Rajasthan High Court - Jaipur
Jai Drinks (P.) Ltd. vs Commissioner Of Income-Tax on 19 April, 1995
Equivalent citations: [1996]217ITR404(RAJ), 1995(2)WLN222
JUDGMENT V.K. Singhal, J.
1. The present writ petition has been filed against the order dated April 15, 1982, passed by the Commissioner of Income- tax under Section 264 of the Income-tax Act, 1961.
2. The brief facts of the case are that the petitioner-company paid advance tax amounting to Rs. 1,79,200 under Section 210 of the Income-tax Act, 1961, as under :
Rs.
(i) 38,500 On 14-6-1976
(ii) 38,500 On 13-9-1976
(iii) 22,200 Cheque given to the bank on 15-12-1976, and encashed on 16-12-1976, as per the certificate of the State Bank of Bikaner and Jaipur.
(iv) 45,216 On 15-12-1976, by adjustment of refund due for the assessment year 1972-73 as a result of appeal effect. The letter for adjustment was given by the assessee on 15-12-1976. The date of the Appellate Assistant Commissioner's order was 8-11-1976. The total amount of refund for 1972-73 amounted to Rs. 1,22,125. The intimation about adjustment of refund was given to the assessee by the Income-tax Officer on 16-12-1976.
(v) 34,784 On 17-1-1977 Total 1,79,200
3. The assessment in respect of the assessment year 1977-78 was finalised on January 16, 1979, on an income of Rs. 2,05,090 and the tax payable was at Rs. 1,18,440. The order of the Income-tax Officer was rectified under Section 154 on April 7, 1979, and the income originally assessed was increased to Rs. 2,36,306. The tax payable thereon was Rs. 1,36,468. This order was further rectified on September 10, 1979, and on rectification the total assessable income was reduced to nil. In pursuance of that order, the assessee became entitled to refund of advance tax, as well as tax deduction at source amounting to Rs. 8,005 and tax at Rs. 12,627, which was adjusted by the Income-tax Officer out of refund for the assessment year 1978-79. The Income-tax Officer refunded the tax to the petitioner-company of Rs. 1,99,832 as under :
Rs.
(i) 44,212 On 4-5-1979, on completion of assessment under section 141A. (ii) 30,193 On completion of assessment under section 143(3) on 16-1-1979. (iii) 1,25,427 On 18-9-1979, on the passing of order under section 154 of the Act on 10-9-1979, 1,99,832
4. Thereafter, the company made an application for grant of interest on the excess amount of tax deposited and refunded. The Income-tax Officer allowed the claim of the assessee in part, vide order dated March 17, 1980, and interest of Rs. 8,047 was allowed as under :
Rs.
1.
1,222 On Rs. 9,428. The interest was paid on Rs. 9,428 from 1-4-1977 to 5-4-1978. This figure was arrived at by reducing Rs. 34,784 from Rs. 44,212 on the ground that the instalment was not paid on the due date and as such on Rs. 34,784 interest is not payable. The figure of Rs. 44,212 was determined while framing the assessment under section 141A.
2. 6,321 This interest has been calculated on Rs. 30,193 from 1-4-1977 to 16-1-1979, on which the assessee was held entitled for interest under section 214.
3. 504 This interest has been calculated on Rs. 12,627 at the rate of 12 per cent, from 5-5-1979, to 18-9-1979, under section 244(1A).
8,047
5. Against the above order, the assessee filed a revision under Section 264 of the Income-tax Act, 1961, before the Commissioner of Income-tax where also part of the claim of the assessee was allowed and it was directed that the interest under Section 244(1A) is separately admissible with effect from January 16, 1979, up to September 10, 1979, on the amount of Rs. 1,25,427. The Commissioner of Income-tax found that while issuing refund of Rs. 44,212 at the time of completion of assessment under Section 141A, the question regarding admissibility of interest under Section 214 upon this amount has already been considered and interest of Rs. 1,222 was allowed on an amount of Rs. 9,428 since the instalment of Rs. 34,784 was deposited by the assessee much after the due date for payment of the instalment. Similarly, while allowing refund of Rs. 30,193 at the time of regular assessment, interest of Rs. 6,321 under Section 214 has already been allowed and, therefore, there is no question of granting any further interest under Section 214 on any further amount.
6. The assessee has claimed that in accordance with the provisions of Section 214, the petitioner is entitled for the interest on the amount of Rs. 34,784 since the said amount was paid before March 31, 1977. Another contention which has been raised is that in respect of advance tax of Rs. 1,04,795 the assessee is entitled to interest from April 1, 1977, to January 15, 1979.
7. In respect of the contention that the assessee is entitled for interest on the advance tax even after the due date, but within the financial year, it is submitted that the provisions of Section 214 provide for payment of simple interest at 15 per cent. per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under Sections 207 to 213, exceeds the amount of the assessed tax from the first day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year during which it is payable by renson of the provisions of Section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment. The dispute is with regard to the payment of interest in respect of the instalment of advance tax which has been paid after the due date. By the Direct Tax Laws (Amendment) Act of 1987, a proviso has been added to Section 211 which provides that any amount paid by way of advance tax on or before the 31st day March, shall also be treated as advance tax paid during the financial year ending on that day for all the purposes of the Act. So far as the question after April 1, 1988, is concerned, the controversy has been set at rest. It is only in respect of the period prior to April 1, 1988, that it is to be considered whether prior to this date on the amount, which has been deposited after the due date but during the financial year, the assessee can claim interest thereon.
8. The Calcutta High Court in the case of General Fibre Dealers Ltd. v. ITO [1979] 116 ITR 40 has held that the regular assessment contemplated by Section 214, should be the assessment made by the Income-tax Officer initially or the first assessment made by the Income-tax Officer if there was no appeal therefrom, but in case there was an appeal, the order passed by the Income-tax Officer finally to give effect to the direction, if any, of the appellate authority.
9. The Gujarat High Court in Anup Engineering Ltd. v. ITO [1984] 145 ITR 105 has dissented from the decision of the Andhra Pradesh High Court in Kangundi Industrial Works (P.) Ltd. v. ITO [1980] 121 ITR 339 and the Kerala High Court in A Sethumadhavan v. CIT [1980] 122 ITR 587 and held that there is no indication in Section 214 of the Income-tax Act, 1961, that the dates of instalments of advance tax are strictly to be adhered to and, if they are not adhered to, interest will not be payable. The decision in Chandrakant Damodardas v. ITO [1980] 123 ITR 748 (Guj) was followed and it was observed that it is clear that the Legislature intended to provide that irrespective of the dates on which the instalments of advance tax are paid, interest will be payable on the excess advance tax if two conditions are satisfied : (i) the entire amount of advance tax is paid up, and (ii) it is paid up before the end of the financial year. There is no further condition that the instalments of advance tax must have been paid on or before the due dates mentioned in Section 211. Failure to pay the instalments on the due dates might involve an assessee in payment of penalty, if the other conditions for levy of penalty are satisfied, but the concept under Section 214 being totally unconnected with deprivation of interest, where penalty is incurred, the interest on excess advance tax must be paid if the two abovesaid conditions are satisfied.
10. The Madhya Pradesh High Court in CIT v. Jagannath Narayan Kutum-bik Trust [1983] 144 ITR 526 observed that Section 214 is a self-contained provision and the Section cannot be interpreted with reference to another provision of the Act, i.e, Section 218, for limiting or enlarging its scope. Section 218 deals with a totally different situation. An assessee is entitled to interest on fulfilment of the conditions laid down in Section 214, even though he may be a defaulter under Section 218 and is liable to penalty under Section 211. It was held that the interest under Section 214 is payable to the assessee on the excess amount paid during the financial year on dates subsequent to the dates stipulated under Section 211 of the Income-tax Act for payment of such instalments.
11. The Bombay High Court in Pfizer Limited v. K. N. Anantharama Aiyar, CIT [1987] 163 ITR 461, while interpreting the provisions of Section 215 of the Act observed that there is nothing in Section 215, which requires payments of instalments of advance tax to be made on or before the due dates and if they are not adhered to, interest is payable by the assessee. It was further observed that while computing the total amount of tax payable, the amount paid by an assessee during the financial year has to be taken into consideration. Interest under Section 215 is not payable on an amount after that amount has been paid over. The words "or otherwise" in Section 215(2) are of the widest amplitude and cover all payments of tax before the date of completion of the regular assessment. If an assessee is made to pay interest on an amount he has already paid to the Revenue, it would amount to imposition of penalty, which is not the purpose of Section 215.
12. The Kerala High Court in Santha S. Shenoy v. Union of India [1982] 135 ITR 39 observed that there is an obligation to pay the advance tax during the financial year, if it is paid the next day or later, but in the financial year, it does not cease to be advance tax. It was further observed that apart from the language of Section 214 which, to us, is quite clear, the very purpose and object of that provision will not be promoted by taking a very narrow and restricted view about the scope of Section 214. The very scheme of the Income-tax Act shows that the obligation of the assessee is to pay tax in advance during the previous year and if he fails to make an estimate in accordance with his income, he invites the liability to pay interest under Section 217. Similarly, if he pays more, he has necessarily the right to get interest on the excess amount paid and that interest is payable from the 1st of April next succeeding. Naturally so, because payment has to be made during the previous financial year. There is no rhyme or reason in limiting the payment of interest to excess paid before specified dates and not in the financial year. Of course if the plain language of the section compels us to read it in a different way despite any rule of reasonableness or logic, we may have to read the section in such plain sense. It was held that the liability to pay advance tax under Sections 207 to 213 of the Income-tax Act is in relation to the financial year though the dates are specified. The payments made pursuant to notices on dates other than the last dates specified would be advance tax payable under the Act and if they are paid during the relevant financial year, they will be given credit for under Section 219. Advance tax paid during the relevant year but not on the specified dates does not cease to have the character of advance tax and continues to be advance tax and is to be credited as advance tax paid against the tax payable at the time of regular assessment in accordance with Section 219. The assessee was held entitled to interest under Section 214 in respect of the advance tax paid during the financial year.
13. The Madras High Court in CIT v. T. T. Investments and Trades Pvt. Ltd. [1984] 148 ITR 347 has also taken the view that though the assessee may be proceeded against for non-payment of advance tax on the due date, so long as the payment is accepted it can only be towards advance tax. Any payment made before the end of the accounting year for which the assessment is made should be taken as advance tax. The assessee was held entitled to interest under Section 214 on the payment in question.
14. The Calcutta High Court in CIT v. Ajoy Paper Mills Ltd. [1990] 181 ITR 454 has observed that if credit is given by the Department for the belated payments made during the financial year in calculating the tax due on regular assessment, there is no reason why such tax should not be treated as advance tax. It is a payment in advance towards tax to be determined on regular assessment. If the Revenue, for the purpose of determining the tax due on regular assessment, cannot ignore such payment, then, for the purpose of calculating interest also such payment cannot be kept out of consideration.
15. The Punjab and Haryana High Court in CIT v. Roadmaster Industries of India (P.) Ltd. [1992] 193 ITR 639 has observed that there is a string of judicial precedents expressing the view that the Legislature intended to provide that, irrespective of the dates on which the instalments of advance tax are paid, interest would be payable on the excess advance tax paid.
16. The Andhra Pradesh High Court (Full Bench) in Bakelite Hylam Ltd. v. CTT [1993] 202 ITR 145, after taking into consideration the various decisions given by the different High Courts observed that any amount paid towards advance tax during the financial year in which it is payable will have to be taken into account for arriving at the aggregate and it is sufficient if the instalment of advance tax is paid during the financial year, even though not on the specified date.
17. The Gujarat High Court in Chimanlal S. Patel v. CIT [1994] 210 ITR 419 observed that irrespective of the dates of payment, interest will be payable if the entire amount of advance tax is paid on or before the end of the financial year. Even interest on interest was directed to be paid though no specific provision for payment of interest on the interest amount exists.
18. The Karnataka High Court in CIT v. Karnataka State Warehousing Corporation Ltd, [1990] 185 ITR 25 followed the decision of the Gujarat High Court in Chandrakant Damodardas v. ITO [1980] 123 ITR 748 and its own decision in CIT v. G.J. Fernandez [1986] 160 ITR 602 and came to the conclusion that interest on the excess advance tax has to be paid by the Government, even if the instalments have been paid after the due dates but within -the financial year.
19. If the history of the Act, Chapter XVII-C of the Income-tax Act, 1961, is seen which contains provisions relating to advance payment of tax, the said Chapter provides liability for payment of advance tax, provision for payment of interest by the Central Government and provision of levy of interest on an assessee on default.
20. Section 207 provides for advance tax and income subject to advance tax. Tax in advance is payable in accordance with the provisions of Sections 208 to 219 in the case of income other than capital gains and income referred to in Sub-clause (ix) of Clause (24) of Section 2. Section 208 stipulates the condition for the liability to pay advance tax. In the case of a company or a local authority such assessee becomes liable to pay advance tax provided the total income exceeds two thousand five hundred rupees. Section 209 provides for the manner of computation of advance tax. Section 209A provides for computation and payment of advance tax by the assessee. Section 210 empowers an Income-tax Officer to make an order requiring to pay advance tax, if an assessee has been previously assessed by way of regular assessment. Section 212 provides for furnishing of an estimate by an assessee. Section 211 provides for payment of advance tax in three equal instalments on or before the stipulated dates.
21. Section 214 fastens liability on the Central Government to pay simple interest at twelve per cent. per annum on the amount by which the aggregate sum of any instalment of advance tax paid during any financial year in which they are payable under Sections 207 to 213 exceeds the amount of tax determined on regular assessment. Interest commences from the 1st day of April next following the said financial year to the date of the regular assessment.
22. Sections 215 and 216 make an assessee liable to pay interest to the Central Government at the rate of 12 per cent. if advance tax is paid in short. The liability to payment is from the 1st day of April next following the said financial year up to the date of the regular assessment. Section 217 provides for liability to payment of interest by an assessee if no estimate is filed by an assessee. Such liability also commences from the 1st. day of April next following the said financial year and at the rate of 12 per cent.
23. Section 218 provides for circumstances when the assessee is deemed to be in default. Section 219 provides for giving credit for advance tax paid in a financial year in the regular assessment. It also provides that any sum paid by or recovered from an assessee as advance tax in pursuance of this Chapter shall be treated as a payment of tax. This section treats payments made during the financial year as advance tax to be adjusted as advance tax in the regular assessment.
24. Chapter XVII-D provides for collection and recovery. Section 221 empowers an Assessing Officer to levy penalty when an assessee is in default or is deemed to be in default in making payment of tax. Section 273 provides for levy of penalty for false estimate or failure to pay advance tax.
25. The proviso which has been added by the Direct Tax Laws (Amendment) Act, 1987, was to dispel the controversy existing and was more in the nature of a clarification rather a substantive provision. The view which has been taken by the different High Courts has been accepted and it shows the legislative intention as well that the view which was taken has been accepted as the correct one. In these circumstances, the only conclusion which could be arrived at is that an assessee is entitled to interest under Section 214 in respect of the excess payment of advance tax which has been paid during the financial year in which they were payable under Sections 207 to 211 though even after the dates specified. The assessee is, therefore, entitled to interest on the refund of Rs. 34,784 which is the amount of instalment paid after the due date but within the financial year. The writ petition is allowed on this count.
26. The other contention which has been raised is in respect of the amount of Rs. 1,04,795 on which the assessee is claiming interest from April 1, 1977, to January 15, 1979. This amount of Rs. 1,04,795 has been arrived at after reducing the figure of Rs. 44,212 and Rs. 30,193 from the total tax of Rs. 1,79,200. This refund was allowed on passing an order under Section 154, to set off loss, unabsorbed loss and depreciation consequent to the appellate order. It includes even the amount which is not paid as advance, tax but was adjusted on account of the appeal effect for the assessment year 1972-73 for which the refund became due to the assessee and was adjusted against the current year liability. This court has taken a view in the case of Associated Stone Industries v. CIT [1996] 217 ITR 246, D. B. Income-tax Reference No. 69 of 1986, decided on March 14, 1995, that interest on refund in the rectification proceeding will not be permissible. The adjustment of refund could not be considered to be an advance tax for which separate provision exists for interest, interest under Section 214 is not allowable. It was not on account of any omission on the part of the Income-tax Officer by which the refund became payable, but it was on account of the appellate orders in respect of the previous years to which effect was given under Section 154. The Division Bench of this court has held that the interest in the proceeding under Section 154 being an arguable point, cannot be claimed and as such the assessee is not entitled to interest in respect of this amount. This part of the relief claimed is not allowable.
27. The writ petition is partly allowed.