2003 (2) TMI 23 - HC - Income Tax

Present petition has been filed by the petitioner-Punjab State Warehousing Corporation for quashing the orders passed by the CIT and the Income-tax Officer, declining to allow interest on the amount retained by the respondents as advance tax on various dates during the accounting period relevant to the assessment year 1973-74 till the date of its refund on December 20, 1978 - petitioner, in the circumstances, is not entitled to claim interest on delayed refunds in terms of section 243(1)(a) or (b). To claim interest in terms of section 243(1) it is to be shown that the total income of the assessee does not consist solely of income from securities and dividends and in any other case within three months from the end of the month in which the claim for refund is made under Chapter XIX. The claim of the petitioner for interest on the refund before the Commissioner was in terms of section 214 of the Act which was declined in terms of the impugned order - there is no merit in this petition and the same is dismissed

Issues Involved:
1. Entitlement to interest on excess advance tax paid.
2. Applicability of sections 214(2), 219, 240, and 244(1A) of the Income-tax Act, 1961.
3. Definition and implications of "regular assessment."
4. Refund and interest on delayed refunds.
5. Interpretation of legal provisions and precedents.

Issue-wise Detailed Analysis:

1. Entitlement to Interest on Excess Advance Tax Paid:
The petitioner, a statutory corporation, sought interest on the excess amount of advance tax paid for the assessment year 1973-74, which was refunded without interest. The petitioner argued that it was entitled to interest on the refunded amount from the date of deposit to the date of refund. The respondents issued demand notices for advance tax, which included exempted income under section 10(29) of the Act. The petitioner complied and later sought a refund, which was granted without interest.

2. Applicability of Sections 214(2), 219, 240, and 244(1A) of the Income-tax Act, 1961:
The petitioner contended that under sections 214(2), 219, 240, and 244(1A), it was entitled to interest on the refunded amount. Section 214(1) mandates interest on excess advance tax from the next financial year to the date of regular assessment. Section 214(2) limits interest to the date of refund. Section 219 treats advance tax as payment of tax for the relevant period. Section 244(1A) provides for interest on refunds resulting from payments made after March 31, 1975, due to assessment or penalty orders.

3. Definition and Implications of "Regular Assessment":
The Supreme Court in Modi Industries Ltd. v. CIT clarified that "regular assessment" refers to the original assessment under section 143/144. The initial assessment was made on January 30, 1976, and subsequent assessments following appellate decisions do not alter this definition. Therefore, interest under section 214 is payable only up to the date of the original assessment.

4. Refund and Interest on Delayed Refunds:
The petitioner claimed interest on the refund, arguing that the delay in refund constituted grounds for interest under section 244(1A). However, the court held that since the initial assessment was non-est and the subsequent assessment followed appellate decisions, the refund was not due until the final assessment. Therefore, the petitioner was not entitled to interest under section 214 or section 244(1A).

5. Interpretation of Legal Provisions and Precedents:
The court referred to the Supreme Court's decision in Modi Industries Ltd., which established that interest on excess advance tax is limited to the date of the original assessment. The court also noted that section 243 provides for interest on delayed refunds but found it inapplicable as the refund was made promptly after the final assessment. The petitioner's reliance on CIT v. Udhoji Shrikishandas was distinguished as the facts differed.

Conclusion:
The petition was dismissed as the petitioner was not entitled to interest on the refunded amount under sections 214, 219, 240, or 244(1A) of the Income-tax Act. The court upheld the Commissioner's order denying interest, emphasizing that the initial assessment date is crucial for determining interest entitlement and that subsequent appellate adjustments do not extend the interest period.

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