Commissioner of Income Tax, Lucknow vs Smt. Shahida Sultana

The income tax Appellate Tribunal, Delhi, has referred following question of law u/s 256(1) of the income tax Act, 1961 (hereinafter referred to as ''the Act'') for opinion to this Court:

Whether, on the facts and in the circumstances of the case, the Tribunal was in law justified in holding that the assessee is eligible for interest u/s 244(1A) of the income tax Act, 1961 ?"

Briefly stated the facts involved in the present case are as under:

The reference relates to the assessment year 1984-85. The respondent-assessee is assessed to income tax in the status of individual. For the assessment year in question, she was granted a refund of Rs. 52,531 at the time of original assessment. Subsequently, an order u/s 154 of the Act was passed and the respondent-assessee became entitled to additional refund of Rs. 24,195. She claimed interest u/s 214 of the Act on the additional refund of Rs. 24,195 granted to her as a consequence of rectificatory order passed u/s 154 of the Act. The claim was rejected by the Assessing Officer on the ground that the refund on the additional amount was eligible for payment of interest only from 1-4-1985 because the Act provided for payment of interest in the case of enhancement of refund to be effective from 1-4-1985 only. The alternative submission to allow the interest u/s 244(1A) of the Act was rejected on the ground that the amount so paid by her was advance income tax and did not amount to payment made under order passed by the Assessing Officer. Feeling aggrieved, the respondent-assessee preferred appeal before the Commissioner of income tax (Appeals) who did not agree with the plea raised by the respondent-assessee and dismissed the appeal. Still feeling aggrieved the respondent-assessee preferred second appeal before the Tribunal. The Tribunal did not accept the plea of the respondent-assessee regarding the interest u/s 214 of the Act. However, the claim of interest u/s 244(1A) of the Act was upheld by the Tribunal by placing reliance on the decision of Delhi High Court in the case of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1998] 130 ITR 928 1.

We have heard Sri A.N. Mahajan, learned standing counsel for the revenue and Shri Vikram Gulati, the learned counsel for the respondent-assessee.

We find that the controversy has been set at rest by the Apex Court in the case of Modi Industries Ltd. v. CIT [1995] 216 ITR 759 1. The Apex Court has held as follows:

(ii) If any tax is paid pursuant to an assessment order after March 31, 1975 (which will include tax deducted at source and advance tax to the extent the same has been retained and treated by the income tax Officer as payment of tax in discharge of the assessee''s tax liability in the assessment order), becomes refundable wholly or in part as a result of any appellate or other order passed, the Central Government will have to pay the assessee interest on the refundable amount u/s 244(1A). For the purpose of this section, the amount of advance payment of tax and the amount of tax deducted at source must be treated as payment of income tax pursuant to an order of assessment on and from the date when these amounts were set off against the tax demand raised in the assessment order, in other words, the date of the assessment order. (p. 808)

Respectfully following the aforesaid decision, interest u/s 244(1A) of the Act is payable on the amount of excess advance payment of tax from the date of assessment order till the order of refund. We, therefore, answer the question referred to us in affirmative, i.e., in favour of assessee and against the revenue. However, there shall be no order as to costs.