1995 (12) TMI 54 - HC - Income Tax

Summary

Issues Involved:

1. Validity of the petitioner's claim for interest under section 214 of the Income-tax Act, 1961.
2. Interpretation of the term "regular assessment" under section 214 of the Act.
3. Entitlement to interest on the refund of advance tax due to the petitioner.

Detailed Analysis:

1. Validity of the Petitioner's Claim for Interest under Section 214 of the Income-tax Act, 1961:

The petitioner, a government company and an assessee under the Income-tax Act, 1961, challenged the rejection of its claim for interest on the advance tax paid for the assessment years 1978-79 and 1979-80. The petitioner argued that interest should be calculated from the first day of April of the respective assessment years to the date of the order of the Commissioner of Income-tax (Appeals), which should be treated as the date of "regular assessment" under section 214 of the Act. However, the respondents contended that interest under section 214 is only payable up to the date of the first regular assessment made under section 143 of the Act, unaffected by any subsequent recomputation of tax liability due to appellate or revisional proceedings.

2. Interpretation of the Term "Regular Assessment" under Section 214 of the Act:

The primary legal question was whether the term "regular assessment" in section 214 of the Act refers to the first order of assessment passed by the Income-tax Officer or includes subsequent assessments made as a result of appellate or revisional proceedings. The petitioner argued that "regular assessment" should include the final assessment order passed after giving effect to the appellate authority's decision. The respondents, however, maintained that "regular assessment" means the first assessment order passed under section 143 or 144 of the Act.

3. Entitlement to Interest on the Refund of Advance Tax Due to the Petitioner:

The petitioner claimed interest on the refundable amount of advance tax from the date of initial payment up to the date of actual refund. The respondents argued that interest is only payable up to the date of the first regular assessment order. The court examined various conflicting decisions of different High Courts on the interpretation of "regular assessment" in section 214. The Supreme Court's decision in Modi Industries Ltd. v. CIT [1995] 216 ITR 759 was pivotal, clarifying that "regular assessment" refers to the first assessment order passed under section 143 or 144 of the Act. The Supreme Court held that interest under section 214 is payable from the first day of April of the relevant assessment year to the date of the first assessment order, and any subsequent recomputation of tax liability does not alter the period for which interest is payable.

Conclusion:

The court concluded that the petitioner is not entitled to claim interest on the refundable amount pursuant to the consequential order passed by the Inspecting Assistant Commissioner of Income-tax to give effect to the appellate authority's order after the date of the first regular assessment. The writ application was dismissed without costs. The judgment aligns with the Supreme Court's interpretation that "regular assessment" in section 214 refers to the first assessment order, and any subsequent orders do not affect the period for which interest is payable.