Commissioner of Income Tax vs Praveen Kapoor

R.K. Agrawal, J.

The Income Tax Appellate Tribunal, Allahabad has referred the following two questions of law u/s 256(1) of the Income Tax Act, 1961, hereinafter referred to as the Act, for opinion to this Court.

"1. Whether, on the facts and in circumstances of the case, the Incon-lctax Appellate Tribunal was correct in law in holding that the interest u/s 214(1) is payable to the assessee on the excess amount paid during the financial year on the date subsequent to the date fixed u/s 211 of the Income Tax Act for payment of such instalment.

Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in law in holding that the interest u/s 214(2) is payable to the assessee, from the date of regular assessment to the date of making refund, on the amount refundable as a result of excess amount paid only as a result of proceedings u/s 155 of the Income Tax Act, subsequent to the regular assessment?"

Briefly stated the facts giving rise to the present reference are as follows:

The reference relates to the assessment year 1974-75. The respondent-assessee is an individual and enjoys income from share from six firms and income from other sources, namely, interest etc. The previous year commenced from 1-7-1973 and ended on 31-3-1974. During the financial year 1973-74, the respondent had paid advance tax in three instalments as under:

Amount (Rs.)

Due Date

Date of Payment

3,100

15-9-1973

17-9-1973

3,100

15-12-1973

14-12-1973

32,325

15-3-1974

14-3-1974

38,525

He filed his return of income on 4-10-1974 declaring an income of Rs. 64,888 which included share income from six firms at Rs. 46,882. In the return a note was made to the effect that the share of profit or loss in the firms M/s. Beni Prasad Sidh Gopal &Co. and M/s. Sidh Company have not been determined and as such has not been included. These two firms also paid interest to the respondent who was a partner apart from the share of profit/loss. The respondent accordingly had showed only interest income from the aforesaid firms, but did not show the share of profit or loss, if any, from these two firms. The Income Tax Officer completed the assessment u/s 143(3) of the Act on 30-9-1975 on an income of Rs. 76,670. He took share income from the six firms at Rs. 56,400 subject to rectification u/s 155 against the returned figure of Rs. 56,882. After adjusting the advance tax paid Rs. 38,525 a demand of Rs. 2,250 was created. Subsequently, on4thJanuary, 1978, there was rectification u/s 154 of the Act whereby the claim u/s 80C of the Act was allowed and total income was reduced to Rs. 74,400 which converted the demand of Rs. 2,250 into refund of Rs. 413. Then again on 17-12-1982, there was a rectification u/s 155 of the Act whereby the determined share from all the six firms were taken in place of share taken originally subject to rectification and the income was revised to Rs. 27,560. After adjusting taxes already paid a ref und of Rs. 33,149 became due to the respondent. The Income Tax Officer also granted interest u/s 214(1) of the Act at Rs. 5,472. Before the Income Tax Officer, the respondent claimed interest undersection 214(1) of the Act till the date of regular assessment and u/s 214(2) from the date of regular assessment till the date of refund. The Income Tax Officer, noticed that the respondent had paid the first instalment of his advance tax at Rs. 3,100 on 17-9-1973 i.e., after the date specified u/s 211 of the Act and, therefore, this payment could not be termed as advance tax within the meaning of sections 207(1) and 207(2) of the Act. He disallowed interest on the amount of Rs. 3,100. As regards claim u/s 214(2), the Income Tax Officer has held that the aforesaid provisions are applicable only when the refund is made prior to the regular assessment. He, therefore, disallowed the claim of interest u/s 214(2) of the Act. In appeal, however, the Appellate Assistant Commissioner directed the Income Tax Officer to allow the interest both tinder sections 214(1) and 214(2) of the Act. The revenue''s appeal before the Tribunal has failed.

We have heard Sri A.N. Mahajan, learned Standing Counsel appearing for the revenue and Sri A.N. Gulati, learned Counsel appearing for the respondent.

Learned counsel for the revenue submitted that as the respondent had paid advance tax of Rs. 3,100 on 17-9-1973 i.e., after the due date on which the first instalment of advance tax became payable the Income Tax Officer had rightly disallowed interest on the said amount. He further submitted that the respondent was not entitled for interest u/s 214(2) of the Act from the date of regular assessment to the date of making refund of the amount paid as a result of proceedings u/s 155 of the Act.

Learned counsel for the respondent, however, submitted that any amount which is paid during the financial year even though it may be beyond the prescribed date is treated to be an advance tax and, therefore, interest had rightly been allowed by the Tribunal. According to him, in view of the proviso to section 211 of the Act, all amount paid by way of advance tax on or before 31st March, is to be treated as advance tax paid during the financial year. He further submitted that the Tribunal has also rightly allowed the interest u/s 214(2) of the Act from the date of regular assessment to the date of making of refund as a result of the orders u/s 155 of the Act.

Having heard the learned counsel for the parties, we find that u/s 214(1) of the Act, the Central Government has to pay simple interest at 12 per cent per annum during the assessment year in question 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 sections 207 to 213 exceeds the amount of the tax determined on regular assessment from the Ist day of April next following the year immediately following the said financial year. It does not talk about the tax being paid after the due date. The interest is payable on the aggregate of all the instalments of advance tax paid during any financial year. We find that Andhra Pradesh High Court in the cases of J and J Dechane Vs. Commissioner of Income Tax, ; Bakelite Hylam Lid. v. CIT (1993) 202 ITR 1451 ; the Bombay High Court in the case of Harinagar Sugar Mills Ltd. Vs. First Income Tax Officer and another, ; the Calcutta High Court in the cases of Commissioner of Income Tax Vs. Ajoy Paper Mills Ltd., ; Commissioner of Income Tax and Others Vs. Graphite India Ltd., , the Gujarat High Court in the cases of Chimanlal S. Patel Vs. Commissioner of Income Tax and Another, ; Chandrakant Damodardas Vs. Income Tax Officer Ward, "A" (Company), Rajkot, ; Anup Engineering Ltd. Vs. Income Tax Officer, Companies Circle-II, Ahmedabad, ; Chimanlal S. Patel''s case (supra). The Gauhati High Courtin the case of Moheema Ltd. (No. 1) Vs. Commissioner of Income Tax and Others, the Karnataka High Court in the cases of Commissioner of Income Tax Vs. Karnataka State Warehousing Corporation Ltd., ; Commissioner of Income Tax Vs. Woodlands Hotel (P) Ltd., ; the Kerala High Court in the cases of Santha S. Shenoy, A.S. Suresh, A.S. Sasidhara Shenoy, A.S. Narayana Shenoy, Sobhana V. Shenoy, A.V. Gopalakrishna Shenoy and A. Sethumadhavan Vs. Union of India (UOI) and Others, ; Commissioner of Income Tax Vs. Travancore Cements Ltd., ; the Patna High Court in the case of CIT v. Kharsawan Mineral Concern (P.) Ltd. (1995) 213 ITR 270 , the Punjab & Haryana High Court in the cases of COMMISSIONER OF Income Tax Vs. ROADMASTER INDUSTRIES OF INDIA (P.) LTD., Commissioner of Income Tax Vs. Agrawal Metal Works (P.) Ltd., the Rajasthan High Court in the case of Jai Drinks (P.) Ltd. Vs. Commissioner of Income Tax, the Madras High Court in the cases of Commissioner of Income Tax Vs. T.T. Investments and Trades Pvt. Ltd., ; Commissioner of Income Tax Vs. Southern Sea Foods Ltd., ; CIT v. Coimbatore Distt. Central Cooperative Supply & Marketing Society Ltd. (1995) Tax LR 1308 ; R.V.S. & Sons v. CIT 699 ITR 192; the Madhya Pradesh High Court in the cases of CIT v. Jagnnath Narayan Kutumbik Trust (1983)114 ITR 526; Nasiruddin v. CIT (1996) 131 Taxation 421; and the Delhi High Court in the case of CIT v. Eskay Electroncis (India) Ltd. (2001) 248 ITR 536, have taken a view that u/s 214(1) of the Act, the assessee becomes entitled to interest in respect of'' excess payment of advance tax paid during any financial year even if (lie date is subsequent to the dates stipulated u/s 211 for payment o(such instalments.

The Gujarat High Court in the case of Commissioner of Income Tax, Gujrat Vs. Kohinoor Flour Mills, has field that in computing the penalty u/s 273(b) of'' the Act the amount of tax paid by the assessee subsequent to the prescribed date for payment of advance tax should be treated as valid advance tax and should be deducted from 75 per cent of (he tax determined. The aforesaid decision has been affirmed by the Apex court in Commissioner of Income Tax Vs. Kohinoor Flour Mills P. Ltd., . Thus, the amount of advance tax which is paid after the prescribed date is to be treated as advance tax.

It may be mentioned here (hat a proviso was added in section 211 of the Act by Taxation Laws (Amendment) Act, 1987 with effect from 1-4-1988, which provided that any amount paid by way of advance tax on or before 31st March shall also be treated as advance tax paid (luring the financial year ending on that date for the purposes of this Act. Thus, the amount paid by way of advance tax after the prescribed date but before the 31st March of the year is being treated as advance tax for all purposes of the Act. This amendment has been held to be clarificatory in nature by the Punjab and Haryana High Court in the case of Roadmaster Industries of India (P.) Ltd. (supra) and Andhra Pradesh High Court in the case of Bakelite Hylam Ltd. (supra).

We are in respectful agreement with the view taken by (lie various High Courts referred to above and hold that the amount of tax paid by way of advance tax on 17-9-1973 by the respondent has rightly been treated as advance tax and taken into consideration for the purpose of granting interest u/s 214(1) of the Act.

So far as the question of payment of interest u/s 214(2) is concerned, we find that under the aforesaid provision the interest is payable up to the date on which the refund was made. It may be mentioned here that sections 214(1) and 214(2) operate in different fields whereas section 214(1) of the Act, interest is payable on the excess amount of'' advance tax from the end of the financial year till the elate of regular assessment whereas u/s 214(2) the interest is payable from the date of regular assessment till the date of refund on the excess amount of'' tax. On plain reading of the said provision we find that the Tribunal was justified in directing the payment of interest u/s 214(2) of tile Act up to the date of refund from the elate of regular assessment.

In view of the foregoing discussion, we answer both the questions referred to us in the affirmative i.e., in favour of the assessee and against the revenue. However, there shall be no order as to costs.