COMMISSIONER OF INCOME-TAX VS D & H SECHERORI ELECTRODES (PVT.) LTD, 2000 PTD-MADHYA-PRADESH-HIGH-COURT-INDIA 1078 (1996)

Income-tax---

----Interest---Refund---Law applicable to assessment---Amount paid in excess of assessed amount---Effect of amendment of S.214 w.e.f 1-4-1985-- Assessee entitled to interest under S.214 read with S.244(lA) for assessment year 1977-78---"Regular assessment" means original assessment and not the assessment made pursuant to appellate/revisional order---Indian Income Tax Act, 1961, Ss.214 & 244.

The legal position is that (i), up to March 31, 1975, interest under section 214 of the Income Tax Act, 1961, is payable from the first day of April of the relevant assessment year to the date of the first assessment order. The amount on which the interest is to be paid is the amount of advance tax paid in excess of the tax payable by the assessee as calculated in the regular assessment the first assessment order); (ii) if any tax is paid pursuant to an assessment order after March 31, 1975 (which will include ear 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), and becomes refundable as a result of any appellate or other order passed, the Central Government will have to pay the assessee interest on the refundable, amount under section 244(1 A). 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; (iii) with effect from April 1, 1985, interest payable under section 214 will increase or decrease in accordance with the variation in the quantum of the excess payment of tax brought about by orders passed subsequent to the regular assessment as mentioned in subsection (1A):

Held accordingly, that the assessee was entitled to interest under section 214 read with section 244(IA) of the Act. even when section 214(lA) had come into effect from April 1, 1985. However, the words "regular assessment" in both sections 214 and 215 would mean only the original assessment and not the last operative order or the assessment made pursuant to an appellate/revisional order.

Modi Industries Ltd. v. CIT (19951 216 ITR 759 (SC) ref.

Sushil Khadelwal for the Commissioner.

J. W. Mahajan for the Assessee.

JUDGMENT

N. K. JAIN, J.---At the instance of the applicant-Revenue, the Income-tax Appellate Tribunal, Indore Bench, Indore, has stated the case and referred the under-noted questions of law under section 256(1) of the Income Tax Act, 1961 (for short, "the Act"), arising out of its common order. dated November 11, 1993, passed in I.T.As. Nos. 558/Ind. of 1991 and 921/Ind of 1990, to this Court for its opinion:

"(i) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in allowing interest under section 214 read with section 244(1A) of the Income Tax Act, 1961, even when section 214(1A) has come into effect from April 1, 1985, only?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the regular assessment for the purpose of section 214(1A) is the last assessment and not the first assessment?"

Briefly stated the facts of the case are that the assessee-company for the assessment year 1977-78 was first assessed to tax on income of Rs.17,58,830 vide assessment order, dated July 17, 1979. On the above assessed income, the assessee was required to pay total tax of Rs.11,08,063. After giving benefit of Rs.10,52,800 paid as advance tax, Rs.5,550 as tax deducted at source and of Rs.52,765 for surcharge deposit, the Assessing Officer raised a demand of Rs.2,461 which included interest of Rs.513 charged under section 217 of the Act. The above amount of Rs.2,461 was adjusted against the amount due to the assessee for the assessment year 1976-77, and thus, taken as paid on July 17, 1979. The said assessment was replaced by the assessment made on February 1, 1984, on a total income of Rs.20,69,960 raising an additional demand of Rs.2,39,548 inclusive of interest under section 217 of the Act. The assessee then filed an appeal and got relief from the appellate authorities. The Assessing Officer while giving effect to the aforesaid order granted refund to the assessee on March 30, 1987, November 18, 1989 and on August 29, 1990. The refund granted included interest allowed under subsections (1) and (IA) of section 244 of the Act.

One of the orders giving effect to the order of the Income-tax Appellate Tribunal, Indore Bench, was passed on August 29, 1988. The Assessing Officer reduced the assessed income as directed by the Tribunal and granted refund without allowing interest under section 214 read with section 244(1A) of the Act. This order was impugned before the Commissioner of Income-tax (Appeals) who disposed of the appeal vide order, dated July 2, 1990. He directed the Assessing Officer to recompute income after verifying the facts and properly give appeal effect. On the question of payment of interest, the Commissioner of Income-tax (Appeals) gave the following direction:

"As per tax working it is noted that though a refund of Rs.16,200 has been worked out as due to the assessee, but no interest payable under section 244(lA) has been worked out. Therefore, the Assessing Officer is directed to allow interest under section 244(lA) read with section 214 as per law."

Aggrieved by the aforesaid directions, the Revenue had filed an appeal before the Tribunal being I.T.A. No. 921/Ind. of 1990, and the following ground had been raised:

"On the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in directing the Assessing Officer to allow interest under section 244(1A) read with section 214 as per law."

In compliance with the direction of the Commissioner of Income-tax (Appeals), dated July 2, 1990 the Assessing Officer again took up the case and held that the assessee was not entitled to any interest under section 244(1A) read with section 214 of the Act as advance tax and TDS to the tune of Rs.10,53,300 was not made in pursuance of any order passed after March 31, 1975. The assessee was, however, held to be entitled to interest under section 244(1A) of the Act and refund of Rs.29,762 was ,granted. The assessee being aggrieved by the above orders, again took up the appeal before the Commissioner of Income-tax (Appeals) who ultimately dismissed the claim of the assessee with the following observations:

"Thus, whereas neither the decision of the Income-tax Appellate Tribunal nor the decision of the Delhi High Court supports the contention of the assessee from April 1, 1977. The decision of a Full Bench of the Gujarat High Court categorically states that section 244(1A) does not apply to the amount paid as advance tax and in this respect only the provisions of section 214 would apply. Under these circumstances, the contention of the assessee is not acceptable that any interest is due to it on the amount of excess advance tax claimed to have been paid, as per the provisions of section 244(1A). Hence, the assessee's appeal is dismissed."

Aggrieved by the aforesaid order of the Commissioner of Income tax (Appeals) the assessee came up in second appeal before the Tribunal which were registered as I. T. A. No. 558/Ind. of 1991. Both the appeals were heard together and disposed of by a common order, dated November 11, 1993. The Tribunal held that the assessee is entitled to interest under section 214(1) read with section 244(IA) of the Act on the excess advance tax paid from the date of the regular assessment. It further held that "regular assessment" for the purpose of section 214(IA) is the last assessment and not the first assessment. With these findings, the appeal filed by the assessee was allowed but that of the Revenue was dismissed.

Feeling aggrieved by the decision of the Tribunal, the Revenue made an application under section 256(1) of the Act which was allowed and the questions of law as noted above have been referred for the opinion of this Court.

We have heard Shri Sushil Khandelwal, Income-tax Officer, appearing on behalf of the application-Revenue and Shri J. W. Mahajan, learned counsel for the non-applicant/assessee.

Shri Khandelwal, Income-tax Officer, sought adjournment as no counsel so far been appointed for the Department. However, Shri J. W. Mahajan, learned counsel for the assessee, pointed out that the points has projected in this behalf stand concluded by the decision of the Supreme Court in the case of Modi Industries Ltd. v. CIT (1995) 216 ITR 759. He conceded that question No. 2 deserves to be answered against him. In view of the Supreme Court's decision, we proceed to answer the reference.

The apex Court in the case of Modi Industries Ltd. (1995) 2.16 ITR 759 has summarised the legal position on the point in the following terms (page 808):

"(i) Up to March 31, 1975, interest under section 214 is payable from the first day of the April of the relevant assessment year to the date of the first assessment order. The amount on which, the interest is to be paid is the amount of advance tax paid in excess of the tax payable by the assessee as calculated in the regular assessment (the first assessment order). The amount on which interest was payable did not vary due to the reduction or enhancement of tax as a result of any subsequent proceeding. But with effect from April 1, 1985, while the period for which interest was payable remained constant, the amount on which the interest was payable, varied with the variation in the quantum of refund as a result of any subsequent orders.

(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), and 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 under section 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. .

(iii) With effect from April 1, 1985, interest payable under section 214 will increase or decrease in accordance with the variation in the quantum of the excess payment of tax brought about by, orders passed subsequent to the regular assessment as mentioned in subsection (1 A). "

It will be, thus, seen that the assessee is entitled to interest under section 214 read with 244(IA) of the Act, even when section 214(lA) has come into effect from April 1, 1985. However, the words "regular assessment" in both sections 214 and 215 would mean only the original assessment and not the last operative order or the assessment made pursuant to an appellate/revisional order. As already pointed out, learned counsel for the non-applicant/assessee has conceded that question No. 2 deserves to be answered against him.

Accordingly, we answer question No. 1 in affirmative, i.e., in favour of the assessee and against the Revenue. Question No. 2 is, however, answered in the negative, i.e., against the assessee and in favour of the Revenue.

The reference, thus, stands disposed of as aforesaid but without any order as to costs.

A copy of this order be Transmitted to the Tribunal.

M.B.A./3358/FC Reference answered.