2001 (6) TMI 35 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement of interest under section 214 on the refund amount.
2. Interpretation of "assessed tax" versus "tax determined on regular assessment."
3. Applicability of the Taxation Laws (Amendment) Act effective from April 1, 1985.
4. Inclusion of tax deducted at source (TDS) in the computation of interest under section 214.

Detailed Analysis:

1. Entitlement of Interest under Section 214 on the Refund Amount:
The primary issue revolves around whether the assessee is entitled to interest on the refund amount under section 214. The assessee had paid advance tax of Rs. 53,00,000, and a sum of Rs. 4,22,544 had been deducted at source. Upon assessment, a refund of Rs. 7,63,329 was determined, but no interest was allowed on this refund amount. The Commissioner of Income-tax (Appeals) remanded the matter to the Assessing Officer to consider the award of interest under section 214. Subsequently, the Assessing Officer allowed interest only on the difference between the advance tax paid and the tax payable on regular assessment, excluding the TDS amount.

2. Interpretation of "Assessed Tax" versus "Tax Determined on Regular Assessment":
The controversy also involved the interpretation of "assessed tax" as against "tax determined on regular assessment." The assessee argued that the tax deducted at source should be credited before computing the tax determined on regular assessment. The Commissioner (Appeals) and the Appellate Tribunal upheld this view, stating that the interest should be computed on the excess of advance tax paid after giving credit for TDS.

3. Applicability of the Taxation Laws (Amendment) Act Effective from April 1, 1985:
The Revenue contended that the concept of "assessed tax" introduced by the Taxation Laws (Amendment) Act effective from April 1, 1985, was not applicable to the assessment year in question (1984-85). They argued that interest under section 214 should be allowed strictly in accordance with the provisions as they stood prior to the amendment.

4. Inclusion of Tax Deducted at Source (TDS) in the Computation of Interest under Section 214:
The Revenue argued that TDS under section 194A does not form part of advance tax under sections 207 to 213, and thus, interest under section 214 should not include the TDS amount. However, the assessee contended that the TDS amount, being credited to the Department from the assessee's income, should be considered in the computation of tax payable on regular assessment. The Tribunal and the Commissioner (Appeals) agreed with the assessee's view, stating that the TDS should be credited before determining the tax payable on regular assessment.

Conclusion:
The High Court, after examining the submissions and the legal provisions, concluded that the question posed by the Tribunal did not determine the real disputed issue. The Court noted that the entitlement of interest on the refund amount had been correctly interpreted by the lower authorities based on the provisions of section 214 as they stood prior to the amendment. The Court emphasized that the TDS amount should be credited in the computation of tax payable on regular assessment, aligning with the Tribunal and the Commissioner (Appeals). Consequently, the High Court declined to answer the reference and returned it without answering, stating that the posed question was not applicable to the case's facts and circumstances.