Full Judgment Text
2005:BHC-OS:11227-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.2777 OF 1988 WRIT PETITION NO.2777 OF 1988 WRIT PETITION NO.2777 OF 1988
M/s.Godrej & Boyce Mfg.Co.Ltd. .. Petitioner
V/s
P.K.Gupta, Commissioner of Income
Tax, Bombay City II, and Ors. .. Respondents.
Mr.P.Pardiwala, Senior Counsel with Ms.Samidha Vedpathak
i/by M/s.Maneksha & Sethna for the Petitioner.
Dr.P.Daniel, Senior Counsel with Mr.Harishankar for the
Respondents.
CORAM: DR.S.RADHAKRISHNAN & CORAM: DR.S.RADHAKRISHNAN & CORAM: DR.S.RADHAKRISHNAN &
J.H.BHATIA, JJ. J.H.BHATIA, JJ. J.H.BHATIA, JJ.
DATE : 10/08/2005. DATE : 10/08/2005. DATE : 10/08/2005.
JUDGMENT: - (Per S.Radhakrishnan, J.) JUDGMENT: - (Per S.Radhakrishnan, J.) JUDGMENT: - (Per S.Radhakrishnan, J.)
1. In this petition, the Petitinoer has challenged the
order dated 14.6.1988 passed by the 1st Respondent- the
Commissioner of the Income Tax with regard to the
Assessment Year 1982-1983 and the Assessment Year
1983-1984 for the claim of interest.
2. The brief facts are that on 8.10.1982, the
Petitioner Company had filed a Return of Income for the
Assessment Year 1982-1983 declaring a loss of
Rs.23,82,75,310/-. It appears that prior to that, the
Petitioner Company had already paid a sum of
Rs.6,30,00,000/- as an advance tax. Over and above, a
sum of Rs.8,44,150/- was also deducted at source and
paid as tax to the Respondents. On 5.6.1984 the
Inspecting Assistant Commissioner, Assessment Range
II(B), Bombay had computed the total income of the
Petitioner Company at Rs.7,93,48,600/-. The Inspecting
Assistant Commissioner determined a refund of
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Rs.1,19,78,111/- together with the interest at
Rs.31,14,306/- under Sectin 214 of the Income Tax Act
and the amount of Rs.4,80,000/- was also charged as an
interest under Section 216. The total amount of refund
was computed at Rs.1,46,12,470/- and it appears that the
part thereof, was adjusted towards the pending tax
demands. On 2nd July, 1985 further order was passed
under Section 154 of the Income Tax Act rectifying
certain mistake in the assessment order and further
refund was granted. Finally the Commissioner of Income
Tax (Appeal) allowed the appeal partly. Based on the
same, the Inspecting Assistant Commissioner by his order
dated 19.2.1987 passed the assessment order giving
effect to the order of the Commissioner of Income Tax
(Appeals) and computed the total refund at
Rs.4,87,92,034/-. There is no dispute that the entire
refund amount has either been adjusted towards the
pending tax demands or the balance has been paid to the
Petitioner. The only grievance is with regard to the
non-payment of interest on the amount refunded to the
Petitioner. The Assessment Order did not grant any
interest. The Petitioner therefore filed an application
on 10th April, 1987 against the order dated 19.2.1987
passed by the Inspecting Assistant Commissioner, before
the Commissioner of Income Tax, under Section 264 of the
Income Tax Act seeking such an interest under Section
214 and 244(1A) of the said Act.
3. Similarly, for the Assessment Year 1983-84, the
Petitioner Company had filed a Return of Income on
29.6.1983 showing a loss of Rs.21,83,75,509/-. On
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25.2.1986, the Inspecting Assistant Commissioner
completed the assessment under Section 143(3) and
computed the total income at Rs.3,47,58,742/-. There
was a demand of Rs.1,52,61,596/- by way of tax, after
giving credit to the advance tax paid in the sum of
Rs.1,02,50,000/-. Over and above, a sum of Rs.59,032/-
was deducted at source. Aggrieved thereby the
Petitioner had filed an Appeal abefore the Commissioner
of Income Tax (Appeals) which was partly allowed on
5.1.1987. Thereafter, on 17.3.1987 the Inspecting
Assistant Commissioner passed an order giving effect to
the order of the Commissioner of Income Tax (Appeals),
by which he determined the total income of the
Petitioner Company at NIL and granted a refund of
Rs.1,03,07,855/-. The Inspecting Assistant Commissioner
however, did not grant any interest on the refund so
determined, and therefore the Petitioner Company filed
an application under Section 264 of the Income Tax Act
claiming for such an interest under Section 214 and
244(1A) of the Income Tax Act.
4. In support of both the aforesaid applications filed
by the Petitioner, the Petitioner had appeared before
the concerned Authority- Respondent No.1 (The
Commissioner of Income Tax) on 2.6.1988 and had made his
submissions. Finally, the Respondent No.1- Commissioner
of Income Tax, by his order dated 14.6.1988 had declined
to grant any interest for the Assessment Years 1982-1983
and 1983-1984.
5. We have perused the order dated 14.6.1988 passed by
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the Commissioner of Income Tax declining to grant such
an interest. Mr.Pardiwalla, the learned Counsel for the
Petitioner has brought to our notice that the
Commissioner of Income Tax has erroneously proceeded on
the basis that the petitioner’s case would be covered by
the provisions of law as it stood prior to the amendment
which came into effect on 1st April, 1985.
Mr.Pardiwalla therefore contended that as far as the
Petitioner’s case is concerned, the Commissioner of
Income Tax ought to have considered the case in view of
the changed law and not by applying the law as it stood
prior to the amendment of 1985. Mr.Pardiwalla has
contended that the order of the Commissioner of Income
Tax declining to grant such an interest suffers from an
error apparent on the face of the record. Mr.Pardiwalla
has contended that the provisions of Section 214 as well
as Section 244(1-A) of the Income Tax Act have not been
properly & correctly construed by the Commissioner of
Income Tax in the aforesaid order dated 14.6.1988 and
that he has wrongly construed the same.
6. In support of his submissions, Mr.Pardiwalla,
referred to and relied upon the Division Bench Judgment
of our High Court, with regard to the interpretation of
Section 214 of the Income Tax Act in the case of
Commissioner of Income Tax V/s.Saswad Mali Sugar Factory Commissioner of Income Tax V/s.Saswad Mali Sugar Factory Commissioner of Income Tax V/s.Saswad Mali Sugar Factory
Ltd. - 249 ITR 756 (Bom.). Ltd. - 249 ITR 756 (Bom.). In that case, the Ltd. - 249 ITR 756 (Bom.).
Assessment Year was 1980-1981 and the assessment was
completed on 25th July, 1983. The assessee had appealed
against the same and the appeal was allowed in December,
1987. Based on the same, the Assessment Order was
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passed on 24th October, 1988 granting refund to the
assessee including the interest from 1st April, 1980
till 24th July, 1983 being the date of completion of the
assessment. Thereafter, the Commissioner of Income Tax
had approached this Court by way of an appeal. It was
argued on behalf of the Appellant Department that the
amendment of Section 214 which came into force from 1st
April, 1985 by Taxation Laws (Amendment) Act, 1984 has
no retrospective effect and as such, the interest could
not have been granted w.e.f.1st April, 1980. This Court
considered the said objection and observed as under:-
"We do not find any merit in this appeal. In this
appeal, we are concerned with the assessment year
1980-81. Sub-section (1A) was substituted in section
214 with effect from April 1, 1985. It not only refers
to the appellate orders under section 250 and section
254 but it also refers to several other orders like
orders under sections 147, 154, 155, 260, 262, 263, 264
and 245D. In the case of Modi Industries Ltd.v.CIT
(1995) 216 ITR 759 (SC), at page 805, it has been held
that even after the amendment of Section 214 with effect
from April 1, 1985, the period for which the interest
has to be paid remains the same, i.e. from the first
day of the relevant assessment year up to the date of
the regular assessment (first assessment). In the
aforestated judgment, the Supreme Court has confirmed
the decision of this Court in the case of CIT v.Carona
Sahu Co.Ltd. (1984) 146 ITR 452 (FB). However, it is
urged on behalf of the Department that in the present
matter the Taxation Laws (Amendment) Act, 1984, has no
application. That, the said amending Act does not
operate retrospectively. That in the present matter,
the regular assessment was completed on July 2, 1983.
That, since the Taxation Laws (Amendment) Act, 1984, has
been brought into force with effect from April 1, 1985,
i.e., after the passing of the regular assessment order,
the Assessing Officer erred in granting interest to the
assessee with effect from April 1, 1980. We do not find
any merit in this argument. The taxation Laws
(Amendment) Act, 1984, is procedural in nature and,
therefore, it will apply to all pending actions.
Secondly in the present matter, the right to receive the
interest accrued to the assessee only on October 24,
1988, when the Assessing Officer gave effect to the
order of the first appellate authority dated December
11, 1987, by which the assessee’s appeal came to be
allowed. Therefore, the amending Act 1984, would apply
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to this case. Lastly, a bare reading of Section 214(1A)
indicates that the said section 214(1A) would apply to
all cases where interest becomes payable as a result of
an order under Section 147 or section 154 or section 250
or section 254 or section 262 or section 263. Therefore
the Taxation Laws (Amendment) Act, 1984, is applicable
to this case and we do not find any merit in the
contention of the Department that the said amending Act
is not applicable to the facts of this case.
Accordingly, the above question is answered in the
affirmative, i.e., in favour of the assessee and against
the Department."
In the aforesaid judgment, this Court has very clearly
held that the Taxation Laws (Amendment) Act, 1984 is
procedural in nature and therefore it will apply to all
the pending actions, and as far as assessee in the said
case was concerned, the assessment year started from 1st
April, 1980 and accordingly, this Court found that there
was nothing wrong in the order granting the interest
from 1st April, 1980 till the date of the assessment
order.
7. Mr.Pardiwalla also referred to and relied upon the
judgment of the Hon’ble Supreme Court in the case of
Modi Industries Limited and Ors V/s. the Commissioner Modi Industries Limited and Ors V/s. the Commissioner Modi Industries Limited and Ors V/s. the Commissioner
of Income Tax and Another -(1995) 216 ITR 759 of Income Tax and Another -(1995) 216 ITR 759 wherein of Income Tax and Another -(1995) 216 ITR 759
the Supreme Court was dealing with the scope of
sub-section 1-A of Section 244 of the Income Tax Act,
and while interpreting the same, has observed as under:-
"Sub-section (1A) of Section 244 does not affect the
operatiOn of sectin 214 in any manner whatsoever. The
period during which interest has to be paid under
section 214 is the first day of the relevant assessment
year to the date of the assessment order. The period
covered by section 244(1A) is the period commencing from
the date of payment of tax or penaly. Under Chapter
XVII of the Act, tax may be collected from an assessee
by way of deduction at source, advance payment and by a
notice of demand under section 156. But, the amount of
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tax deducted at source is treated as income-tax paid by
the assessee upon the completion of the assessment
proceedings (Section 199(1)).
Similarly, the amount of advance tax paid has to be
treated as payment of tax and credit for this amount has
to be given to the assessee in the regular assessment
(section 219). Any excess amount remaining to the
credit of the assessee thereafter will have to be
refunded to the assessee. The amount which was retained
by the Income-tax Officer and adjusted against the tax
demand must be treated as payment of tax pursuant to the
assessment aorder by the assessee. Advance tax or tax
deducted at source loses its identity as soon as it is
adjusted against the liability created by the assessment
order and becomes tax paid pursuant to the assessment
order.
Therefore, the phrase "any amount having been
paid.... after March 31, 1975" occuring in sub-section
(1A) of section 244 must be construed to mean not only
the amount which has been paid directly pursuant to the
order of assessment but will also include the amount of
tax deducted at source and advance tax, which were lying
to the credit of the assessee and were ultimately
adjusted and set off against the tax demands raised in
the assessment order. The excess amount of tax paid
under sub-section (1A) of sectin 244 must be calculated
by treating the amount of tax deducted at source and the
amount of advance tax which were adjusted against the
assessee’s liability to pay tax as well as the amount of
tax paid directly upon the assessment under Chapter XVII
of the Income-tax Act. In other words, so far as the
amount of advance tax is concerned, it must be
understood to have been paid "in pursuance of any order
of assessment" only on the date of the original order of
assessment - and not on the date of actual payment. The
reason is obvious, on the day the advance tax amount is
paid there is no assessment and, hence, it cannot be
said to have been paid "in pursuance of any order of
assessment". This view was also taken by the Punjab and
Haryana High Court in the case of Leader Engineering
Works [1989] 178 ITR 529.
Interest under sub-section (1A) of section 244 is
payable when the tax or penalty paid by an assessee
pursuant to an order of assessment has been reduced in
appeal or any other proceeding. In such a case an
excess amount of tax or penaly paid by the assessee will
have to be refunded and the Central Government has to
pay interest on the excess amount from the date on which
such amount was paid to the date on which the refund was
granted. On course, there can be no question of paying
interest both under section 214(1A) and section 244(1A)
simultaneously. The rate of interest being the same
under both the provisions, there would be no difference
in the actual amount of interest payable, whichever
provision is applied.
This sub-section substantially alters the scheme of
payment of interest on refund contained in sections 243
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and 244 of the Income-tax Act, but does not affect the
scope of section 214 in any way. Section 214 deals with
payment of interest on the amount of tax found to have
been paid in excess of the tax determined as payable on
the regular assessment. Interest will have to be paid
from the first day of the relevant assessment year to
the date of the regular assessment, i.e., the first
assessment. If the amount on which the interest was
payable was varied subsequent to the first assessment,
then the quantum of interest had also to be increased or
decreased accordingly. But the period for which the
interest had to be paid was not altered by the newly
substituted sub-section (1A) of section 214."
8. Mr.Pardiwalla has therefore contended that both the
above judgments have very clearly laid down the law as
far as section 214 as well as section 244(1A) of the
Income Tax Act are concerned. He therefore submitted
that based on the said provisions of law, the Petitioner
is entitled to interest. Mr.Pardiwalla produced before
us two Charts showing the calculations of the interest
to which the Petitioner is entitled to, for both the
Assessment Years 1982-1983 as well as 1983-1984. Both
the Charts are taken on record and marked as "X" and "Y"
for identification.
9. Mr.Daniel, the learned Counsel who appeared on
behalf of the Respondents-Department, could not dispute
the propositions of law as laid down by this Court in
the case of Saswad Mali Sugar Factory Limited Saswad Mali Sugar Factory Limited while Saswad Mali Sugar Factory Limited
interpreting Section 214 of the Income Tax Act, as well
as by the Supreme Court in the case of Modi Industries Modi Industries Modi Industries
Limited Limited while interpreting Section 244(1-A) of the Limited
Income Tax Act.
10. Having regard to the facts and circumstances of the
case, we are not going to determine the exact amount of
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interest payable to the petitioner. However, we make it
clear that the law has been very clearly laid down by
the Division Bench of this Court in the aforesaid case
of Saswad Mali Sugar Factory Limited Saswad Mali Sugar Factory Limited so far as Section Saswad Mali Sugar Factory Limited
214 of the Income Tax Act is concerned, and by the
Supreme Court in the aforesaid case of Modi Industries Modi Industries Modi Industries
Limited Limited so far as Section 244(1-A) of the Income Tax Act Limited
is concerned. Under these circumstances, we direct the
Respondent No.1 to compute the interest payable to the
Petitioner as indicated in the two Charts produced
before us by the learned Counsel for the Petitioner for
both the Assessment Years 1982-1983 and 1983-1984, in
accordance with law, as expeditiously as possible,
preferrably within a period of three months from today.
Rule is accordingly made absolute in the above terms.
(DR.S.RADHAKRISHNAN J.) (DR.S.RADHAKRISHNAN J.)
(DR.S.RADHAKRISHNAN J.)
(J.H.BHATIA J.) (J.H.BHATIA J.) (J.H.BHATIA J.)
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.2777 OF 1988 WRIT PETITION NO.2777 OF 1988 WRIT PETITION NO.2777 OF 1988
M/s.Godrej & Boyce Mfg.Co.Ltd. .. Petitioner
V/s
P.K.Gupta, Commissioner of Income
Tax, Bombay City II, and Ors. .. Respondents.
Mr.P.Pardiwala, Senior Counsel with Ms.Samidha Vedpathak
i/by M/s.Maneksha & Sethna for the Petitioner.
Dr.P.Daniel, Senior Counsel with Mr.Harishankar for the
Respondents.
CORAM: DR.S.RADHAKRISHNAN & CORAM: DR.S.RADHAKRISHNAN & CORAM: DR.S.RADHAKRISHNAN &
J.H.BHATIA, JJ. J.H.BHATIA, JJ. J.H.BHATIA, JJ.
DATE : 10/08/2005. DATE : 10/08/2005. DATE : 10/08/2005.
JUDGMENT: - (Per S.Radhakrishnan, J.) JUDGMENT: - (Per S.Radhakrishnan, J.) JUDGMENT: - (Per S.Radhakrishnan, J.)
1. In this petition, the Petitinoer has challenged the
order dated 14.6.1988 passed by the 1st Respondent- the
Commissioner of the Income Tax with regard to the
Assessment Year 1982-1983 and the Assessment Year
1983-1984 for the claim of interest.
2. The brief facts are that on 8.10.1982, the
Petitioner Company had filed a Return of Income for the
Assessment Year 1982-1983 declaring a loss of
Rs.23,82,75,310/-. It appears that prior to that, the
Petitioner Company had already paid a sum of
Rs.6,30,00,000/- as an advance tax. Over and above, a
sum of Rs.8,44,150/- was also deducted at source and
paid as tax to the Respondents. On 5.6.1984 the
Inspecting Assistant Commissioner, Assessment Range
II(B), Bombay had computed the total income of the
Petitioner Company at Rs.7,93,48,600/-. The Inspecting
Assistant Commissioner determined a refund of
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Rs.1,19,78,111/- together with the interest at
Rs.31,14,306/- under Sectin 214 of the Income Tax Act
and the amount of Rs.4,80,000/- was also charged as an
interest under Section 216. The total amount of refund
was computed at Rs.1,46,12,470/- and it appears that the
part thereof, was adjusted towards the pending tax
demands. On 2nd July, 1985 further order was passed
under Section 154 of the Income Tax Act rectifying
certain mistake in the assessment order and further
refund was granted. Finally the Commissioner of Income
Tax (Appeal) allowed the appeal partly. Based on the
same, the Inspecting Assistant Commissioner by his order
dated 19.2.1987 passed the assessment order giving
effect to the order of the Commissioner of Income Tax
(Appeals) and computed the total refund at
Rs.4,87,92,034/-. There is no dispute that the entire
refund amount has either been adjusted towards the
pending tax demands or the balance has been paid to the
Petitioner. The only grievance is with regard to the
non-payment of interest on the amount refunded to the
Petitioner. The Assessment Order did not grant any
interest. The Petitioner therefore filed an application
on 10th April, 1987 against the order dated 19.2.1987
passed by the Inspecting Assistant Commissioner, before
the Commissioner of Income Tax, under Section 264 of the
Income Tax Act seeking such an interest under Section
214 and 244(1A) of the said Act.
3. Similarly, for the Assessment Year 1983-84, the
Petitioner Company had filed a Return of Income on
29.6.1983 showing a loss of Rs.21,83,75,509/-. On
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25.2.1986, the Inspecting Assistant Commissioner
completed the assessment under Section 143(3) and
computed the total income at Rs.3,47,58,742/-. There
was a demand of Rs.1,52,61,596/- by way of tax, after
giving credit to the advance tax paid in the sum of
Rs.1,02,50,000/-. Over and above, a sum of Rs.59,032/-
was deducted at source. Aggrieved thereby the
Petitioner had filed an Appeal abefore the Commissioner
of Income Tax (Appeals) which was partly allowed on
5.1.1987. Thereafter, on 17.3.1987 the Inspecting
Assistant Commissioner passed an order giving effect to
the order of the Commissioner of Income Tax (Appeals),
by which he determined the total income of the
Petitioner Company at NIL and granted a refund of
Rs.1,03,07,855/-. The Inspecting Assistant Commissioner
however, did not grant any interest on the refund so
determined, and therefore the Petitioner Company filed
an application under Section 264 of the Income Tax Act
claiming for such an interest under Section 214 and
244(1A) of the Income Tax Act.
4. In support of both the aforesaid applications filed
by the Petitioner, the Petitioner had appeared before
the concerned Authority- Respondent No.1 (The
Commissioner of Income Tax) on 2.6.1988 and had made his
submissions. Finally, the Respondent No.1- Commissioner
of Income Tax, by his order dated 14.6.1988 had declined
to grant any interest for the Assessment Years 1982-1983
and 1983-1984.
5. We have perused the order dated 14.6.1988 passed by
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the Commissioner of Income Tax declining to grant such
an interest. Mr.Pardiwalla, the learned Counsel for the
Petitioner has brought to our notice that the
Commissioner of Income Tax has erroneously proceeded on
the basis that the petitioner’s case would be covered by
the provisions of law as it stood prior to the amendment
which came into effect on 1st April, 1985.
Mr.Pardiwalla therefore contended that as far as the
Petitioner’s case is concerned, the Commissioner of
Income Tax ought to have considered the case in view of
the changed law and not by applying the law as it stood
prior to the amendment of 1985. Mr.Pardiwalla has
contended that the order of the Commissioner of Income
Tax declining to grant such an interest suffers from an
error apparent on the face of the record. Mr.Pardiwalla
has contended that the provisions of Section 214 as well
as Section 244(1-A) of the Income Tax Act have not been
properly & correctly construed by the Commissioner of
Income Tax in the aforesaid order dated 14.6.1988 and
that he has wrongly construed the same.
6. In support of his submissions, Mr.Pardiwalla,
referred to and relied upon the Division Bench Judgment
of our High Court, with regard to the interpretation of
Section 214 of the Income Tax Act in the case of
Commissioner of Income Tax V/s.Saswad Mali Sugar Factory Commissioner of Income Tax V/s.Saswad Mali Sugar Factory Commissioner of Income Tax V/s.Saswad Mali Sugar Factory
Ltd. - 249 ITR 756 (Bom.). Ltd. - 249 ITR 756 (Bom.). In that case, the Ltd. - 249 ITR 756 (Bom.).
Assessment Year was 1980-1981 and the assessment was
completed on 25th July, 1983. The assessee had appealed
against the same and the appeal was allowed in December,
1987. Based on the same, the Assessment Order was
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passed on 24th October, 1988 granting refund to the
assessee including the interest from 1st April, 1980
till 24th July, 1983 being the date of completion of the
assessment. Thereafter, the Commissioner of Income Tax
had approached this Court by way of an appeal. It was
argued on behalf of the Appellant Department that the
amendment of Section 214 which came into force from 1st
April, 1985 by Taxation Laws (Amendment) Act, 1984 has
no retrospective effect and as such, the interest could
not have been granted w.e.f.1st April, 1980. This Court
considered the said objection and observed as under:-
"We do not find any merit in this appeal. In this
appeal, we are concerned with the assessment year
1980-81. Sub-section (1A) was substituted in section
214 with effect from April 1, 1985. It not only refers
to the appellate orders under section 250 and section
254 but it also refers to several other orders like
orders under sections 147, 154, 155, 260, 262, 263, 264
and 245D. In the case of Modi Industries Ltd.v.CIT
(1995) 216 ITR 759 (SC), at page 805, it has been held
that even after the amendment of Section 214 with effect
from April 1, 1985, the period for which the interest
has to be paid remains the same, i.e. from the first
day of the relevant assessment year up to the date of
the regular assessment (first assessment). In the
aforestated judgment, the Supreme Court has confirmed
the decision of this Court in the case of CIT v.Carona
Sahu Co.Ltd. (1984) 146 ITR 452 (FB). However, it is
urged on behalf of the Department that in the present
matter the Taxation Laws (Amendment) Act, 1984, has no
application. That, the said amending Act does not
operate retrospectively. That in the present matter,
the regular assessment was completed on July 2, 1983.
That, since the Taxation Laws (Amendment) Act, 1984, has
been brought into force with effect from April 1, 1985,
i.e., after the passing of the regular assessment order,
the Assessing Officer erred in granting interest to the
assessee with effect from April 1, 1980. We do not find
any merit in this argument. The taxation Laws
(Amendment) Act, 1984, is procedural in nature and,
therefore, it will apply to all pending actions.
Secondly in the present matter, the right to receive the
interest accrued to the assessee only on October 24,
1988, when the Assessing Officer gave effect to the
order of the first appellate authority dated December
11, 1987, by which the assessee’s appeal came to be
allowed. Therefore, the amending Act 1984, would apply
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to this case. Lastly, a bare reading of Section 214(1A)
indicates that the said section 214(1A) would apply to
all cases where interest becomes payable as a result of
an order under Section 147 or section 154 or section 250
or section 254 or section 262 or section 263. Therefore
the Taxation Laws (Amendment) Act, 1984, is applicable
to this case and we do not find any merit in the
contention of the Department that the said amending Act
is not applicable to the facts of this case.
Accordingly, the above question is answered in the
affirmative, i.e., in favour of the assessee and against
the Department."
In the aforesaid judgment, this Court has very clearly
held that the Taxation Laws (Amendment) Act, 1984 is
procedural in nature and therefore it will apply to all
the pending actions, and as far as assessee in the said
case was concerned, the assessment year started from 1st
April, 1980 and accordingly, this Court found that there
was nothing wrong in the order granting the interest
from 1st April, 1980 till the date of the assessment
order.
7. Mr.Pardiwalla also referred to and relied upon the
judgment of the Hon’ble Supreme Court in the case of
Modi Industries Limited and Ors V/s. the Commissioner Modi Industries Limited and Ors V/s. the Commissioner Modi Industries Limited and Ors V/s. the Commissioner
of Income Tax and Another -(1995) 216 ITR 759 of Income Tax and Another -(1995) 216 ITR 759 wherein of Income Tax and Another -(1995) 216 ITR 759
the Supreme Court was dealing with the scope of
sub-section 1-A of Section 244 of the Income Tax Act,
and while interpreting the same, has observed as under:-
"Sub-section (1A) of Section 244 does not affect the
operatiOn of sectin 214 in any manner whatsoever. The
period during which interest has to be paid under
section 214 is the first day of the relevant assessment
year to the date of the assessment order. The period
covered by section 244(1A) is the period commencing from
the date of payment of tax or penaly. Under Chapter
XVII of the Act, tax may be collected from an assessee
by way of deduction at source, advance payment and by a
notice of demand under section 156. But, the amount of
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tax deducted at source is treated as income-tax paid by
the assessee upon the completion of the assessment
proceedings (Section 199(1)).
Similarly, the amount of advance tax paid has to be
treated as payment of tax and credit for this amount has
to be given to the assessee in the regular assessment
(section 219). Any excess amount remaining to the
credit of the assessee thereafter will have to be
refunded to the assessee. The amount which was retained
by the Income-tax Officer and adjusted against the tax
demand must be treated as payment of tax pursuant to the
assessment aorder by the assessee. Advance tax or tax
deducted at source loses its identity as soon as it is
adjusted against the liability created by the assessment
order and becomes tax paid pursuant to the assessment
order.
Therefore, the phrase "any amount having been
paid.... after March 31, 1975" occuring in sub-section
(1A) of section 244 must be construed to mean not only
the amount which has been paid directly pursuant to the
order of assessment but will also include the amount of
tax deducted at source and advance tax, which were lying
to the credit of the assessee and were ultimately
adjusted and set off against the tax demands raised in
the assessment order. The excess amount of tax paid
under sub-section (1A) of sectin 244 must be calculated
by treating the amount of tax deducted at source and the
amount of advance tax which were adjusted against the
assessee’s liability to pay tax as well as the amount of
tax paid directly upon the assessment under Chapter XVII
of the Income-tax Act. In other words, so far as the
amount of advance tax is concerned, it must be
understood to have been paid "in pursuance of any order
of assessment" only on the date of the original order of
assessment - and not on the date of actual payment. The
reason is obvious, on the day the advance tax amount is
paid there is no assessment and, hence, it cannot be
said to have been paid "in pursuance of any order of
assessment". This view was also taken by the Punjab and
Haryana High Court in the case of Leader Engineering
Works [1989] 178 ITR 529.
Interest under sub-section (1A) of section 244 is
payable when the tax or penalty paid by an assessee
pursuant to an order of assessment has been reduced in
appeal or any other proceeding. In such a case an
excess amount of tax or penaly paid by the assessee will
have to be refunded and the Central Government has to
pay interest on the excess amount from the date on which
such amount was paid to the date on which the refund was
granted. On course, there can be no question of paying
interest both under section 214(1A) and section 244(1A)
simultaneously. The rate of interest being the same
under both the provisions, there would be no difference
in the actual amount of interest payable, whichever
provision is applied.
This sub-section substantially alters the scheme of
payment of interest on refund contained in sections 243
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and 244 of the Income-tax Act, but does not affect the
scope of section 214 in any way. Section 214 deals with
payment of interest on the amount of tax found to have
been paid in excess of the tax determined as payable on
the regular assessment. Interest will have to be paid
from the first day of the relevant assessment year to
the date of the regular assessment, i.e., the first
assessment. If the amount on which the interest was
payable was varied subsequent to the first assessment,
then the quantum of interest had also to be increased or
decreased accordingly. But the period for which the
interest had to be paid was not altered by the newly
substituted sub-section (1A) of section 214."
8. Mr.Pardiwalla has therefore contended that both the
above judgments have very clearly laid down the law as
far as section 214 as well as section 244(1A) of the
Income Tax Act are concerned. He therefore submitted
that based on the said provisions of law, the Petitioner
is entitled to interest. Mr.Pardiwalla produced before
us two Charts showing the calculations of the interest
to which the Petitioner is entitled to, for both the
Assessment Years 1982-1983 as well as 1983-1984. Both
the Charts are taken on record and marked as "X" and "Y"
for identification.
9. Mr.Daniel, the learned Counsel who appeared on
behalf of the Respondents-Department, could not dispute
the propositions of law as laid down by this Court in
the case of Saswad Mali Sugar Factory Limited Saswad Mali Sugar Factory Limited while Saswad Mali Sugar Factory Limited
interpreting Section 214 of the Income Tax Act, as well
as by the Supreme Court in the case of Modi Industries Modi Industries Modi Industries
Limited Limited while interpreting Section 244(1-A) of the Limited
Income Tax Act.
10. Having regard to the facts and circumstances of the
case, we are not going to determine the exact amount of
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interest payable to the petitioner. However, we make it
clear that the law has been very clearly laid down by
the Division Bench of this Court in the aforesaid case
of Saswad Mali Sugar Factory Limited Saswad Mali Sugar Factory Limited so far as Section Saswad Mali Sugar Factory Limited
214 of the Income Tax Act is concerned, and by the
Supreme Court in the aforesaid case of Modi Industries Modi Industries Modi Industries
Limited Limited so far as Section 244(1-A) of the Income Tax Act Limited
is concerned. Under these circumstances, we direct the
Respondent No.1 to compute the interest payable to the
Petitioner as indicated in the two Charts produced
before us by the learned Counsel for the Petitioner for
both the Assessment Years 1982-1983 and 1983-1984, in
accordance with law, as expeditiously as possible,
preferrably within a period of three months from today.
Rule is accordingly made absolute in the above terms.
(DR.S.RADHAKRISHNAN J.) (DR.S.RADHAKRISHNAN J.)
(DR.S.RADHAKRISHNAN J.)
(J.H.BHATIA J.) (J.H.BHATIA J.) (J.H.BHATIA J.)
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