COMMISSIONER OF Income Tax vs ROADMASTER INDUSTRIES OF INDIA (P.) LTD.

S. S. SODHI. J. - The controversy here is with regard to payment of interest on advance tax paid in excess of the amount of tax as determined on regular assessment.

On May 15, 1973, the Income Tax Officer issued a notice to the assessee upon it to pay a sum of Rs. 3,20,499 in three equal instalments, as advance tax for the assessment year 1974-75. The assessee paid the first instalment of one-third of the said amount, namely, Rs. 1,06,833 on June 11, 1973.

Later, on September 5, 1973 the Income Tax Officer served another demand notice upon the assessee u/s 210 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), this time requiring it to pay Rs. 1,16,211 as the second installment of advance tax. This, the assessee paid on September 13, 1973.

As regards third and final installment of advance tax of Rs. 1,16,211, the assessee paid this amount by cheques which was dispatched from Rajpura on December 14, 1973, the due date for this installment being December 15, 1973. The record shows that this cheque was cleared by the bank on December 24, 1973, and eventually credited to the Government Treasury on January 14, 1974.

According to the final assessment as framed on September 17, 1975, the total tax payable by the assessee worked out to Rs. 90,817 with Rs. 9,041 as interest thereon. As the total amount paid was Rs. 3,39,255 there was and excess payment of tax to the extent of Rs. 2,39,367. This amount was, consequently, refunded to the assessee along with Rs. 43,056 an interest thereon.

The Commissioner of Income Tax, exercising his revisional jurisdiction u/s 263 of the Act, modified the order of the Income Tax Officer regarding the interest payable on the excess amount paid as advance tax, by holding that no interest was payable on the last installment which was paid by cheque, as it was credited to the Government Treasury after December 15, 1973, and therefore, a sum of Rs. 23,734 was wrongly allowed by the Income Tax Officer as interest on the excess advance tax paid. This order was, however reversed by the Income Tax Appellate Tribunal by upholding the order of the Income Tax Officer.

It is this factual background that has led to the following question being referred for the opinion of this court, namely :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal error in holding that the Commissioner of Income Tax could not have assumed proper jurisdiction due to lack of jurisdictional facts and his order was, therefore, bad in law ?

Mr. Ajay Mittal, appearing for the Commissioner of Income Tax, sought to contend that no interest was payable where the advance tax is paid after the due date as specified in section 211 of the Act, the argument being that when this provision of law specified particular dates for payment of advance tax it thereby renders such dates mandatory and interest on excess advance tax paid is thus payable only if it is paid before these dates and not otherwise. Support for this contention was sought by reference to the Direct Tax Laws (Amendment) Act, 1987, where with effect from April 1, 1988, a proviso has been added to section 211 of the Act, which reads as under :

"Provided that any amount paid by way of advance tax on or before the 31st day March shall also be treated as advance tax paid during the financial year ending on that day for all the purposes of this Act."

The point raised with regard to the controversy here being that it was only because the intention of the Legislature earlier was otherwise that this proviso came to be added, namely, that to qualify for inters to excess advance tax paid such tax had to be paid before the dates specified in section 211 of the Act.

Counsel for the Commissioner of Income Tax also sought to rely upon the judgment of the High Court of Andhra Pradesh in Kangundi Industrial Works (P.) Ltd. Vs. Income Tax Officer, A-Ward, , where it was held that the assessee is entitled to interest u/s 214 of the Act, on the advance tax paid in excess of the Income Tax, finally determined as payable on regular assessment only if the assessee had paid the installments of advance tax by the due dates without commutation any default. A similar view has also been expressed by the High Court of Allahabad in P.C. DWADESH SHRENI and CO. LTD. Vs. Income Tax OFFICER, A-WARD, ALIGARH., and by the High Court of Kerala in A. Sethumadhavan Vs. Commissioner of Income Tax and Another, .

The preponderance of judicial opinion is, however, to the contrary. There is a string of judicial precedents expressing the view that the Legislature intended to provide that, irrespective of the dates on which the installments of advance tax are paid, interest would be payable on the excess advance tax paid if two conditions are satisfied : (i) that the entire amount of advance tax is paid up, and (ii) it is paid up before the end of the financial year. It has also been observe that there is no further condition that the installment of advance tax mush have been paid on or before the due dates maintain in section 211 of the Act. Failure to pay any installment on the due date might involve an assessee in payment of penalty if the other conditions regarding payment of penalty are satisfied but the concept to section 214 is totally unconnected with deprivation of interest Whether or not penalty is incurred interest on advance tax must be paid if the two condition referred to earlier are satisfy. This has been so held by the High court of Gujarat in Chandrakant Damodardas Vs. Income Tax Officer Ward, "A" (Company), Rajkot, , which was later followed in Anup Engineering Ltd. Vs. Income Tax Officer, Companies Circle-II, Ahmedabad, . Several other High Courts too have taken the same view, namely, in Moheema Ltd. (No. 1) Vs. Commissioner of Income Tax and Others, ; Commissioner of Income Tax Vs. Jagannath Narayan Kutumbik Trust, ; Commissioner of Income Tax, Bombay City-V Vs. Traub (India) P. Ltd., ; Commissioner of Income Tax Vs. T.T. Investments and Trades Pvt. Ltd., ; CIT v. Jaipur Udyog Ltd. [1987] 167 ITR 306 and Commissioner of Income Tax Vs. Ajoy Paper Mills Ltd., .

As regards the judgment of the High Court of Kerala in A. Sethumadhavan Vs. Commissioner of Income Tax and Another, , this was subsequently specifically reverse on appeal in 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, .

Finally, coming to the argument founded upon the proviso to section 211 which came to be added by the Direct Tax Laws (Amendment) Act, 1987, it clearly does not warrant the interpretation as was sough to be put upon it by counsel, for the Commissioner of Income Tax as it was evidently clarificatory in nature and must thus be construed as such.

Such being the settled position in law, we hereby answer the reference in the negative in favor of the assessee an against the Revenue. This reference is dispose of accordingly. There will, however, be no order as to costs.