1999 (2) TMI 63 - HC - Income Tax

Advance Tax, Protective Assessment, Waiver Of Interest, Grounds Of Equity, Regular Assessment

Summary

Issues:
1. Interpretation of provisions of section 64(3) of the Income-tax Act, 1961.
2. Entitlement to refund of advance tax and interest under section 214 of the Act.

Analysis:

Issue 1: Interpretation of provisions of section 64(3) of the Income-tax Act, 1961
The case involved a minor being assessed for income tax for his share in a partnership firm, with his father also being a partner in the same firm. The amendment of section 64(3) of the Income-tax Act, 1961, made it clear that if a minor is admitted to the benefits of partnership, income falling to his share will be assessed in the hands of the parent with the higher income. The petitioner filed his return of income post the amendment, showing his share income as taxable in the hands of the minor. However, the assessment was initially made on the minor but later added to the father's income. The petitioner argued for a refund of advance tax and interest under section 214 of the Act, based on the timing of assessment and payment of advance tax.

Issue 2: Entitlement to refund of advance tax and interest under section 214 of the Act
The Department contended that interest is payable only if the amount due exceeds the assessed tax in a regular assessment. They argued that the interest levied on the father for short payment of advance tax on the minor's income was waived, making it unfair to allow interest on the advance tax paid and adjusted towards the father's income. The petitioner argued that the waiver of interest on the father was due to the timing of advance tax payment, not concealment of income. The Assessing Officer treated the initial protective assessment as a regular assessment in a subsequent order, declaring the demand raised earlier as nil. The petitioner claimed entitlement to a refund under section 214, emphasizing that the provision does not mandate a regular assessment for interest payment but focuses on the refundable amount exceeding the assessed tax.

In the judgment, it was observed that section 214 enables interest refund if the instalments paid exceed the assessed tax, with no requirement for a regular assessment specifically mentioned. The petitioner was deemed entitled to interest under section 214 unless the interest charged on the father was waived. Given the waiver of interest on the father's advance tax, equity demanded dismissal of the petition, and no costs were awarded.