COMMISSIONER OF INCOME-TAX VS ENGINE VALVES LTD.
2001 P T D 229
[238 I T R 489]
[Madras High Court (India)]
Before R. Jayasimha Babu and Mrs. A. Subbulakshmy, JJ
COMMISSIONER OF INCOME-TAX
versus
ENGINE VALVES LTD. and another
T.C. No.820 of 1988 (Reference No.607 of 1988) and T.C.P. 410 of 1986, decided on 05/02/1999.
Income-Tax---
‑‑‑‑Interest‑‑‑Advance tax‑‑‑Interest payable by Government ‑‑‑Assessee filing estimate and paying advance tax for financial year 1978‑79‑‑‑Assessee seeking permission and permitted to change accounting year as 1‑4‑1978 to 30‑6‑1979‑‑‑Income thereof assessable in assessment year 1980‑81‑‑‑Sums paid as advance tax during 1978‑79 are not sums "payable" in financial year ‑‑‑Assessee not entitled to interest thereon‑‑‑Indian Income Tax Act, 1961,S.214.
The assessee‑company had paid advance tax, during the 12‑month period preceding March 31, 1979, which was its financial year at the time of payment. However, on June 27, 1979, it applied to the Income‑Tax Officer seeking permission to change its accounting year to June and permit the profits for the period of April 1, 1978, to June 30, 1979, to be offered for assessment in the assessment year 1980‑81. That request was granted by the Income‑tax Officer. The assessee nevertheless filed a return of income on June 30, 1979, for the assessment year 1979‑80 and sought refund of the amount paid as advance tax during the financial year 1978‑79. The Income -tax Officer issued refund and also directed payment of interest on Rs.1,19,854 under section 214 of the Income Tax Act, 1961. The Commissioner in revision suo motu under section 263 held that the assessee was not entitled to interest. The Tribunal, however, reversed the order of the Commissioner of Income‑tax and restored the order of the Income‑tax Officer, Allowing interest under section 214. On a reference:
Held, that for the assessment year 1979‑80 there was no obligation on the part of assessee to file a return, muchless an obligation to pay advance tax, as at the request of the assessee itself, the accounting year was allowed to be altered to a period of 15 months from April 1, 1978 to June 30, 1979. The assessment of the income for that period was t9 be made in the assessment year 1980‑81. The amount that had been deposited by the assessee as advance tax, therefore, was not the amount which was "payable" under sections 207 to 213 of the Act in respect of which, interest under section 214 could be claimed. Although, as on the date the advance tax was paid, the assessee was required to pay that amount, the assessee having subsequently voluntarily altered the accounting year, the amounts paid earlier as advance tax lost their character as advance tax at least in so far as section 214 of the Act was concerned. The assessee could only take refund of the amount and the Department was not required to pay any interest on that amount.
S.V. Subramaniam, Senior Standing. Counsel for Mrs. Chitra Venkataraman for the Commissioner.
S. Ilambharathi for C.V. Mahalingam for the Assesses.
JUDGMENT
R. JAYASIMHA BABU, J.‑‑‑The questions referred to us at the ,instance of the Revenue are:
"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the order passed under section 263 of the Income Tax Act, 1961, by the Commissioner of Income‑Tax cancelling the order of the Income‑Tax Officer for the assessment year 1979‑80 on the ground that there was no previous year at all?
(2) Whether, the Appellate Tribunal's view that the order passed by the Income‑Tax Officer for the assessment year 1979‑80 when there is no previous year is valid in law and that the assessee is entitled to interest under section 214 of the Income‑tax Act is sustainable in law, having regard to the provisions of sections 3(1) and 4 of‑the Income Tax Act, 1961?"
The assessee company carries on business in manufacture and sale of engine valves. It had paid advance tax, during the 12 month period preceding March 31, 1979, which 12 month period was its financial year at the time of payment. However, on June 27, 1979, it applied to the Income‑tax Officer seeking permission to change its accounting year to June and permit the profits for the period of April 1, 1978 to June 30, .1979, to be offered for assessment in the assessment year 1980‑81. That request was granted by the Income‑tax Officer. The assessee had, before seeking the change in the accounting year, filed the estimate in Form No.29 on March 2, 1979, under section 212(3A) estimating its income for the previous year ending March 31, 1979, at Rs. 1,03,75,000 and estimated the tax liability at Rs.60,63,750. Deducting therefrom the am6unt paid towards advance tax prior to March 12, 1979, it had paid a sum of Rs. 25,21,188 on March 10, 1979.
After that the assessee applied to the Income-tax Officer on June 27, 1979, to change its accounting year to June and that request was granted by the Income‑tax Officer. It nevertheless filed a return of income on June 30, 1979, for the‑assessment year 1979‑80 and sought refund of the amount paid as advance tax during the financial year 1978‑79. The Income‑tax Officer issued refund and also directed payment of interest on Rs.1,19,854 under section 214 of the Act.
It is that order of the Income‑tax Officer which was revised suo motu by the Commissioner who held that the assessee was not entitled to payment of interest as the amount paid by it was not the amount which was required to be paid by it as advance tax for the year 1979‑80 in view of the change in the accounting year to June, 1979.
There was no occasion at all for making any assessment for the year 1979‑80 and the return filed by the assessee was of no consequence. The amount though paid as advance tax, was not the amount which was required to be paid in view of the change in the accounting year.
The Tribunal, to whom the assessee appealed, has set aside the order of the Commissioner and restored the order of the Income‑tax Officer. The Revenue being aggrieved by it is how before us.
We have heard counsel for the parties. The questions referred to us are similar to the questions reference of which is sought by the Revenue in T.C.P. No. 410 of 1986 and that T.C.P. is also being disposed of by this order. The questions referred to us in the T.C.P. are treated as having been referred to us. Those questions are raised for the assessment year 1979‑80 and those questions are also answered by this order.
The facts referred to by us earlier clearly show that for the assessment year 1979‑80, there was no obligation on the part of the assessee to file a return much less an obligation to gay advance tax, as at the request of the assessee itself, the accounting year was allowed to be altered to a period of 15 months from April 1, 1978 to June 30, 1979. The assessment of the income for that period was to be made for the assessment year 1980‑81. The amount that had been deposited by the assessee as advance tax, therefore, was not the amount which was "payable" under sections 207 to 213 of the Act in respect of which, interest under section 214 could be claimed. It is no doubt true that as on the date the advance tax was paid, the assessee was required to pay that amount but the assessee having subsequently voluntarily altered the accounting year, the amount paid earlier as advance tax lost their character as advance tax at least in so far as section 214 of the Act is concerned: While the assessee was entitled to take back the amount so deposited, they were not the amounts which could be regarded as advance tax which were payable during the financial year relevant to the assessment year 1980‑81 by the assessee by reason of the. change in the accounting year. The assessee was not required to have its income assessed for that year as the entire 12 month period from April 1, 1978 to June 30, 1979, being a part of the 15 month period from April 1, 1978 to June 30, 1979, constituted the financial year relevant to the assessment year 1980‑81. The amount that had been paid earlier while being refundable to the assessee, the assessee had not acquired any right to claim interest on these amounts under section 214 of the Act. Interest under that provision is allowable only in respect of the amount paid as advance tax during. Any financial year in which "they are payable under sections 207 to 213" of the Act, if the amount so paid exceeds the amount of assessed tax. After having obtained permission from the Income‑Tax Officer to offer income for a 15 month period for the assessment year 1980‑81, the assessee cannot contend that the assessed tax for the assessment year 1979‑80 is "O" that the entire amount paid as advance tax between April 1, 1978 to March 31, 1979, is an amount which is in excess of the amount assessed to tax and claim interest thereon under section 214. The Tribunal has found fault with the Income‑Tax Officer for not stipulating a condition while allowing the change in the accounting year to the effect that the amount paid as advance tax by the assessee will be treated only as non interest bearing amount. It was wholly unnecessary for the Income‑tax Officer to stipulate any such condition. It was at the request of the assessee the accounting year had been altered. The assessee cannot take advantage of such alternation to claim interest on the amounts, which by its own showing were amounts which were not required to be paid in that financial year though they had been paid. The assessee could only take refund of the amount and the Department was not required to pay any interest on that amount. The Commissioner of Income‑tax was perfectly right in revising the order of the Income‑tax Officer and in holding that the assessee was not entitled to the interest that had been allowed by the Income , tax Officer.
The questions referred to us in the Tax Case No. 820 of 1988 and those raised in T.C.P. No.410 of 1986, and which are treated by us as having been referred to us, are answered in favour of the Revenue and against the assessee. The Revenue shall be entitled to costs in the sum of Rs.2,000 (rupees two thousand only).
M.B.A./129/FC
Reference answered.