1996 (8) TMI 25 - HC - Income Tax

Summary

Issues:
1. Interpretation of advance tax payment under sections 210, 212(3A), and 214 of the IT Act, 1961.
2. Entitlement to interest under section 214 on excess tax paid.
3. Validity of filing an upward estimate under section 212(3A) when tax demanded under section 210 is not exceeded by 33-1/3 per cent.

Analysis:

Issue 1: Interpretation of advance tax payment
The case involved a dispute regarding the nature of a tax payment made by the assessee. The Department demanded advance tax of Rs. 20,85,000 under section 210. The assessee paid a total of Rs. 25,90,000, exceeding the demanded amount by Rs. 5,05,000. The CIT contended that the excess payment was not advance tax but a deposit, ineligible for interest under section 214. However, the Tribunal held that the payment was relatable to section 212(3A) and should be treated as advance tax, entitling the assessee to interest under section 214.

Issue 2: Entitlement to interest on excess tax paid
The CIT issued a notice under section 263, directing the withdrawal of interest granted under section 214 on the excess amount paid by the assessee. The Tribunal overturned this decision, emphasizing that the payment, though exceeding the demanded advance tax, should be considered as an advance tax payment. The Tribunal's decision was supported by legal precedents highlighting that any payment accepted by the Department as advance tax should be treated as such, making the assessee eligible for interest under section 214.

Issue 3: Validity of filing an upward estimate
The Department argued that the assessee was not entitled to file an upward estimate under section 212(3A) since the difference between the tax demanded and paid did not meet the 33-1/3 per cent threshold. Conversely, the assessee contended that the excess payment should be treated as advance tax, especially since the Department accepted it as such. Legal authorities cited in the judgment supported the view that any payment made before the end of the accounting year should be considered advance tax, aligning with the Tribunal's decision.

In conclusion, the High Court upheld the Tribunal's decision, affirming that the excess tax payment should be treated as advance tax, entitling the assessee to interest under section 214. The Court emphasized the acceptance of the payment by the Department and the negligible difference between the tax demanded and finally determined amounts. The judgment highlighted the statutory compulsion to pay advance tax and concluded that the CIT had no grounds to interfere with the ITO's order under section 263.