2002 (6) TMI 20 - HC - Income Tax

Interest, Advance Tax - 1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to interest under section 214 of the Income-tax Act, 1961, on the net refund amount determined with Rs. 1,95,951? - 2. Whether, on the facts and in the circumstances of the case and having regard to the provisions of sections 208 to 219 of the Income-tax Act, 1961, a payment of Rs. 12,00,000 made on March 14, 1979, should be treated as advance payment of tax? - we confirm the order passed by the Tribunal and answer the reference against the assessee and in favour of the Revenue.

Summary

Issues:
1. Entitlement to interest under section 214 of the Income-tax Act, 1961 on the net refund amount.
2. Treatment of a payment made as an advance payment of tax.

Issue 1: Entitlement to Interest under Section 214:
The case involved a dispute regarding the entitlement to interest under section 214 of the Income-tax Act, 1961 on an excess amount of advance tax paid. The assessee had paid an amount exceeding the required sum by Rs. 55,000. The assessing authority only allowed interest on a lesser amount of Rs. 1,40,951 instead of the total excess amount of Rs. 1,95,951. The Tribunal upheld the assessing authority's decision, leading to an appeal by the assessee. The court analyzed the relevant provisions of the Act, particularly sections 209 and 209A, to determine the nature of advance tax payments. It concluded that the excess payment made by the assessee, not in accordance with the estimate sent to the assessing authority, could not be considered as advance tax eligible for interest under section 214. The court emphasized that the instalments of advance tax must align with the estimate provided by the assessee, and any excess payment beyond the estimate does not qualify for interest under section 214.

Issue 2: Treatment of Payment as Advance Tax:
The second issue revolved around whether a payment made by the assessee in excess of the required amount should be treated as an advance payment of tax. The court examined previous judgments cited by the counsel for the assessee, such as CIT v. T. T. Investments and Trades Pvt. Ltd. and Modi Industries Ltd. v. CIT, to distinguish the nature of the tax paid from its payability. The court clarified that the excess payment made by the assessee, not in line with the estimate provided, could not be deemed as advance tax. The court highlighted that the payment of tax should align with the estimate submitted by the assessee to be considered as advance tax. Therefore, the court upheld the Tribunal's decision, confirming that the excess payment made by the assessee did not qualify as advance tax and, consequently, was not eligible for interest under section 214.

In conclusion, the court ruled in favor of the Revenue, confirming the Tribunal's order and rejecting the claim for interest on the excess amount of advance tax paid by the assessee. The judgment emphasized the importance of aligning advance tax payments with the estimates provided by the assessee to qualify for interest under section 214 of the Income-tax Act, 1961.