Calcutta High Court
Central Concrete And Allied Products ... vs Deputy Commissioner Of Income-Tax And ... on 14 January, 1994
Equivalent citations: [1994]210ITR506(CAL)
JUDGMENT Ajoy Nath Ray, J.
1. In this writ application, the petitioner prays for an appropriate amount of interest upon an admittedly refundable amount of tax above Rs. 26 lakhs.
2. The year concerned is the accounting year ending September 30, 1987. For such accounting year, if advance tax had been paid by an ordinary assessee, paying it from his own account prior to assessment, it is not in dispute that 15 per cent. would be payable on the excess tax paid from April 1, 1988, until payment. This clearly follows from Section 214 of the Income-tax Act.
3. The question of rate and payment of interest formed the subject-matter of later further legislation and Section 244A has now been inserted with effect from April 1, 1989. Since I do not want to dwell upon Section 244A any more hereafter, it is my opinion that the treatment there at par of advance tax paid and of tax treated as paid in regard to deductions at source, is not modificatory but merely declaratory of the law, for, as will be clear from what is stated hereafter, a whole and correct reading of the Act shows that they were already at par, for purposes like those mentioned in Section 214.
4. However, the terms of Section 214, as prevailing during the accounting year in which tax was paid either by or on behalf of the petitioner, will determine the rate of interest which will be payable, if at all, in this case.
5. A refund order has been passed in favour of the petitioner accepting that the tax deducted at source in respect of the petitioner for the said assessment year was Rs. 26,21,523. By the order of the Deputy Commissioner of Income-tax dated May 2, 1993, the said authority has allowed interest at the rate of 15 per cent. per annum from only September 5, 1991, on the balance sum of Rs. 20,88,918 remaining unpaid to the petitioner.
6. If the petitioner's contention is correct then the petitioner is to get an additional interest for nearly 31/2 years from May 1, 1988, to September 4, 1991. The money value of this is quite substantial and around Rs. 10 lakhs.
7. The petitioner has contended that on the total sum of Rs. 26,21,523 they are entitled to interest at the rate of 15 per cent. per annum from April 1, 1988, and upon any balance sum that might have remained due therefrom.
8. It has been contended on behalf of the respondents that if this sum of Rs. 26 lakhs and odd had been paid by the assessee itself to the Department then the contention of the assessee would be unassailable. However, the payment of tax for the said accounting year was made on the basis of the 2 per cent. deduction of contractor's bill in accordance with the provisions of tax deduction at source mentioned, inter alia, in Section 194C of the said Act. Thus it has been contended that this advance payment is on a separate footing than direct payment of advance tax by an assessee himself. Being on a different footing the claim for refund is to be made by the assessee for any excess deduction at source in accordance with the provisions of Chapter XIX containing the sections regarding refund and an application for refund is called for;
9. In my opinion, the contention of the respondents is unsound. Under Section 199 of the Act it is quite clear that the credit for tax deducted is to be given to the contractor whose bills have been deducted from, as if the deduction had been made and the deducted sum had been paid to the Central Government on behalf of the contractor assessee himself.
10. Thus, the deductions made by the employer and paid under Section 200 of the Act were all done in pursuance of the obligations cast upon the employer by the Act and these obligations are discharged by the employer as if the employer were acting on behalf of the employee contractor.
11. Furthermore, under Section 209(1)(d) the amount of tax deducted at source is permitted to be knocked off by the assessee from his computation of advance tax. This section treats advance tax paid by the assessee himself and the tax deducted at source and paid on behalf of the assessee by the employer to the Central Government as at par.
12. If we come now to the express words of Section 214 we find that the Central Government is to pay on its own simple interest at the rate of 15 per cent. per annum on the "aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under Sections 207 to 213" in so far as the same "exceeds the amount of the assessed tax".
13. It is not mentioned in Section 214 that the advance tax has to be paid by the assessee himself. The word used is that the advance tax must have been "paid" during the relevant financial year. In my opinion, the tax paid from source is advance tax paid by the employer on behalf of the assessee.
14. The mention of Sections 207 to 213 in Section 214 includes Section 209 according to which, as I have mentioned above, the tax deducted at source ranks pari passu with self-paid advance tax, and can, therefore, be used for pro tanto diminution of the assessee's liability to pay advance tax.
15. On the express words of Section 214 I find no exclusion of its applicability to excess deduction made at source and paid to the Central Government.
16. On a purposive construction of the said statute also it appears to me to be quite reasonable to construe the same to apply to deductions made at source. The Central Government gets the benefit of advance tax as well as tax deducted at source at the same time, i.e., during the financial year which is yet to be under assessment. Thus, if the Government is to pay 15 per cent. simple interest on excess amounts of which it has had the benefit when paid under one count, it should equally pay the same interest on the sums of which it has had similar benefit though paid under another count.
17. Thirdly, a different construction put upon Section 214 would tend to bring it in violation with Article 14 of the Constitution. A person who earns his income by doing a contractor's work might have no opportunity to pay advance tax from his own account as the deduction at source more than accounts for the advance tax that is to be paid by him.
18. His next door neighbour might be employed in a different way and though having the same amount of income and the same amount of liability to pay advance tax, he might be paying the same from his own personal bank account. If I am to accept the contention of the respondents then I would have to hold that the contractor must make an application for refund, but that in the case of his neighbour no such application need be made and the Central Government will pay 15 per cent. on the excess advance tax on its own. There is no doubt in my mind that to put such a construction upon Section 214 would introduce a class distinction between the two different types of vocations without there being any reasonable basis for such differentiation between the two persons in the two different classes. No object of the Income-tax Act is furthered by such a class distinction.
19. Under these circumstances, the petitioners' application succeeds. The order of refund dated May 20, 1993, is to be read as modified in the following manner.
20. The respondents will pay the petitioners interest at the simple rate of 15 per cent. per annum from April 1, 1988, until payment upon the sum of Rs. 26,21,523. They shall also refund the said principal amount or such part of it as yet remains unrefunded. In case any part or parts of the principal sum have already been paid, interest upon the said sum or sums shall naturally cease to run from the respective date or dates of payment.
21. All payments ordered above are to be completed within four weeks of service of a copy order upon the respondents or their concerned officers.
22. Stay of operation of this order is prayed for on the part of the respondents but the same is refused.
23. The rule shall be drawn up as a rule absolute in the form of a mandamus. The parties and all others concerned will, however, act upon a signed xerox copy of this dictated order upon the undertaking of the petitioners to have the same duly drawn up, completed and filed.