BAKELITE HYLAM LTD. VS COMMISSIONER OF INCOME-TAX
1994 P T D 295
[202 ITR 145]
[Andhra Pradesh High Court (India)]
Before Syed Shah Mohammed Quadri, N.D. Patnaik and Parvatha, Rao, JJ
BAKELITE HYLAM LTD.
Versus
COMMISSIONER OF INCOME-TAX
Case Referred No.124 of 1985, decided on 16/06/1992.
Income-tax---
----Advance tax---Interest payable by Government---Scope of section 214, Indian Income Tax Act, 1961---Payment of instalments of advance tax after due dates---Liability of Government to pay interest not affected---Indian Income Tax Act, 1961, S.2141 [Kangundi Industrial Works (P.) Ltd. v. ITO (1980) 121 ITR 339 (AP) overruled].
Sections 207 to 213 of the Income Tax Act, 1961, provide for advance payment of tax during the financial year, in all its facets, for the computation of the tax so payable, for the instalments in which such' tax is payable, for the dates on which such instalments are to be paid, and in certain cases for the deferment of payment even beyond the financial year. The tax payable in advance is compendiously referred to as "advance tax". Therefore, when subsection (1) of section 214 refers to sections 207 to 213, there is no justification for looking only at section 211 and to conclude that unless the instalments are paid strictly as per section 211, interest is not payable under section 214 on the excess amount of advance tax paid during the financial year, ignoring section 208 which provides that advance tax shall be payable during the financial year. There is no justification also for relying on the provisions of sections 218 and 221 for interpreting section 214. Section 218 specifically deals with defaults in payment of instalments of advance tax on the dates specified in section 210 or in section 211. If an assessee does not pay any instalment of advance tax on the date specified under section 210 or in section 211, under section 218, he is deemed to be an assessee in default in respect of such instalment or instalments and penalty will be leviable under section 221. But from that it does .not follow that instalments of advance tax cannot be paid after the specified dates or that amounts paid as advance tax after the specified dates though during the financial, year are not to be treated as advance payment of tax. If the Income-tax Officer is satisfied that the default is for good and sufficient reason no penalty shall be levied as per the said proviso. It is obvious from this that instalments of advance tax can also be paid after the specified dates without the default attracting penalty if there is good and sufficient cause. The proviso added to section 211 by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1988, states that any amount paid by way of advance tax on or before March 31, shall also be treated as advance tax paid during the financial year ending on that day for all the purposes of this Act. This amendment is clarificatory in nature and must be construed as such. Hence, if the requirement of payment during the financial year is satisfied and the aggregate of such payments exceeds the amount of tax determined on regular assessment, on the excess amount the assessee is entitled to interest under subsection (1) of section 214 from the first day of April next following the financial year to the date of the regular assessment.
Kangundi Industrial Works (P.) Ltd. v. ITO (1980) 121 ITR 339 (AP) overruled.
CIT v. Viswanatha Reddy (T.N.) (1991) 190 ITR 266 (AP) and J and J Dechane v. CIT (1990) 182 ITR 345 (AP) approved.
Anup Engineering Ltd. v. ITO (1984) 145 ITR 105 (Guj.); Chandrakant Damodardas v. ITO (1980) 123 ITR 748 (Guj.); CIT v. Ajoy Paper Mills Ltd. (1990) 181 ITR 454 (Cal.); CIT v. Jagannath Narayan Kutumbik Trust (1983) 144 ITR 526 (MP); CIT v. Karnatka State Warehousing Corporation Ltd. (1990) 185 ITR 25 (Kar.); CIT v. Roadmaster Industries of India (P.) Ltd. (1992) 193 ITR 639 (P&H.); CIT v. Surajbhan Mahawar (1990) 186 ITR 400 (Cal.); CIT v. T.T. Investments and Trades Pvt. Ltd. (1984) 148 ITR 347 (Mad.); Moheema Ltd. (No.l) v. CIT (1990) 182 ITR 187 (Gauhati); Pfizer Ltd. v. K.N. Anantharama Aiyer, CIT (1987) 163 ITR 461 (Bom.) and Santha S. Shenoy v. Union of India (1982) 135 ITR 39 (Ker.) fol.
CIT v. Carona Sahu Co. Ltd. (1984) 146 ITR 452 (Bom.); CIT v. P. Ramagouda Satyam Reddy and Co. (1988) 172 ITR 491 (AP); CIT v. Traub (India) P. Ltd. (1979) 118 ITR 525 (Bom.); Sethumadhavan (A.) v. CIT (1980) 122 ITR 587 (Ker.) and Syed Hasan Rasul Numa v. Union of India SC '711 ref.
M.J. Swamy for the Assessee.
S.R. Ashok for the Commissioner.
JUDGMENT
S. PARVATHA RAO, J.---The sole question in this referred case, referred for the decision of this Court under subsection (1) of section 256 of the Income-tax Act, 1961 (hereinafter referred to as the Act), at the instance of the assessee, i.e. Messrs Bakelite Hylam Ltd., Hyderabad, is:
"Whether, on the facts and in the circumstances of the case, the Tribunal erred in holding that the assessee was not entitled to interest under section 214 of the Income Tax Act, 1961, on Rs.4,29,219 which was the excess amount of tax paid in the financial year 1971-72 (relevant to the assessment year 1972-73) over the tax determined on regular assessment for the assessment year 1972-73?"
It is covered by the decision of a Division Bench of this Court in Kangundi Industrial Works (P.) Ltd. v. ITO (1980) 121 ITR 339 against the assessee. However, when this referred case came up for final disposal on March 10, 1988, before G. Ramanujulu Naidu and Y.V. Anjaneyulu, JJ., learned counsel for the assessee represented that the said decision of this Court required reconsideration as the High Courts of Bombay, Madhya Pradesh, Kerala and Gujarat dissented from the view of this Court. The learned Judges felt that, in view of the importance of the matter, it was desirable to refer the matter to a Full Bench and that is how this referred case is before us.
The facts are in a narrow compass. The relevant assessment year is 1972-73 and the relevant previous year is the calendar year ending on December 31, 1971. The assessee made payments of advance tax on June 15, 1971, September 15, 1971, and December 15, 1971, aggregating to Rs.9,07,500. On March 10 and 14, 1972, the assessee paid further amounts aggregating to Rs.6,71,000 as advance tax. By an assessment order, dated May 23, 1976, the Income-tax Officer assessed the income of the assessee at Rs.19,43,750 and computed the income-tax payable thereon by the assessee as Rs.11,49,281 and arrived at the amount refundable to the assessee as follows:--
| | Rs. | Rs. |
| Income assessed | 19.43,750 | |
| Tax thereon | 11,49,281 | |
| Less: advance tax paid | 9,07,500 | 2,41,781 |
| Less: tax paid in the | | |
| nature of deposits | | 6,71.000 |
| Refundable | | 4 29.219 |
He did not treat the amounts aggregating to Rs.6,71,000 paid by the assessee on March 10 and 14, 1972, as advance tax and, therefore, did not allow any interest under section 214 of the Act on the said refundable amount of Rs.4,29,219. On further appeals by the assessee questioning the non-allowance of interest under section 214 of the Act on the said refundable amount of Rs.4,29,219, the Commissioner of Income-tax (Appeals) and the Tribunal held against the assessee in view of the said decision of this Court in Kangundi Industrial Works (P.) Ltd. v. ITO (1980) 121 ITR 339.
Learned counsel for the assessee placed before us a long catena of cases of various High Courts taking a view different from that of this Court in Kangundi Industrial Works' case (1980) 121 ITR 339, and holding that interest under section 214 of the Act had to be paid on the excess advance tax paid during the relevant financial year even though the instalments were not paid within the time specified.
The Kangundi Industrial Works' case (1980) 121 ITR 339 (AP) arose on a writ petition. The assessee in that case paid the entire advance tax during the relevant financial year, i.e. 1974-75, but it had not paid the second and third instalments on the due dates, i.e. December 15, 1974, and March 15, 1975, but paid on December 16, 1974, March 25,1975 and March 29, 1975. The assessee was not paid interest on the excess amount of advance tax i.e. Rs.1,47,095 paid by it, on the ground that it had not been paid on the due dates. Contending that it was entitled to interest on the said excess amount under section 214 of the Act, the assessee approached this Court by way of a writ petition. In a short judgment, a Division Bench of this Court held as follows (at page 341):
"According to us, the assessee can claim interest under section 214 of the Act only if he has complied with the requirement specified under section 211 of the Act. A careful reading of section 214 of the Act will indicate that the stress is not on the question whether all the instalments of advance tax were paid during the financial year, but the stress is that the instalments must have been paid before the due dates fixed for payment if the assessee was to be given the right to claim interest under section 214 of the Income Tax Act, 1961. Section 214 of the Income-tax Act has to be read alongwith section 218 of the Act. Under section 218 of the Income-tax Act, if the instalment of advance tax was not paid by the specified date, the assessee shall be deemed to be an assessee in default in respect of such instalment and the Revenue is given the right to impose penalty on such assessee for not paying the instalment before the due date. It is not disputed that the Department could have proceeded against the petitioner and levied the penalty for the delay... Under the Explanation to section 221 of the Income-tax Act, an assessee shall not cease to be liable to any penalty merely by reason of the fact that before the levy of such penalty he has paid the tax. When once the company committed default in paying the instalments before the specified dates, it cannot claim interest on the excess of tax paid over the tax determined on regular assessment."
It is obvious from the above that the Division Bench viewed section 214 in the shadow cast by sections 211 and 218 of the Act and not in the light of all the relevant provisions.
In Syed Hasan Rasul Numa v. Union of India, AIR 1991 SC 711, the Supreme Court observed (at page 714):
"But in matters of interpretation, one should not concentrate too much on one word and pay too little attention to the other words. No provision in the statute and no word in the section may be construed in isolation. Every provision and every word must be looked at generally and in the context in which it is used."
Subsection (1) of section 214 of the Act has to be interpreted keeping in view the above principles of construction. Subsection (1) of section 214 of the Act is as follows:
"214. Interest payable by Government.--- (1) The Central Government shall pay `simple interest at twelve per cent per annum 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 1st day of April, next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year during which it is payable by reason of the provisions of section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment:
Provided that in respect of any amount refunded on a provisional assessment under section 141-A, no interest shall be paid for any period after the date of such provisional assessment."
The answer to the question before us in this referred case turns on the interpretation of the aggregate sum of any instalments of the advance tax paid during any financial year in which they are payable under sections 207 to 213 occurring in subsection (1) of section 214. It will be noticed that reference is made to a fasciculus s of sections from 207 to 213 and not to one section 211 only, under which the instalments of advance tax are payable. The second aspect to be noticed is that the said sections are referred to only as provisions under which the instalments are payable for the purpose of identifying the financial year in which they are payable under the said sections. As regards the actual payment of instalments of advance tax, the requirement is that they should be paid during the relevant financial year. Another aspect to be noticed
is that, whatever the date on which the instalments of advance tax are paid during the relevant financial year, subsection (1) of section 214 provides for interest on the said payments only from the first day of April next following the said financial year and not from the date of actual payment of each of the instalments. Keeping these several aspects in view, we find it difficult to sustain the view of the Division Bench of this Court in Kangundi Industrial Works' case (1980) 121 ITR 339 (at page 341); that a careful reading of section 214 of the Act will indicate that the stress is not on the question whether all the instalments of advance tax are paid during the financial year, but the stress is that the instalments must have been paid before the due dates fixed for payment if the assessee was to be given the right to claim interest under section 214 of the Act. An examination of the various relevant provisions including sections 207 to 213 specifically referred to in subsection (1) of section 214 does not support the view of the Division Bench.
Sections 207 to 213 occur in part C of Chapter XVII of the Act, which deals with "Collection and recovery of tax". Part A of Chapter XVII has the heading "General". It begins with section 190. Subsection (1) of section 190 provides that "notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, the tax on such income shall be payable by deduction at source or by advance payment, as the case may be, in accordance with the provisions of this Chapter Part .B of Chapter XVII deals with "Deduction at source" Part C deals with "advance payment of tax" and begins with section 207. Subsection (1) of section 207 provides that "tax shall be payable in advance in accordance with the provisions of sections.208 to 219 in the case of income other than "certain specified categories of income with which we are not concerned here; and subsection (2) states that such tax is referred to in Chapter XVII "as advance tax". Subsection (1) of section 208 requires, inter alia, that advance tax shall be payable during the financial year, section 209 provides for computation of advance tax payable by an assessee in the financial year. Subsection (1) of section 210 provides that the Income-tax Officer may, on or after the 1st day of April, in the financial year, by order in writing, require a person who has been previously assessed, to pay advance tax determined in accordance with the provisions of sections 207, .208 and 209. Subsection (1) of section 211 provides that advance tax shall be payable in three equal instalments on the specified dates like the 15th day of June, the 15th day of September, the 15th day of December, and the 15th day of March. Section 212 provides for the filing of estimates of advance tax by the assessee. And section 213 provides for deferment of payment of advance tax on income of the nature of commission to the date on which such income would be normally received or adjusted and, in such cases, the assessee is required to communicate to the Income-tax Officer the date to which such payment .is deferred.
Sections 207 to 213 thus provide for advance payment of tax during the financial year, in all its facets--for the computation of the tax so payable, for the instalments in which such tax is payable, for the dates on which such instalments are to be paid, and in certain cases for the deferment of payment even beyond the financial year. The tax payable in advance is compendiously referred to as advance tax--Section 207(2). Therefore, when subsection (1) of section 214 refers to sections 207 to 213, there is no justification for looking only at section 211, and to conclude that unless the instalments are paid strictly as per section 211, interest is not payable under section 214 on the excess amount of advance tax paid during the financial year, ignoring section 208 which provides that advance tax shall be payable during the financial year.
There is no justification also for relying on the provisions of sections 218 and 221 for interpreting section 214. Section 218 specifically deals with default in payment of instalments of advance tax on the dates specified' under section 210 or in section 211. If an assessee does not pay any instalment of advance tax on the date specified in section 210 or in section 211, under section 218, he is deemed to be an assessee in default in respect of such instalment or instalments and penalty will be leviable under section 221. But from that it does not follow that instalments of advance tax cannot be paid after the specified dates or that amounts paid as advance tax after the specified dates though, during the financial year, are not to be treated as advance payment of tax. The Division Bench in Kangundi Industrial Works' case (1980) 121 ITR 339 (AP) noticed the explanation to subsection (1) of section 221 which clarifies that an assessee shall not cease to be liable to any penalty merely by reason of the fact that, before the levy of such penalty, he has paid the. tax. But the Division Bench failed to see that this illustrates that tax can be paid even after the default attracting the levy of penalty and that a fiction is created under subsection (1) of section 218 thereby attracting the levy of penalty under-section 221. The Division Bench also failed to notice the second proviso to subsection (1) of section 221 which is as follows:--
"Provided further that where the Income-tax Officer is satisfied that the default was for good and sufficient reasons, no penalty shall be levied under this section."
The fact that has to be kept in view here is that the assessee is deemed to be in default in respect of one or more instalments of advance tax because he has not paid them on the specified dates during the finanical year and thus committed default. If the Income-tax Officer is satisfied that the default is for good and sufficient reasons, no penalty shall be levied as per the said proviso. It is obvious from this that instalments of advance tax can also be paid after the specified dates without the default attracting penalty, if there is good and sufficient cause.
Another Division Bench of this Court in CIT v. P. Ramagouda Satyam Reddy and Co. (1988) 172 ITR 491, considered the meaning of the Explanation to clause (i) of subsection (1) of section 271 of the Act which is as follows (at page 492):
"Explanation---In this clause assessed tax means tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C."
The question referred to this-Court for decision under section 256(1) of the Act was (at page 492):
"Whether, on the facts and in the circumstances of the case, the advance tax paid beyond due date should be deducted from the tax payable for the purpose of calculating the penalty under section 271(1)(a)?"
Dealing with the various provisions of Chapter XVII-C, B.P. Jeevan Reddy, J. (as he then was), speaking for the Division Bench, observed as follows (at page 492):--
"Section 214 provides that where the advance tax paid during any financial year exceeds the amount of tax determined on regular assessment, interest shall be payable by the Central Government to the assessee on such excess amount from the 1st day of April next following the relevant financial year to the date of the regular assessment for the said assessment year. Similarly, section 215 provides that where during any financial year, the assessee has paid advance tax which is less than 75 per cent of the assessed tax, interest at the prescribed rate shall be chargeable up to the date of the regular assessment on such advance amount. Where, however, no advance tax is paid on the prescribed dates, he will be treated as a defaulter and he will be liable to the levy of penalty under section 221. Section 219 provides that any sum paid by or recovered from an assessee as advance tax in pursuance of the said Chapter shall be treated as a payment of tax in respect of the income 'of the period which' would be the previous year for an assessment year next following the financial year in which it was payable and credit therefor shall be given to the assessee in the regular assessment. This, in short, is the scheme of payment of advance tax. One feature to be noticed is that the concept of advance tax is tied up with the financial year relevant to the assessment year and not with the previous year adopted by the particular assessee for the said assessment year ... The question of imposition of penalty under section 271 arises only after the financial year is over and only where the return is not filed within the prescribed period. For such delay or default, as the case may be, penalty is levied and this penalty is calculated on the basis of the tax assessed. But the tax deducted at source and tax paid by way of advance are deducted from out of the tax assessed for the purpose of calculating the penalty. Having regard to this context, it would be reasonable to hold that all the tax, which is paid as advance tax during the relevant financial year should be deducted. All such amounts should be treated as advance tax paid under Chapter XVII-C for the purpose of the Explanation to section 271(1)(a). It would not be reasonable to say that any instalment of advance tax not paid on or before the prescribed date but paid after the due date but during the relevant financial year shall not be treated as advance tax and shall not be deducted as contemplated by the aforesaid explanation. Having regard to the purpose, object and context of section 271(1)(a), the proper course is to treat all tax paid as advance tax during the financial year as tax paid in advance under Chapter XVII-C and deduct the same from out of the assessed tax as contemplated by the Explanation to section 271(1)(a)."
The learned Judge steered clear of the Kangundi Industrial Works' case (1980) 121 ITR 339 (AP), observing that certain decisions were placed before them, but none of them dealt with the Explanation with which they were concerned. A Division Bench of the Calcutta High Court also in CIT v. Surajbhan Mahawar (1990) 186 ITR 400 took a similar view dealing with the very same explanation and observed as follows (at page 402):
"There is no warrant for the interpretation that any amount paid after the date on which the last instalment of advance tax was payable will not be an amount paid in advance under Chapter XVII-C of the Act. Section 211 of the Act, reliance on which was placed by Shri Chakraborty, only lays down the dates on which the advance tax instalments are required to be paid. There is nothing in this section to suggest that any payment made after the last of these dates will cease to be payment of advance tax. This section, as pointed out by Shri Singh, says that the advance tax shall be payable on the dates mentioned in the section. The argument adopted by the Department, if accepted, may even mean that payments made before those dates (and not on these dates) will not be payments of advance tax. The argument is plainly illogical."
Another Division Bench of this Court in CIT v. T.N. Viswanatha Reddy (1991) 190 ITR 266, addressing itself to the question whether there was scope for controversy or debate in regard to the interpretation of section 214 of the Act observed as follows (at page 270):--
"Section 211(1) sets out the time schedule for the payment of advance tax instalments. In Kangundi Industrial Works (P.) Ltd. v. ITO (1980) 121 ITR 339, this Court took the view that unless the instalments have been paid before the due dates fixed for payment, the assessee forfeits the right to claim interest under section 214. In that context, the Division Bench referred to section 218 of the Act and observed that, if the instalment of advance tax was not paid by the specified date, the assessee shall be deemed to be in default in respect of such instalment and becomes liable to pay penalty. The other view is based upon the plain and literal interpretation of the section. On such an interpretation, it is possible to say that it would be sufficient compliance with section 214 if the advance tax is aid during the financial year though such payment is strictly not in accordance with section 211 of the Act... We have already made a reference to another judgment of this Court in CIT v. P. Ramagouda Satyam Reddy & Co. (1988) 172 ITR 491, which had struck a different note while interpreting more or less similar language employed in the explanation to section 271(1)(a). This casts a further cloud on the correctness of the decision of this Court in Kangundi Industrial Works (P.) Ltd. v. ITO (1980) 121 ITR 339:'
Y.V. Anjaneyulu, J., speaking for another Division Bench of this Court, observed in J and J Dechane v. CIT (1990) 182 ITR 345 as follows (at page 349):--
"We have earlier referred to the provision contained in section 209 which provides that the amount of advance tax is payable by an assessee in the financial year, which lends support to the contention (of the learned counsel) that, even if the advance tax instalment is not paid on the due date, it should be taken into account if it is paid during the financial year preceding the assessment year."
Thus, in subsequent decisions of this Court Kangundi Industrial' Works' case (1980) 121 ITR 339, does not find support. We are also unable to agree with that decision. On a fair and reasonable interpretation of subsection (1) of section 214, we are of the view that, if the requirement of payment during the financial year is satisfied and the aggregate sums of such payments exceed the amount of tax determined on regular assessment, on the excess amount the assessee is entitled to interest under subsection (1) of section 214 from the first day of April next following the financial year to the date of the regular assessment.
A number of High Courts have taken a view different from that of the Division Bench in Kangundi Industrial Works' case (1980) 121 ITR 339 (AP). In Chandrakant Damodardas v. ITO (1980) 123 ITR 748, a Division Bench of the Gujarat High Court considered the very same question in a writ petition and, after detailed discussion of the various relevant provisions, held as follows (at page 753):--
"The question is of the financial year in which the instalments are payable under sections 207 to 213. The Legislature in our opinion has deliberately omitted to use the words "paid in accordance with sections 207 to 213". The. Legislature has used the words "payable under sections 207 to 213". That being the case and since there is no other indication in section 214 that the dates of instalments are strictly to be adhered to and if they are not adhered to interest will not be payable, the contention urged on behalf of the Revenue cannot be accepted. We would be required to do violence to the language used by the Legislature if we read into section 214 the requirement that for the purpose of earning interest from the 1st day of April, following the end of the financial year in question, the assessee must have paid all the instalments of advance tax on the dates referred to in section 211... In view of the language used in section 214 particularly with reference to the 1st day of April and not with reference to the dates on which the instalments are actually paid by the assessee, it is clear that what the Legislature intended to do is to provide that irrespective of the dates on which instalments of advance tax are paid, interest will be payable if the entire amount of advance tax which was paid up in the course of the fiancial year exceeds the amount of tax determined on regular assessment. If these two conditions are satisfied interest must be paid to the assessee. The further requirement which the Revenue wants us to read, namely, the third condition which it also wants us to read in section 214, namely, that instalments of advance tax must have been paid on or before the due dates mentioned in section 211 for the payment of instalments, cannot be read looking to the language of section 214. Looking to the purpose and. the scheme of section 214 which we have analysed above, it is obvious that the stand taken by the Revenue is entirely untenable. The pay-ability is one aspect and the dates on which the amounts of instalments are required to be paid is another aspect altogether. As we have indicated earlier, failure to pay the instalments on due dates might involve an assessee in payment of penalty if the other conditions regarding payment of penalty are satisfied, but the concept under section 214 being totally unconnected with any concept of deprivation of interest in the case where penalty is incurred, the interest referred to in section 214 must be paid if the two conditions are satisfied, namely, that all the instalments of advance tax are paid in the course of the financial year irrespective of the dates when they are paid, and, secondly, the aggregate sum of the instalments of advance tax paid in the course of the financial year exceeds the amount of tax determined on regular assessment. There is no third condition to be read in section 214 as one of the conditions qualifying for the payment of interest in respect of excess from the 1st day of April following the end of the financial year in question up to the date of the regular assessment."
When the same question arose again before another Division Bench of the Gujarat High Court in Anup Engineering Ltd. v. ITO (1984) 145 ITR 105, the decision of this Court in Kangundi Industrial Works' case (1980) 121 ITR 339 was relied upon by the Departmental counsel and the Gujarat High Court did not agree with the view taken by this Court in that case. Even though the decision of this Court in Kangundi Industrial Works' case (1980) 121 ITR 339, found favour with a learned single Judge of the Kerala High Court in A. Sethumadhavan v. CIT (1980) 122 ITR 587, on appeal, a Division Bench of that Court reversed the judgment of the learned single Judge in Santha S. Shenoy v. Union of India (1982) 135 ITR 39 (Ker.), disagreeing with the decision in Kangundi Industrial Works' case (1980) 121 ITR 339 (AP) and agreeing with the view of the Gujarat High Court in Chandrakant Damodarda's case (1980) 123 ITR 748. The Division Benches of the Madhya Pradesh High Court in CIT v. Jagannath Narayan Kutumbik Trust (1983) 144 ITR 526 and of the Madras High Court in CIT v. T.T. Investments and Trades Pvt. Ltd. (1984) 148 ITR 347 and of the Gauhati High Court in Moheema Ltd. (No.l) v. CIT 182 ITR 187 disagreed with the decision of this Court in Kanguodi Industrial Works' case (1980) 121 ITR 339 and agreed with the view of the Gujarat High Court in Chandrakant Damodardas's case (1980) 123 ITR 748. A Division Bench of the Karnataka High Court in CIT v. Karnataka State Warehousing Corporation Ltd. (1990) 185 ITR 25 agreed with the view of the Gujarat High Court in Chandrakant Damodardas's case (1980) 123 ITR 748 and held that interest under section 214 was rightly allowed on the instalment of advance tax paid after the specified date on March 20, 1978. A Division Bench of the Calcutta High Court in CIT v. Ajoy Paper Mills Ltd. (1990) 181 ITR 454, held that, under subsection (1) of section 214, interest shall be payable by the Central Government if two conditions were satisfied; firstly, instalments of advance tax must have been paid during the financial year in which they are payable under sections 207 to 213; secondly, the agreed sum of instalments should exceed the amount of tax determined on regular assessment. Rejecting the contention of the Revenue that the assessee cannot claim interest under section 214 unless payments have been made in accordance with the provisions of the Act within the time provided under the law, it was observed as follows (at page 457):
"There is no reference in section 214(1) about the dates on which instalments are payable under section 211 of the Act. This section does not prescribe that, to be eligible for interest, advance tax has to be paid on the date(s) stipulated under section 211 for payment of such instalments. It only provides that instalments must have been paid during the financial year in which they are payable. It is true that section 214 refers to instalments payable under sections 207 to 213, which include section 211 but there is no reference in section 214 about the manner of payment of instalments. We cannot persuade ourselves to read the mandate of section 211 in section 214 which is only concerned with the payments made during the financial year and not payments made on the specified date(s) during the financial year.In our view, whatever is paid before the close of the financial year would qualify as advance tax. If credit is given by the Department for the belated payments made during the financial year in calculating the tax due on regular assessment, we fail to see how such tax would not be treated as advance tax. It is a payment in advance towards tax to be determined on regular assessment. If the Revenue, for the purpose of determining the tax due on regular assessment, cannot ignore such payment, then for the purpose of calculating interest also, such payment cannot be kept out of consideration."
In CIT v. Traub (India) P. Ltd. (1979) 118 ITR 525, it was contended before a Division Bench of the Bombay High Court that, in order to be entitled to interest under the provisions of section 214 of the Act, the payment of advance tax must have been made in accordance with the schedule prescribed under sections 207 to 213 and since the schedule had not been adhered to, but there had been a default (though only of a period of two days, the assessee would not be entitled to interest under section 214, and the Division Bench observed (at page - 527): "The question whether this is a proper reading of section 214 is debatable". The Division Bench did not further enquire into the question in view of the finding on the facts of that case that the delayed payment by the assessee was accepted by the Department as payment of advance tax instalment and that as all the other requirements of section 214 were satisfied, the assessee was entitled to interest in respect of the excess of the advance tax so paid by it and that, therefore, the facts did not give rise to any question of law. However, a learned single Judge of the Bombay High Court in Pfizer Ltd. v. K.N. Anantharama Aiyar, CIT (1987) 163 ITR 461, while dealing with the question whether delayed payments of advance tax could be ignored under section 215 of the Act, also considered the provisions of section 214 and observed as follows (at page 464):--
"The concept of section 214 of the Act (which has been held by a Full Bench of this Court in CIT v. Carona Sahu Co. Ltd. (1984) 146 ITR 452 (Bom.) (FB) to be the counterpart of section 215 was the concept of the aggregate amount of the instalments of advance tax paid during the particular financial year. There was no indication in section 214 that the dates of the instalments were strictly to be adhered to and, if they were not adhered to interest would not be payable. It would be doing violence to the language used in section 214 if the requirement were to be read into it that, for the purpose of earning interest from 1st April following the end of the financial year in question, the assessee must have paid all the instalments ref advance tax eon the elates referred to in section 211... There is nothing in section 215, which requires the payments of instalments of advance tax to be made on or before the due dates thereof before the provisions of that section can apply. I cannot, with great respect, agree with the reasoning of the Andhra Pradesh High Court that, because the assessee has rendered himself liable to penalty for late payment of an instalment of advance tax, he becomes disentitled to the recovery of interest under section 214 if the amount paid by him as advance tax is in excess of the amount assessed to be due. I see no reason to link the provisions of the Act in regard to the payment of interest and the provisions, which impose a penalty for late payment of instalments of advance tax. The payment of interest is to recompense the party who has unlawfully been deprived of moneys due to it. Interest does not in any way partake of the nature of a penalty. To make an assessee pay interest on an amount he has already paid to the Revenue would be to impose upon him a penalty. which is not the purpose of section 215. A penalty for the late payment of an instalment of advance tax is provided for elsewhere in the Act."
A Division Bench of the Punjab and Haryana High Court also in CIT v. Roadmaster Industries of India (P.) Ltd. (1992) 193 ITR 639 did not agree with the decision of this Court in Kangundi Industrial Works's case (1980) 121 ITR 339 and preferred to follow the preponderance of judicial opinion to the contrary. In that case, an additional argument was sought to be advanced on behalf of the Department, based oh the proviso added to section 211 of the Act by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1988. The said proviso reads as follows (at page 641):--
"Provided that any amount paid by way of advance tax on or before the 31st day of 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 contention advanced was that, prior to the introduction of the proviso, the intention of the Legislature was otherwise and that, therefore, any amounts paid subsequent to the dates specified in section 211 could not be treated as advance tax. The learned Judges of the Punjab and Haryana High Court rejected the said contention observing that the said amendment was only clarificatory in nature and must be construed as such. We agree with this view.
For the reasons stated above, we overrule the decision of the Division Bench of this Court in Kangundi Industrial Works (P.) Ltd. v. ITO (1980) 121 ITR 339, and hold that under subsection (1) of section 214 of the Act, any amount paid towards advance tax during the financial year in which it is payable will have to be taken into account for arriving at the aggregate and. it is sufficient if the instalment of advance tax is paid during the financial year even though not on the specified date. It is not in dispute that, in the present case, the assessee paid the further sum of Rs.6,71,000 as advance tax, during the previous year in question, i.e. by March 31,1972. There is no provision in the Act to treat the said payment of tax as in the nature of deposit and refuse interest thereon under section 214 of the Act. The Income-tax Officer seems to have anticipated a possible contention that may be advanced on behalf of the assessee that, once the payment is accepted as payment of advance tax instalment, it would not be open to the Department to treat it as anything else for the purpose of section 214 of the Act.
In the circumstances, the question referred to us is answered in the affirmative, in favour of the assessee and against the Department.
M.B.A./49/TFReference answered