RAMANUJAM J.

The assessee, Shri M. K. KR. Muthukaruppan Chettiar, and his sons along with his father, Karuppan Chettiar (since deceased), formed an HUF which owned certain properties and business in India and Penang and also some interest in certain firms in Keddah, Kungayaigone and Coloroon. The assessments were made on the above entity as an HUF till 1948-49. In the course of assessment proceedings for 1949-50, a claim was made by the assessee that there has been partition between Karuppan Chettiar on the one hand and Muthukaruppan Chettiar and his sons on the other. The ITO, however, rejected the claim for partition and assessed the HUF for the three years 1950-51, 1951-52, and 1952-53, treating Karuppan Chettiar's returns as the proper returns for the family. By his order dated June 18, 1953, the ITO closed the assessments in the case of the family of Muthukaruppan Chettiar observing that he had already held that there was no division between Karuppan Chettiar and Muthukaruppan Chettiar, and, therefore, the file had to be clubbed only with the file of the father, Karuppan Chettiar. He further stated that if for any reason it was ultimately held that the claim for partition has to be accepted, it would be possible to take action under s. 34 of the Indian I.T. Act, 1922. On appeal against the assessments made by the ITO on the family of Karuppan Chettiar, the AAC by his order dated December 18, 1954, held that there was complete partition, and, therefore, the order of the ITO on the basis of the continued existence of the HUF had to be cancelled The ITO, for the purpose of giving effect to the order of the AAC, issued notices under s. 34 of the Indian I.T. Act on March 2, 1957, to the family of Muthukaruppan Chettiar for the three assessment years 1950-51 to 1952-53, after obtaining the previous approval of the Commissioner. In response to the said notices, Muthukaruppan Chettiar submitted returns on April 9, 1957, for the three assessment years under protest. On the basis of the returns filed, the ITO made assessments on Muthukaruppan Chettiar ignoring his protest. Muthukaruppan Chettiar appealed to the AAC, but the appeal was dismissed. The matter was taken to the Appellate Tribunal, but without success. It was then taken to the High Court. The High Court by judgment dated September 16, 1964, held that the reassessment for the year 1952-53 was valid, but the assessments for the earlier two years 1950-51 and 1951-52 were invalid. On appeal, the Supreme Court held that the reassessments for all the three years were invalid. The decision of this court was given effect to by the Appellate Tribunal by their order dated December 5, 1964As a result thereof, the taxes collected on the basis of the impugned assessments for 1950-51 and 1951-52 amounting to Rs. 36, 434 and Rs. 1, 51, 792, respectively, had to be refunded. The refund was, however, granted only on June 16, 1971, though it became due on June 5, 1965, as per s. 244. The interest on delayed refund from June 5, 1965, to June 16, 1971, calculated at 6% up to September 30, 1967, and at 9% from October 1, 1967, to June 16, 1971, came to Rs. 77, 844. This interest was actually paid on September 24, 1971, in the assessment year 1972-73. Muthukaruppan Chettiar sought to have this amount spread over from 1966-67 to 1972-73 in the following manner.

Assessment Period Interest

Year Rs

1966-67 5-6-1965 to 12-4-66-10 months and 7 days at

6% on Rs. 1, 64, 547 8, 406

1967-68 13-4-66 to 12-4-67-One year at 6% 9, 873

1968-69 13-4-67 to 30-9-67-5 months and 7 days at

6% and 1-10-67 to 12-4-68-6 months and 15

days at 9% 12, 506

1969-70 13-4-68 to 12-4-69-One year at 9% 14, 809

1970-71 13-4-69 to 12-4-70-One year at 9% 14, 809

1971-72 13-4-70 to 12-4-71-One year at 9% 14, 809

1972-73 12-4-71 to 16-6-71-2 months and 4 days 2, 632

Total 77, 844

The ITO rejected that plea. On appeal, the AAC, however, observed that the interest in this case was to be assessed on accrual basis from 1960-61 onwards,