The Income Tax Commissioner-LTU vs Asian Paints Ltd.

J.P. Devadhar, J.—Not on board. Taken up on board by consent of the parties.

The appeal is admitted on the following question of law:

Whether on the facts and in the circumstances of the case, ITAT was justified in holding that interest was payable to the Assessee u/s 244A of the Income Tax Act, 1961 for the month of December, 2003, even though the amount of tax paid by the Assessee was credited to the Central Government Account on 1st January, 2004?

The A.Y. Involved herein is the block period 1-4-1995 to 21-3-2002.

In the present case, tax demand raised under the block assessment was paid by the Assessee by depositing a cheque for the amount of tax demanded on 29th December, 2003 in the bank authorized by the Central Government. On 30th December, 2003, the Bank account of the Assessee was debited by the amount of tax under the cheque deposited on 29th December, 2003.

As the block assessment order was set aside by CIT(A),the Assessee become entitled to refund of tax paid. The Assessing Officer refunded the tax with interest u/s 244(A) of the Act from January, 2004 till grant of refund. The assessing officer declined to grant interest for the month of December, 2003 on the ground that the tax paid by the Assessee was credited to Central Government Account on 1st January, 2004.

On appeal filed by the Assessing officer the CIT(A) held that the Assessee was entitled to interest from the month of December, 2003 on the ground that the amount of tax offered was debited to bank account of the Assessee on 30th December, 2003. On further appeal filed by the revenue, the ITAT by the impugned order upheld the decision of CIT(A). Being aggrieved by the aforesaid order, the revenue has filed the present appeal.

According to the Counsel for the revenue, though the Assessee had deposited the cheque towards the tax demand on 29th December, 2003, the amount was actually credited to the Central Government account on 1st January, 2004 and therefore, on grant of refund, the Assessee was entitled to interest from January, 2004. In support of the above contention, Counsel for the revenue relied upon a decision of Rajasthan High Court in the case of Rajasthan State Electricity Board (now Rajasthan Rajya Vidyut Prasaran Nigam Ltd.) Vs. Commissioner of Income Tax and Another, and the decision of the Delhi High Court in the case of Commissioner of Income Tax-III Vs. Sutlej Industries Ltd., .

u/s 244A(1)(b) of the Act, interest on refund is payable from the date of payment of tax to the date on which refund is granted. In the present case, admittedly the cheque for the amount of tax demanded was deposited with the authorized agent of the Central Government on 29th December, 2003 and the account of the Assessee was debited to that extent on 30th December, 2003. The question therefore, to be considered is, whether debiting the tax amount from the bank account of the Assessee by the authorized agent of the Central Government account viz. the authorized bank constitutes payment of tax u/s 244(A)(1)(b) of the Act?

It is not in dispute that the payment of tax by cheque is a permissible mode of payment. It is not in dispute that the Assessee had deposited the cheque towards the tax amount in the bank which was authorized by the Central Government to collect the tax on behalf of the revenue. It is not in dispute that the authorized agent of the Central Government had debited the amount of tax from the bank account of the Assessee on 30-12-2003. Once the authorized agent of the Central Government collects the tax by debiting the bank account of the Assessee, the payment of tax to the Central Government would be complete. The fact that there is delay on the part of the authorized agent to credit that amount to the account of the Central Government, it cannot be said that the payment of tax is not made by the Assessee, till the amount of tax is credited to the account of the Central Government. For calculating interest u/s 244A(1)(b) of the Act the relevant date is the date of payment of tax and not the date on which the amount of tax collected is credited to the account of the Central Government by the agent of the Central Government. Therefore, in the facts and circumstances of the present case, the decision of the ITAT in holding that the Assessee had paid the taxes on 30th December, 2003 cannot be faulted.

Once it is found that the tax was paid on 30th December, 2003, then as per the Rule 119A(b), of the Income Tax Rules, on the tax becoming refundable, the Assessee had to be refunded tax with interest for the entire month of December, 2003. Thus, in the facts of the present case, No. fault can be found with the decision of the ITAT in holding that the Assessee that the tax was paid on 30-12-2003 & therefore, the tax was liable to be refunded with interest for the entire month of December, 2003.

The decision of the Rajasthan High Court, as also the decision of the Delhi High Court relied upon by the Counsel for the revenue are distinguishable on the facts as in both the above cases, the Courts were not called upon to consider the scope of the expression ''payment of tax'' contained u/s 244A(1)(b) of the Act. In fact, the circular No. 261 dated 8th August, 1979 issued by the Board to the effect that the date of presenting the cheque should be the date of payment supports the contention of the Assessee.

In the result, the question raised in the appeal is answered in favour of the Assessee and against the revenue. Appeal is disposed of accordingly.