The Commissioner Of Income Tax, Coimbatore v. M/S Seshasayee Paper & Board Ltd., Erode-7

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 02/12/2003 CORAM THE HON'BLE MR.JUSTICE R.JAYASIMHA BABUandTHE HON'BLE MR.JUSTICE S.R.SINGHARAVELU T.C.No.250 of 1999 The Commissioner of Income Tax,Coimbatore. ..Petitioner -Vs- M/s Seshasayee Paper & Board Ltd.,Erode-7. ..Respondents Tax Case reference under Sec.256 (1) of the Income-tax Act, 1961,against the order of the Income-tax Appellate Tribunal, 'B' Bench, Madras,dated 19.10.1993, made in R.A.No.1549/Mds/91 in ITA No.2657/Mds/8 7. !For petitioner : Mr.K.Subramanian,Sr. Standing Counsel forI.T. Department. ^For respondent : Mr.V.Ramachandran,Senior Counselfor Ms. Anitha Sumanth :ORDER (The order of the Court was madeby R.JAYASIMHA BABU, J.) The question referred is "whether the Tribunal is right in holdingthat the assessee is entitlted to interest under Section 244 (1A) of theIncome-tax Act where the refund arises out of the advance tax paid by theassessee beyond the previous year under first proviso to Section 212 (3A) ofthe Income-tax Act?". The Assessment Year is 1975-76 .2. The assessment of the assessee's income for the assessment year 1975-76 was made on 28.8.1978 and all the amounts that had been paid by theassessee towards advance tax including the sum of Rs.1,47,76,64 0/-, whichamount had been paid as advance tax in January 1976, after obtaining thepermission of the Commissioner who was empowered to extend the period forpayment of that instalment of the advance tax by 30 days was adjusted towardsthe amount of the tax that was assessed by the assessing officer. The assessing officer declined to grant interest on this amount which had becomeexcess after the consequential order came to be made after the assessee'sappeal in respect of this sum was allowed on the ground that the amount hadbeen paid after the closure of the financial year and, therefore, interestunder Section 214 was not required to be paid on that sum. 3. On the assessee's appeal, the Commissioner directed the payment of interest under Section 214, but that order of the Commissioner was set asideby the Tribunal, which upheld the view of the assessing officer that interestunder Section 214 was not payable in respect of the amount of advance tax paidafter the closure of the financial year. 4. The Tribunal, however, considered the assessee's right to receive interest under Section 244 (1A) and held that interest under that provisioncould not be denied to the assessee. 5. It is contended for the Revenue that as this amount had been paid as advance tax before the order of assessment was made, the assessee is notentitled to any interest under Section 244 (1A) which only refers to paymentsmade "in pursuance of any order of assessment" if any part of the amount sopaid is found on appeal to be in excess of the amount which the assessee isliable to pay. 6. When advance tax is paid, the amount so paid is required to be adjusted against the tax that would be assessed on the assessee at the time ofassessment. When such adjustment is made, the amount is ' paid' as taxpursuant to the order of assessment. The advance tax does not retain thecharacter of advance tax for all times. The amount paid as advance tax is anadvance only till the assessment and on assessment, the amount paid becomesthe tax that is paid by the assessee. The words "in pursuance of" in theprovision does not imply that the payment of the amount should have been madesubsequent to the order of assessment. Those words are only meant to clarifythat the amount of excess on which the interest is to be paid under thatsection is an amount which is in excess of the amount which has been assessedas tax after the appellate order. 7. If we were to accept the construction sought to be placed on this 7. If we were to accept the construction sought to be placed on this provision by the Revenue, it would result in the denial of any interest to anassessee even after the assessee succeeds in appeal on the sole ground thatthe amount had been paid before the assessment and not subsequent to theassessment, when the very object of the payment of advance tax is to pay thetax that would be determined as payable in future, in advance. 8. So far as the significance of the word "paid" in that provision is concerned, having regard to the reference to payment of tax being pursuant toan order of assessment that word can at best be regarded as implying that itis the date of the order of assessment which is to be regarded as the date onwhich the payment was made as the adjustment made of the advance tax towardsthe tax assessed would result in the discharge of the liability of theassessee for the payment of the assessed tax and such discharge can only be onaccount of the assessee having paid the tax. Payment does not necessarily imply that the amount should have been paid only by cash or cheque on the dateit is regarded as having been paid. Payment can also be by way of adjustmentfrom an amount which is already available with the Department against theliability as determined in the order of assessment. On any such adjustmentbeing made, the amount adjusted becomes the tax paid pursuant to the order ofassessment. 9. We, therefore, see no error in the order of the Tribunal directingpayment of interest under Section 244 (1A). The question referred is answeredin favour of the assessee and against the Revenue. The assessee shall beentitled to cost in the sum of Rs.3,000/-. Index: YesWebsite: Yes To 1.The Assistant Registrar,Income Tax Appellate Tribunal,Rajaji Bhavan,III Floor, Besant Nagar,Madras-90. (with records) (5 copies) 2.The Secretary,Central Board of Revenue,New Delhi. (3 copies) 3.The Commissioner of Income Tax,Coimbatore. 4.The Commissioner of Income-tax,(Appeals), Coimbatore. 5.The Income-tax Officer,Circle 1 (1), Salem. Dev/ �