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Issues involved: Interpretation of interest under section 244(1A) on self-assessment tax payments.
The Income-tax Appellate Tribunal referred the question of law regarding the allowance of interest under section 244(1A) on self-assessment tax payments made by the assessee for the assessment year 1977-78. The Tribunal considered whether self-assessment tax paid by the assessee should be treated as tax paid in pursuance of the assessment order for the purpose of interest calculation under section 244(1A). The Commissioner of Income-tax (Appeals) and the Assessing Officer had previously denied the claim of the assessee for interest under section 244(1A), stating that such interest becomes due only on payments made in pursuance of an assessment or penalty order. They argued that self-assessment tax does not fall under this category. In the appeal before the Tribunal, it was held that self-assessment tax paid by the assessee should be considered as tax paid in pursuance of the assessment order. The Tribunal directed the Assessing Officer to allow the refund and interest under section 244(1A) taking into account the self-assessment tax paid by the assessee. The decision in the case of Modi Industries Ltd. v. CIT [1995] 216 ITR 759 (SC) was cited to support the Tribunal's ruling. It was emphasized that interest under section 244(1A) is payable even when the tax or penalty paid by the assessee pursuant to the assessment order is reduced in appeal. The judgment clarified the treatment of advance tax, excess realizations, and refunds under various sections of the Income Tax Act. The judgment concluded that interest under section 244(1A) cannot be paid in addition to interest under section 214(1A). However, self-assessment tax paid by the assessee should be considered as tax paid in pursuance of the assessment order, making the assessee eligible for interest under section 244(1A). In summary, the High Court of Karnataka ruled in favor of the assessee, holding that interest under section 244(1A) should be allowed on self-assessment tax payments, considering them as tax paid in pursuance of the assessment order.
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