The Commissioner Of Income-Taxjalandhar v. M/S P.k. Industries, Jalandhar

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITR No.102 of 1983Date of decision: 03.03.2008 The Commissioner of Income-taxJalandhar ......Applicant Versus M/s P.K. Industries, Jalandhar ......Respondent CORAM:-HON'BLE MR.JUSTICE SATISH KUMAR MITTALHON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present:Mr. Sanjiv Bansal, Advocate for the applicant-revenue. * * * Rakesh Kumar Garg, J . 1.The present reference has been sent by the Income-taxAppellate Tribunal, Amritsar vide order dated 23.9.1983 passed in RANo.55/ASR/1983 for the opinion of this Court on the following questions oflaw which have arisen out of order passed in ITA No.747/ASR/1981 andCross-objections No.85/ASR/1981 for the assessment year 1977-78 :- “(i)Whether on the facts and in the circumstances ofthe case, the ITAT is correct in returning a finding thatthe issue raised is not debatable? (ii)Whether on the facts and in the circumstances ofthe case, the Appellate Tribunal is correct in upholdingthe finding of CIT(A) that the assessee is entitled tointerest u/s 244 (1A) of the Income Tax Act? (iii)Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holdingthat the assessee is entitled to receive interest u/s 214of the Income Tax Act from the prescribed date to theactual date on which refund was ordered?” 2.The assessee had made payment of advance income taxunder Section 210 of the Income Tax Act (hereinafter referred to as the“Act”) when the assessment was made. Further after the return had beenfiled, a further amount of Rs.47,856/- was required to be paid by way of tax.Out of this sum, Rs.15,000/- was paid. The assessee having feltaggrieved, appealed against the assessment made, whereby the IncomeTax Officer had made a considerable addition. As a result of the appellateorder, assessment made by the Income Tax Officer was slashed and thetotal income was reduced to the extent that the assessee became entitledto claim a refund of a part of the advance tax paid by him under Section210 of the Act. The assessee made a claim that the interest on the excessamount of advance tax paid by him be allowed to him. The ITO turneddown his claim both u/s 214 as well as u/s 244(1A) of the Act. 3.The assessee felt aggrieved against the said order, filed anappeal before the CIT(A), Jalandhar. The CIT(A), Jalandhar vide orderdated 23.9.1981 held that the assessee was entitled to claim interest fromthe date of passing of the regular assessment order made upto the date ofpayment of refund under Section 244(1A) and directed the ITO to revisethe assessment. However, the plea of the assessee for allowing interestunder Section 214 was declined. 4. Not satisfied with the order of the CIT(A), Jalandhar, theassessee further filed an appeal before the Tribunal. The revenue alsofiled cross-objections before the Tribunal. The assessee was in appealagainst the findings of the CIT(A), Jalandhar in respect of his claim for interest from the date of payment of the advance upto the date ofassessment, whereas the case of the revenue in the cross-objections wasagainst the admission of the claim of the assessee for interest from thedate of assessment upto the date of refund made. The Tribunal vide itsorder dated 24.3.1983 accepted the appeal filed by the assessee and thecross-objections filed by the revenue were dismissed. 5.We have heard Mr. Sanjiv Bansal, Advocate, learned counselfor the revenue and perused the record. 6.At the outset, it is relevant to mention that question No.1 hasnot been pressed by the counsel for the revenue. As regards questionNo.2, it has been pointed out that the said question has to be answered infavour of the assessee and against the revenue in view of the judgementof the Supreme Court reported asSandvik Asia Ltd. v. Commissioner ofIncome-Tax and others (2006) 280 ITR 643 (SC) wherein it has been heldas under:- 5.We have heard Mr. Sanjiv Bansal, Advocate, learned counselfor the revenue and perused the record. 6.At the outset, it is relevant to mention that question No.1 hasnot been pressed by the counsel for the revenue. As regards questionNo.2, it has been pointed out that the said question has to be answered infavour of the assessee and against the revenue in view of the judgementof the Supreme Court reported asSandvik Asia Ltd. v. Commissioner ofIncome-Tax and others (2006) 280 ITR 643 (SC) wherein it has been heldas under:- “The Government is liable to pay interest, at the rateapplicable to the excess amount refundable to theassessee, on the interest amount which becomes dueunder Section 214(1). Section 214(1) itself recognizesin principle the liability to pay interest on the amount oftax paid in excess of the amount of assessed tax andwhich is retained by the Government. Interest on theexcess amount is payable at the rate specified thereinfrom the first day of the year of assessment to the dateof regular assessment. Once the interest becomes due,it takes the same colour as the excess amount of taxwhich is refundable on regular assessment TheSupreme Court inModi Industries(1995) 216 ITR 759 has clarified that advance tax has to be treated as paidpursuant to an order of assessment and hence interestis payable thereon but under Section 244. Interest is payable on the amount to be refundedunder Section 244(1) within three months from thedecision of the appellate or other authority specified inSection 240. The expression “amount” in the earlierpart of Section 244(1A) refers not only to the tax but alsoto the interest ; it is a neutral expression and it cannot belimited to the tax paid in pursuance of the order ofassessment. Even assuming that there is no provision forpayment of compensation, compensation for delay isrequired to be paid as the Act itself recognizes inprinciple the liability of the Department to pay interestwhen excess tax was retained and the same principleshould be extended to cases where interest wasretained.” 7.The said judgement has also been followed by the BombayHigh Court in the case ofGodrej and Boyce Manufacturing Co. Ltd. v.P.K. Gupta, Commissioner of Income-Tax and others(2006) 284 ITR85 (Bom). Following the above judgements, question No.2 is answeredagainst the revenue and in favour of the assessee. 8.We also find that question No.3 as raised by the revenue hasto be answered against the revenue and in favour of the assessee in viewof the judgement of the Apex Court reported asModi Industries Ltd. andothers v. Commissioner of Income-Tax and another(1995) 216 ITR759 (SC). The conclusions drawn up by the Hon'ble Apex Court in the said judgement are reproduced hereinafter below: “(i)Up to March 31, 1975, interest under Section 214is payable from the first day of April of the relevantassessment year to the date of the first assessmentorder. The amount on which the interest is to be paid isthe amount of advance tax paid in excess of the taxpayable by the assessee as calculated in the regularassessment ( the first assessment order). The amounton which interest was payable did not vary due to thereduction or enhancement of tax as a result of anysubsequent proceeding. But with effect from April 1,1985, while the period for which interest was payableremained constant, the amount on which the interestwas payable, varied with the variation in the quantum ofrefund as a result of any subsequent orders. judgement are reproduced hereinafter below: “(i)Up to March 31, 1975, interest under Section 214is payable from the first day of April of the relevantassessment year to the date of the first assessmentorder. The amount on which the interest is to be paid isthe amount of advance tax paid in excess of the taxpayable by the assessee as calculated in the regularassessment ( the first assessment order). The amounton which interest was payable did not vary due to thereduction or enhancement of tax as a result of anysubsequent proceeding. But with effect from April 1,1985, while the period for which interest was payableremained constant, the amount on which the interestwas payable, varied with the variation in the quantum ofrefund as a result of any subsequent orders. (ii)If any tax is paid pursuant to the assessment orderafter March 31, 1975 (which will include tax deducted atsource and advance tax to the extent the same hasbeen retained and treated by the Income-tax Officer aspayment of tax in discharge of the assessee's tax liabilityin the assessment order), becomes refundable wholly orin part as a result of any appellate or other order passed,the Central Government will have to pay the assesseeinterest on the refundable amount under Section 244(1A). For the purpose of this section, the amount ofadvance payment of tax and the amount of tax deductedat source must be treated as payment of income-taxpursuant to an order of assessment on and from the date when these amounts were set off against the taxdemand raised in the assessment order, in other words,the date of the assessment order. (iii)With effect from April 1, 1985, interestpayable under Section 214 will increase or decreasein accordance with the variation in the quantum of theexcess payment of tax brought about by orderspassed subsequent to the regular assessment asmentioned in sub-section (1A). Accordingly, we approve the view taken by theBombay, Allahabad, Andhra Pradesh, Patna andDelhi High Courts to the extent their views accord withthe view taken herein.“ 9.The Calcutta High Court has also followed the judgementof the Hon'ble Apex Court in Modi Industries case(supra) and in thecase of Simplex Concrete Piles (India) Ltd. v. Commissioner ofIncome-Tax and others(2006) 286 ITR 518 (Cal). 10.We are in respectful agreement with the above saidjudgements. Thus, question No.3 is answered against the revenue and infavour of the assessee. 11.Thus, the questions referred to above are answeredaccordingly. (RAKESH KUMAR GARG) JUDGE (SATISH KUMAR MITTAL) JUDGE