Income-tax---

----Advance tax---Interest payable by Government ---Assessee filing revised estimate and paying more than amount demanded under S.210---Payment accepted by Revenue ---Assessee entitled to interest under S.214 on excess payment---Indian Income Tax Act, 1961, Ss.210 & 214.

Any payment made before the end of the accounting year for which assessment was made should be taken as advance tax. Since the amount paid by the assessee was accepted by the Income-tax Officer as advance tax the assessee would be entitled to interest under section 214 of the Income Tax Act, 1961, on the excess payment.

The assessee was required to pay advance tax of Rs.20,85,000 for the assessment year 1978-79 under section 210 of the Income Tax Act, 1961, in three instalments. It paid two instalments amounting to Rs.13,90,000. Then it filed an upward estimate under section 212(3Aj and paid Rs.12 lakhs. Thus, the total tax paid was Rs.25,90,000. The tax finally determined was Rs.24,70,114. The Income-tax Officer in the assessment proceedings treated this entire amount of Rs.25,90,000 as advance tax and on that basis granted interest under section 214 on the refund of tax. Subsequently, the Commissioner of Income-tax found that the grant of interest tinder section 214 to the assessee on the excess tax paid by it than demanded under section 210 was not correct and, therefore, the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. He set aside the assessment and directed the Income-tax Officer to withdraw the interest under section 214 of the Act. The Tribunal cancelled the order of the Commissioner of Income-tax. On a reference.

Held, that the Tribunal was right in holding that the payment should be considered to be an advance tax payment made under section 212(3A) and interest under section 214 should be granted on the excess amount so paid.

New India Maritime Agencies (P.) Ltd. v. CIT (1995) 216 ITR 76 (Mad.); CIT v. Ajoy Paper Mills Ltd. (1990) 181 ITR 454 (Cal.) and Srinivasan (T.V.) v. CWT (1985) 152 ITR 599 (Mad.) ref.

C. V. Rajan for the Commissioner.

P. P. S. Janarthana Raja for the Assessee.

JUDGMENT

K.A. THANIKKACHALAM, J.---At the instance of the Department, the Tribunal referred the following question for the opinion of this Court under section 256(1) of the Income Tax Act, 1961:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the payment of tax not in excess of 1 /3rd of the tax demanded under section 210 should be considered to be an advance tax payment made under .section 212(3A) and interest under section 214 should be granted on the excess amount so paid?"

The assessee was required to pay advance tax Rs.20,85,000 for the assessment year 1978-79 under section 210 of the Act in three instalments. It paid two instalments amounting to Rs.13,90,000. Then it filed an upward estimate under section 212(3A) and paid Rs.12 lakhs. Thus, the total tax paid was Rs.25,90,000, which was in excess of the advance tax demanded by Rs.5,05,000. The Income-tax Officer in the assessment: proceedings treated this entire amount of Rs.25,90,000 as advance tax and on that basis granted interest under section 214 on the refund of tax. Subsequently, the Commissioner of Income-tax found that the grant of interest under section 214 to the assessee on the sum of Rs.5,05,000 being the excess tax paid by it than demanded under section '' 10 was not correct and, therefore, the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. According to him, the amount in excess of Rs.20,85,000 demanded under section 210 is not advance tax, because the assessee was not obliged to file an upward estimate inasmuch as the tax payment of Rs.25,90,000 did not exceed Rs.20,85,000 demanded under section 210 by 33-1/3 percent. He also held that the excess payment is in the nature of deposit, which does not have the stamp of a payment under sections 210 to 213 of the Act to make it eligible for interest under section 214. Accordingly, he issued a notice to the assessee under section 263 and after hearing the assessee, concluded that the interest granted under section 214 on the sum of Rs.5,05,000 should be withdrawn. He accordingly set aside the assessment and directed the Income-tax Officer to withdraw the interest under section 214 granted wrongly.

The assessee appealed to the Tribunal, the Tribunal held that even though the assessee is not obliged to furnish an upward estimate, the payment is certainly relatable to the provisions of section 212(3A) and, therefore, it should be treated as an advance tax paid under, section 212(3A) or under section 210. In this view, it held that the assessee would be entitled to interest under section 210 on the refund of excess tax. The Tribunal further observed that there was no provision in the Income-tax Act for making a deposit of any amount and the payment can be construed as the payment of. third instalment of advance tax with, something in excess of what is liable to be paid. Thus, the Appellate Tribunal cancelled the order of the Commissioner of Income-tax passed under section 263, directing the Income ?tax Officer to withdraw the interest under section 214 already granted on Rs.5,05,000.

Before us learned standing counsel appearing for the Department submitted that the assessee is not entitled to file an upward estimate, while the correct tax was demanded under section 210 of the Act. It was further' submitted that amount paid in excess of what is demanded under section 210 of the Act cannot be treated as payment of advance tax. According to learned standing counsel, the assessee was not obliged to file an upward estimate inasmuch as the tax payment of Rs.25,90,000 did not exceed Rs.20,85,000 demanded under section 210 of the Act by 33-1/3 percent. Therefore, according to learned standing counsel, the excess payment in the nature of deposit cannot be considered to be payment under section-213 of the Act to make it eligible for interest under section 214. It was further submitted that the Tribunal was not correct in setting aside the order passed by the Commissioner of Income-tax under section 263 of the Act.

On the other hand, learned counsel appearing for the assessee, while supporting the order passed by the Tribunal, submitted that the advance tax demanded under section 2,10 was Rs.20,85,000 for the assessment year 1978-79. Two instalments amounting to Rs.13,90,000 were paid. For the third instalments, the assessee filed an upward estimate under section 212(3A) and paid Rs.12 lakhs. Thus, the total tax paid comes to Rs.25,90,000. According to the Department, the assessee can file an upward estimate only when there is a difference of 33-1/3 per cent, between the tax demanded under section 210 and the tax paid by the assessee: In the present case, the tax demanded under section 210 was Rs.20,85,000. The total tax paid was Rs.25,90,000.

It is true that the difference does not come to the extent of 33-1/3 percent. The fact remains that ultimately, the tax was determined as Rs.24,70,114, after giving credit for the tax deducted at source. Between the finally determined tax and the total tax paid by the assessee there was not much difference. Therefore, according to learned counsel appearing for the assessee, the excess advance tax paid over and above the demanded advance tax under section 210 of the Act should be treated as payment of advance tax, especially when the Department accepted such payment. For these reasons, it was submitted that the Tribunal was correct to holding that action under section 263 of the Act is not possible in the present case.

The point for consideration is whether the assessee is entitled to interest under section 214 of the Act on a sum of Rs.5,05,000. Under section 210 of the Act, the Department demanded advance tax of Rs.20,85,000. By way of the first two instalments, the assessee had paid a sum of Rs.13,90,000. For payment of the third instalment, the assessee filed an upward estimate and paid a tax of Rs.12 lakhs under section 212(3A) of the Act. The tax finally determined for the assessment year under consideration was Rs.24,70,114. The total advance tax paid by the assessee was Rs,25,90,000. There is not much difference, between both these figures. The Department demanded advance tax under section 210 of the Act on the basis of the previous year's assessment, but at the time when the third instalment was to be paid, the assessee come to know that the income for the assessment year under consideration would be increased and, therefore, filed an upward estimate and paid Rs.12 lakhs, Thus, the total tax paid by the assessee comes to Rs.25,90,000. According to the Department, the assessee is not entitled to file an upward estimate, since the difference between Rs.25,90,000 and Rs.20,85,000 is not 33-1/3 percent. In fact, the demand raised by the Department under section 210 is definitely lower than the tax finally determined for the assessment year under consideration. Thus, the assessee fled an upward estimate and paid tax more than what was demanded under section 210 of the Act. Even if the assessee paid the advance tax as demanded by the Department under section 210 of the Act, then also after the assessment was completed, the assessee would be compelled to pay the difference between Rs.24,70,114 and Rs.20,85,000. It also remains to be seen that when a sum of Rs.12 lakhs was paid under section 212(3A), the Department accepted such payment as advance tax.

In New India Maritime Agencies (P.) Ltd. v. CIT (1995) 216 ITR 76, this Court, while considering the interest payment under section 139(8) of the Act held that (headnote):

"So long as the payment was accepted, it could only be towards` advance tax. Any payment made before the end of the accounting year for which assessment was made should be taken as advance tax. Since the amount paid by the assessee was accepted by the Income? tax Officer as advance tax and the amount paid was over and above what was due by way of tax, no interest under section 139(8) could be levied."

In the case of CIT v. Ajoy Paper Mills Ltd. (1990) 181 ITR 454, the Calcutta High Court, while considering the provisions of sections 211 and 214, held that (headnote):

"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, there is no reason why such tax 'should not be treated as advance tax."

In the case of T. V. Srinivasan v. CWT (1985) 152 ITR 599, this Court, while considering the provisions of section 2(m)(ii) of the Wealth Tax Act, 1957, held that (headnote):

"... having regard to the statutory provisions which compel an assessee to pay,-advance tax and make the non-payment of advance tax penal, the amount of advance tax or excess advance tax paid in pursuance of a statutory compulsion cannot be taken to be a deposit. The entire advance tax paid will be an asset of the assessee and the entire accrued income-tax liability for the relevant accounting year will be debt owed by the assessee to the Government with the result`' that the excess advance tax will continue to have the character of an asset of the assessee."

According to the facts arising in the present case, under section 210 the Department demanded advance tax of Rs.20,85,000. The assessee paid a sum -of Rs.25,90,000 by filing an upward estimate for the third instalment under section 212 (3A) of the Act. It is no doubt true that the difference between Rs.20,85,000 and Rs.25,90,000 would not come to 33-1/3 percent. But, the fact remains that even though the tax demanded under section 210 was Rs.20,85,000, the tax finally determined was Rs.24,70,114. If that is so, between Rs.25,90;000 the total tax paid, and Rs.24,70,114, the tax finally demanded, the difference would be very negligible. Even though the advance tax demanded under section 210 basing upon the previous year's assessment is very much lower than the actual tax is finally determined, the assessee visualising increase in the income, filed am upward estimate for the third instalment under section 212(3A). This visualisation of the assessee gets justified when the tax is finally. determined at Rs.24,70,,114. Further, Rs.12 lakhs paid by the assessee by way of the third instalment under section 212(3A) was accepted by the Department as advance tax. If once the payment was accepted as advance tax and the difference between the tax demanded and the total tax paid was very negligible, it cannot be said that the assessee is not entitled to interest under section 214 of the Act on the excess payment of tax. This conclusion we have arrived at on the basis of various decisions cited supra. Thus, considering the facts arising in this case, we are of the opinion that there is no ground for the Commissioner of Income-tax to interfere with the order passed by the Income-tax Officer under section 263 of the Act.

In that view of the matter, we hold that the order passed by the Tribunal in cancelling the order passed under section 263 of the Act is. in order. Accordingly, we answer the question referred to us in the affirmative and against the Department, No costs.

M.B.A./3208/FC???????????????????????????????????????????????????????????????????????????????? Reference answered.