Harinagar Sugar Mills Ltd. vs First Income Tax Officer and another

T.D. Sugla, J.—By this petition under article 226 of the Constitution of India, the petitioner has challenged the order of the Income Tax Officer dated August 24, 1981, granting interest of Rs. 29,972 u/s 214 on Rs. 7,49,447. Briefly stated, the relevant facts are that the petitioner is a company. The proceedings relate to its assessment for the assessment year 1978-79. The previous year ended on September 30, 1977. Advance tax was payable by the petitioner for the year on June 15, 1977, September 15, 1977 and December 15, 1977. However, two installments totalling Rs. 6,07,716 were paid on January 25, 1978, and February 16, 1978, i.e., after the due date but before the end of the financial year 1977-78. Provisional assessment u/s 141 was made on August 7, 1978, resulting in a refund of Rs. 13,81,186. However, the same was received by the petitioner on October 15, 1978. As against the provisional claim for interest u/s 214 on the excess amount of Rs. 13,81,186 from April 1, 1978, the Income Tax Officer granted the petitioner interest on Rs. 7,49,447 only and that too for the period from April 1, 1978, to August 7, 1978.

An appeal against the short allowance of interest u/s 214 was filed before the Commissioner (Appeals) who allowed the appeal. However, the Department preferred an appeal before the Tribunal and succeeded as, according to the Tribunal, the interest payable u/s 214, was not appealable. It is in these circumstances that this petition has been filed before this court.

The first question involved herein is whether the petition is entitled to interest on the entire amount of tax paid in excess of the tax payable by it and refunded to it as such, i.e., Rs. 13, 81,186 or only on Rs. 7,49,447, which represented the excess of amounts paid as advance tax on due dates over its tax liability. This court in Commissioner of Income Tax, Bombay City-V Vs. Traub (India) P. Ltd., , rejected the Department''s contention that interest u/s 214 is payable only in respect of payment of advance tax in accordance with the dates prescribed and held that the question whether that was a proper reading of section 214 was debatable. Observing that delayed payment of instalment of advance tax was accepted by the Department as payment of advance tax and the other requirements of section 214 were satisfied, the court further held that the conclusion that the assessee was entitled to interest on the actual amount of excess was not even required to be referred to the court. The ratio of this decision is applicable in this case. The petitioner is, therefore, entitled to interest in terms of the provisional assessment order dated August 7, 1978.

The second question is whether the interest is payable up to the date of the provisional assessment order, i.e., August 7, 1978, or the date on which the provisional assessment order was served on the petitioner on which date there was a constructive receipt of the amount of refund. Placing reliance on another decision of this court in the case of Associated Cement Companies Ltd. Vs. Commissioner of Income Tax, Bombay, , the learned counsel contended that the petitioner was entitled to interest up to the date of the assessment order under sub-section (1) of section 214 and from the date of the assessment order up to the date of actual refund under sub-section (2) thereof. It is, however, seen that the proviso to sub-section (1) of section 214 specifically lays down that no interest is payable for any period after the date of the provisional assessment. That apart, sub-section (2) of section 214 is applicable to refunds under that Chapter, i.e., Chapter XVII. In the present case, the refund was issued not under Chapter XVII, but under Chapter XIV and, sub-section (2) as such is not applicable.

In the circumstances, it cannot be said that there is any apparent mistake of law in the order of the Income Tax Officer in granting interest up to the date of the provisional assessment order. Accordingly, the rule is made partly absolute, i.e., the petitioner shall be entitled to the interest on the entire amount of refund, i.e., Rs. 13,57,063, from April 1, 1978, to August 7, 1978. No order as to costs.