Madras High Court
Sholingur Textiles Ltd. vs Commissioner Of Income Tax on 29 January, 1998
Equivalent citations: (1999)154CTR(MAD)346
JUDGMENT N. V. BALASUBRAMANIAN, J.
At the instance of the assessee, the Tribunal under s. 256(1) of the IT Act, 1961, hereinafter referred to as the "Act", has referred the following question of law, for our consideration "Whether on the facts and circumstances of the case, the Tribunal was right in holding that the issue relating to the grant of interest under s. 214 cannot be entertained even though an appeal was filed contesting various additions apart from the denial of interest under s. 214 of the IT Act ?
2. The assessee is a company. The assessee, in the course of assessment proceedings of asst. yr. 1980-81 claimed interest before the ITO under s. 214 of the Act. The ITO did not grant the interest on the ground that a sum of Rs. 25.8 lakhs paid by the assessee was not an advance tax, but and ad hoc payment and hence, he did not allow any interest under s. 214 of the Act, even though there was a refund of a sum of Rs. 4,90,994. There were certain other disallowances and additions in the order of assessment.
3. The assessee challenged the order of assessment disputing the deduction of the value of subsidy received from SIPCOT, from the actual cost under s. 43(1) of the Act and along with some other objections, against the order of assessment, it also raised a question that the assessee was entitled to interest under s. 214 of the Act. In other words, the assessee filed an appeal against the order of assessment before the CIT(A). The CIT(A) held that the assessee was entitled to interest under s. 214 of the Act, on the basis of the decision of this Court in CIT vs. T.T. Investments & Trades (P) Ltd. (1984) 42 CTR (Mad) 48 : (1984) 148 ITR 347 (Mad) and partly allowed the appeal preferred by the assessee.
4. The Department preferred an appeal before the Tribunal and contended that against the order of the refusal to grant interest under s. 214 of the Act, the appeal preferred by the assessee was not maintainable in law. the Tribunal accepted the contention of the Department following its earlier order and held that no appeal would be entertained against the order of refusal to grant interest under s. 214 of the Act.
5. On an application filed by the assessee, the Tribunal had referred the question of law referred to us as above.
6. Mr. P.P.S. Janarthana Raja learned counsel for the assessee submitted that the issue is covered in favour of the assessee by a decision of this Court in Thplicane Urban Co-operative Society Ltd. vs. CIT (1980) 16 CTR (Mad) 273 : (1980) 126 ITR 125 (Mad) : and a decision of the Supreme Court in Central Provinces Manganese Ore Co. Ltd. vs. CIT (1986) 58 CTR (SQ) 112 (1986) 160 ITR 961 (SQ) : 6.
7. Mr. C.V. Rajan, learned counsel for the Revenue, has submitted that he did not seriously dispute the position of law submitted by the learned counsel for the assessee.
8. We have carefully considered the submissions of the learned counsel. This Court in Thplicane Urban Co-operative Society Ltd. vs. CIT (supra) has taken the view that the appeal would he against an order refusing to grant interest on the refund due to the assessee under s. 214 of the Act, provided the assessee had challenged the order of assessment, but the assessee could not challenge the refusal to grant interest alone, but if an assessee has filed an appeal against the order of assessment, it is open to him to challenge the order refusing to grant interest. The following passage extracted herein is relevant for the purpose of the case.
"These two decisions can to be considered in T.C. No. 378 of 1975 (CIT vs. City Palayacot Co.) dt. 6th July, 1979 (1980) 15 CTR (Mad) 365: (1980) 122 5R 430 (Mad) : . After referring to both these cases, it was pointed out :
"There is no inconsistency between the two decisions. This aspect as to whether the legality of the levy of penal interest could be challenged on in an appeal against the assessment on other aspects had not to be considered in the earlier decision.
The view taken in the last mentioned case was that so long as the assessee had grievance regarding the assessment, he could include his objection to the levy of interest in the appeal before the AAC but an appeal will not, however, he only against the levy of interest simpliciter. The same principle would hold good even with reference to the claim of interest by the assessee on the refund due to him. "
9. The Supreme Court also had an occasion to consider the question whether an appeal would lie against an order levying interest under s. 214 of the Act. The Supreme Court held that the levy of interest is a part of the process of assessment and it is open to the assessee to dispute the levy in appeal, provided, he limits himself to the ground that he is not liable to the levy at all. the above two decisions, viz., the decision of this Court as well as the decision of the Supreme Court make it clear that it is open to the assessee to challenge the order of the ITO refusing to grant interest under s. 214 of the Act provided he has challenged the order of assessment. It is no doubt true that no appeal would lie against an order refusing to grant interest simpliciter, but, when the entire assessment is challenged before the AAC, it is open to the assessee to challenge the order of the ITO refusing to grant interest.
10. In view of the earlier decision of this Court in 7bplicane Urban Co-operative Ltd. vs. CIT (supra) and the decision of the Supreme Court in Central Provinces Mdnganese Ore Co. Ltd. vs. CIT (supra), we are of the view that the Tribunal was not correct in holding that the appeal will not be entertained against an order refusing to grant interest under s. 214 of the Act. We hold that the appeal filed by the assessee was competent before the CIT(A) as the assessee has challenged not only refusal of interest, but also the entire assessment as such. Since the Tribunal has not considered the matter in merits of the case, the Tribunal is directed to consider the same.
11. Accordingly, we answer the question of law in the negative and in favour of the assessee. There will be no order as to costs.
OPEN