Commissioner of Income Tax vs Mineral and Metals Trading Corpn. of India Ltd.

In respect of the assessment year 1966-67, at the instance of the revenue, the following question has been referred for the opinion of this Court: Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee was entitled to have the amount of interest payable u/s 214 recomputed by means of an application u/s 154 of the Act?

Briefly the facts are these: For the assessment year in question, the assessee filed its advance tax estimate, showing profit of Rs. 63.37 lakhs and on that basis made an advance tax payment of Rs. 29.88 lakhs u/s 210 of the income tax Act, 1961 (''the Act'') on 30-3-1966. Subsequently, the assessee filed its return of income on 21-12-1966 declaring an income of Rs. 36.79 lakhs. The ITO completed the assessment u/s 143(3) of the Act on a total income of Rs. 52.42 lakhs and the tax liability was determined at Rs. 27.10 lakhs. The assessment order was passed by the ITO on 24-3-1970. On the excess payment of advance tax the ITO allowed interest of Rs. 88,712 u/s 214 of the Act. As a result of appeal filed by the assessee and orders made by the Tribunal a further refund of Rs. 7,12,931 was granted by the ITO to the assessee. Thereafter on 21-6-1975 the assessee filed an application u/s 154 of the Act, seeking further interest of Rs. 2,19,238 u/s 214 consequent to the relief given by the appellate authorities. According to the assessee, the interest u/s 214 was payable on the excess payment of advance tax determined as refundable on regular assessment, as revised u/s 254 of the Act. The I.T.O. did not agree with the view of the assessee. The assessee, however, succeeded before the AAC and the Tribunal and under these circumstances the question noticed above has been referred for the opinion of this Court.

In Modi Industries Limited, Modinagar and Others Vs. Commissioner of Income Tax, Delhi and Another, upon analysis of various provisions of the 1961 Act, and the law, the Supreme Court has held that up to 31-3-1985, interest u/s 214 is payable from the first date of April of the relevant assessment year to the date of the first assessment order. The amount on which the interest is to be paid is the amount of advance tax paid in excess of the tax payable by the assessee as calculated in the regular assessment (the first assessment order). The amount on which the interest was payable did not vary due to reduction or enhancement of tax as a result of any subsequent proceeding.

In view of the aforesaid decision, the assessee is entitled to interest u/s 214 only up to the date of regular assessment (first assessment) and refund of the amount determined in terms of the first assessment. In this position of law, the question whether the rectification could be allowed or not has, as of now, become academic. In view of the aforesaid Supreme Court decision the question is answered in the negative, in favour of the revenue and against the assessee. No costs.