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1991 Supreme(Bom) 329
IN THE HIGH COURT OF BOMBAY
M.L. Pendse A.V. Savant, JJ.
Cyanamid India Limited.... Petitioner.
Versus
K.N. Anantharama Ayyar others.... Respondents.
Writ Petition No. 529 of 1982, decided on 18-7-1991.
Advocates appeared:
S.E. Dastur with P.J. Pardiwala instructed by M/s. Crawford Bailcy Co., for the petitioner.
G.S. Jetly with Pradeep Jetly K.C. Sidhwa, for the respondents.
Section 244(1-A) of the Income-tax Act, 1961 applies to amounts paid as advance tax.
Headnote:
INCOME TAX - Interest on refund - Advance tax - Regular assessment - Section 214(1) and 244(1-A) of the Income-tax Act, 1961 - Whether interest is payable under section 214(1) of the Act beyond the date of first assessment - Whether section 244(1-A) of the Act applies to amounts paid as advance tax.
Fact of the Case:
The petitioner, a company, paid advance tax and filed a return for the assessment years 1973-74 and 1974-75. The assessments were completed and refunds were granted. The petitioner claimed interest on the refunds under sections 214(1) and 244(1-A) of the Income-tax Act, 1961. The Commissioner of Income-tax rejected the claim for interest under section 214(1) but allowed the claim for interest under section 244(1-A) for the assessment year 1973-74. The petitioner challenged the rejection of the claim for interest under section 214(1) and the grant of interest under section 244(1-A) for the assessment year 1974-75.
Finding of the Court:
The court held that the petitioner was not entitled to interest under section 214(1) of the Act beyond the date of first assessment. However, the court held that the petitioner was entitled to interest under section 244(1-A) of the Act for both the assessment years.
Issues: 1. Whether interest is payable under section 214(1) of the Act beyond the date of first assessment? 2. Whether section 244(1-A) of the Act applies to amounts paid as advance tax?
Ratio Decidendi: 1. The court held that the expression "regular assessment" in section 214(1) of the Act means the first order of assessment and not the last operative order of regular assessment at any given point of time passed in appellate or revisional proceedings. Therefore, the petitioner was not entitled to interest under section 214(1) beyond the date of first assessment. 2. The court held that section 244(1-A) of the Act applies to amounts paid as advance tax. The court held that the advance tax loses its character and is credited towards the liability arising out of the order of assessment. Therefore, the petitioner was entitled to interest under section 244(1-A) for both the assessment years.
Final Decision: The petition was partly allowed. The Department was directed to pay interest to the Company on the amount of refund of tax made in regard to the giving effect to the appellate order in respect of rectification order for assessment year 1973-74. The Department was also directed to pay interest on the amount of refund for assessment year 1974-75 for the period commencing from April 1, 1974 till January 3, 1990.
2. The Company preferred an appeal to the Appellate Assistant Commissioner, Income-tax against the original order of assessment under section 143(3) of the Act. The Company also preferred appeal against the order of rectification passed by the Income-tax Officer. By order dated October 25, 1978, the Commissioner of Income-tax (A) partly allowed both the appeals and effect was given to the orders of Commissioner of Income-tax and of the Tribunal by order dated July 30, 1979. The total income of Company was computed at Rs. 4,02,54,680/- and the total refund of Rs. 2,54,533/- was found due. The said amount of refund comprised of sum of Rs. 1,588/- being the amount due as a result of the order of the Commissioner of Income-tax and the balance amount being the amount of refund due as a result of the order of the Tribunal. The Company received the refund on September 20, 1979.
3. For the assessment year 1974-75, the Company had paid advance tax of Rs. 2,71,30,402/-. The return was filed on June 27, 1974 and the income returned was Rs. 4,64,20,130/-. The assessment was completed under section 143(3) of the Act by order dated September 29, 1975 and the Company was assessed of income of Rs. 4,70,76,060/-. The Income-tax payable was Rs. 2,71,86,424/-. After giving credit for the advance tax paid and the tax deducted at source the Officer raised the demand of Rs. 36,441/- on the Company. The Company was entitled to refund of the tax for the assessment year 1972-73 and, therefore, the entire demand was adjusted to the said amount of refund.
By order dated October 27,1976, the Income-tax Officer in exercise of powers under section 154 of the Act rectified certain mistakes which were apparent on the face of record and revised the total income to Rs. 4,70,26,320/- and the Company was called upon to pay further tax of Rs. 7,717/-. The demand was also adjusted against the refund due to the Company for the assessment year 1962-63.
The Company preferred an appeal against the order of the original assessment to Commissioner of Income-tax (A) and the appeal was partly allowed by order dated July 5, 1979. The Income-tax Officer gave effect to the order determining the refund due to the Company of Rs. 2,82,132/-. The amount of refund was adjusted in January 1980 against the sur-tax demand for assessment year 1976-77. The amount of Rs. 2,82,132/- included the refund of excess advance tax paid of Rs. 2,60,024/-.
4. Under section 214(1) of the Act, the assessee is entitled to interest on the amount of advance tax paid d
