1994 (7) TMI 20 - HC - Income Tax

Summary

Issues: Interpretation of provisions of section 244(1A) and entitlement to interest on refund of tax under sections 214 and 244(1A) of the Income-tax Act, 1961.

The judgment delivered by the High Court of Rajasthan pertains to a reference made by the Income-tax Appellate Tribunal regarding the entitlement of interest on the refund of tax under sections 214 and 244(1A) of the Income-tax Act, 1961. The case involved an assessee who had paid tax at source and advance tax, which was later adjusted against the tax liability created. The dispute arose when the assessee claimed interest under section 214 up to the date of regular assessment and under section 244(1A) up to the date of the order giving effect to the appellate order. The Inspecting Assistant Commissioner initially denied the interest under section 214, stating that regular assessment meant the date of the initial assessment order. Additionally, it was held that interest under section 244(1A) applies only when the amount is paid in pursuance of an assessment order and not as advance tax. The Commissioner of Income-tax (Appeals) relied on a decision of the Delhi High Court and directed the interest to be allowed on the refunded amount. The Income-tax Appellate Tribunal, following its earlier decision, held that interest under section 244(1A) is payable from the date of regular assessment, as the advance tax stood adjusted against the demand made by the Department. The Tribunal also emphasized that the interest under section 244(1A) cannot be withdrawn by the Inspecting Assistant Commissioner. The High Court noted that the assessee is entitled to interest on the amount deposited as advance tax under section 214, as per the precedent set in another case. The court concluded that interest on the refund should be granted to the assessee in accordance with the decision in the Associated Stone Industries case.

The judgment extensively analyzed the provisions of section 244(1A) of the Income-tax Act, which outline the conditions for the entitlement to interest on a refund. These conditions include the refund being due to the assessee, the payment being made after a specified date, the payment being in pursuance of an assessment order or penalty, and the refund arising from an appellate order or other proceedings under the Act. The court also referred to previous judgments, such as the National Agricultural Co-operative Marketing Federation case and the M. L. Sanghi case, to establish the principles governing the entitlement to interest on tax refunds. It was clarified that interest under section 244(1A) is payable when the refund arises from an excess amount paid after an assessment order, as determined in appeal or other proceedings. The court emphasized that the interest under section 244(1A) cannot be denied based on the mode of payment, as long as the conditions specified in the provision are met. The judgment highlighted the importance of adhering to legal precedents and interpreting the provisions of the Income-tax Act in a manner that upholds the rights of the assessee.

In conclusion, the High Court resolved the reference by affirming the entitlement of the assessee to interest on the refunded amount, both under section 214 and section 244(1A) of the Income-tax Act, based on the specific conditions and legal principles governing such entitlement. The court's decision was guided by established legal interpretations and precedents, ensuring a fair and consistent application of the provisions related to interest on tax refunds.