, 1961, for the opinion of the High Court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that interest under s. 214 of the IT Act was rightly directed to be allowed to the assessee from 1st April, 1980 to the date of issue of refund instead of date of regular assessment on the excess payment of advance tax ?"

The assessee M/s Hindustan Radiators, Jodhpur, was assessed under s. 143(3) /144B of the IT Act, for the asst. yr. 1980-81 by the ITO, Central Circle, Jodhpur, for the total income of Rs. 10,78,180. The assessment was completed on 8th Sept., 1983. The assessee paid advance tax amounting to Rs. 2,13,600. The assessee challenging the assessment, preferred an appeal before the CIT(A), Jodhpur, which was allowed in part and the income assessed was reduced to Rs. 5,75,589. Due to the reduction of the assessed income, the assessee was allowed refund of excess of advance tax paid by him. The ITO, however, did not allow interest under s. 214 on the excess advance tax paid by the assessee. The assessee filed application under s. 154 of the IT Act before the Assessing Officer claiming interest under s. 214/244(1A) on the excess advance tax paid by him, but this application was dismissed by the ITO. Aggrieved with the order disallowing interest on the advance tax, which was ordered to be refunded, the assessee filed an appeal. The appeal was allowed and the ITO was directed to pay interest upto the date of refund. The Revenue, aggrieved with the decision of the CIT(A), Jodhpur, preferred an appeal before the Tribunal, Jaipur Bench, Jaipur, and the Tribunal dismissed the appeal of the Revenue and upheld the order passed by the CIT(A), Jodhpur. The Revenue, thereafter, preferred an application under s. 256(1) of the Act before the Tribunal, to refer the questions of law mentioned in the application for the opinion of the High Court and the Tribunal referred the question of law mentioned in para No. 1 above.

It is contended by the learned counsel for the Revenue that the learned Tribunal committed an error in allowing the interest under s. 214 of the Act to the assessee on the excess amount of advance tax paid by the assessee because no amount of interest can be allowed under s. 214 on such amount. In support of his contention, learned counsel for the Revenue has placed reliance upon the Division Bench judgment of this Court rendered in Commissioner of Income Tax Vs. Hindustan Engineering Co.,

We have considered the submissions made by the learned counsel for the Revenue.

Sec. 214 deals with the interest payable by the Central Government to the assessee on the excess advance tax paid by him. It states as under :

"214. (1) The Central Government shall pay simple interest at fifteen per cent per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under ss. 207 to 213 exceeds the amount of the assessed tax from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year, during which it is payable by reason of the provisions of s. 213, interest, as aforesaid, shall also be payable on that instalment from the date of its payment to the date of regular assessment."

The object of s. 214 of the Act is to compensate an assessee by paying interest on the amount paid as advance tax in excess of the assessed tax. The assessee is entitled to the interest on the excess amount of advance tax if the circumstances set out in s. 214 of the Act, are satisfied. Sec. 214 makes it obligatory on the Central Government to pay interest to the assessee at the rate set-out in the section on the amount by which the aggregatge sum of any instalment of the amount of advance tax paid during the financial year in which they are payable under ss. 207 to 213, exceeds the amount of assessed tax, from the first day of April following the financial year. Sec. 214 further states that where such instalment is paid after the expiry of financial year during which it is payable by reason of provisions of s. 213, interest, as aforesaid, shall, also, be payable on that instalment from the date of its payment to the date of regular assessment. Once it is determined that the excess amount in the form of advance tax has been paid then on the excess tax paid by the assessee, the Department is not absolved from its liability to pay interest on that amount on the ground that the assessee itself paid the amount. Once the advance tax has been paid by the assessee and received by the Central Government, who has appropriated the sum and later on if such amount has been ordered to be refunded to the assessee, s. 214 is attracted and the Department is liable to pay interest on the said amount.

The Division Bench of this Court in Commissioner of Income Tax Vs. Jaipur Udyog Ltd., held that "the assessee was entitled for the interest under s. 214 of the Act on the excess payment made towards advance tax within the meaning of ss. 207 to 213 of the Act". The Division Bench, therefore, allowed interest to the assessee under s. 214 of the Act on the payment made as advance tax though it was paid late. The judgment, on which reliance has been placed by the learned counsel for the Revenue relates to the amount of tax deducted at source (TDS), which exceeds the assessed amount. The Division Bench, in such circumstances, held that "the excess amount of TDS is not eligible for interest under s. 214 of the Act as there is no enabling provision in the Act for the payment of interest on the tax deducted at source and there is no equity in tax matters." The judgment reported in CIT vs. Hindustan Engineering Co., cited by the learned counsel for the Revenue, is, therefore, not applicable to the present controversy.

There is a specific provision in the form of s. 214 of the Act which casts a duty upon the assessing authority to make payment of interest specified in the section, on the excess amount of advance tax paid by the assessee and the Department cannot absolve this liability to pay interest. The Tribunal as well as the CIT(A), Jodhpur, were, therefore, justified in awarding interest under s. 214 of the Act on the excess amount of the advance tax paid by the assessee. The assessee is entitled for the interest upto the date of the refund as the amount was ordered to be refunded during the appeal by the CIT(A), Jodhpur.

Consequently, the reference is answered in affirmative, i.e., in favour of the assessee and against the Revenue and it is held that the Tribunal, Jaipur Bench, Jaipur, was justified in holding that the interest under s. 214 of the Act was rightly directed to be allowed to the assessee by the CIT(A) from 1st April, 1980 to the date of issuance of the refund instead of date of regular assessment, on the excess amount of advance tax.