1993 (7) TMI 11 - HC - Income Tax

Issues Involved:
1. Eligibility for interest under Section 214 of the Income-tax Act, 1961.
2. Classification of payments as advance tax.
3. Calculation of interest on refunded amounts.
4. Regular assessment and its implications on interest calculation.

Issue-wise Detailed Analysis:

1. Eligibility for Interest under Section 214 of the Income-tax Act, 1961:
The petitioner challenged three orders rejecting its claim for interest under Section 214 of the Income-tax Act, 1961. The petitioner argued that the payment of Rs. 30,00,000 on March 15, 1983, should be considered as advance tax and, therefore, eligible for interest. The court referenced CIT v. Ajoy Paper Mills Ltd. [1990] 181 ITR 454, which established that if advance tax instalments paid during the financial year exceed the tax determined on regular assessment, interest is payable under Section 214. The court concluded that the petitioner is entitled to interest if the conditions in Section 214 are satisfied, even if the advance tax was not paid by the due dates.

2. Classification of Payments as Advance Tax:
The Assessing Officer initially did not treat the Rs. 30,00,000 paid on March 15, 1983, as advance tax because it was paid after the accounting period ended on December 31, 1982. However, the court held that any payment made before April 1, i.e., before the commencement of the relevant assessment year, must be considered for calculating interest. The court emphasized that payments made during the financial year should be treated as advance tax, aligning with the decision in Ajoy Paper Mills Ltd.'s case.

3. Calculation of Interest on Refunded Amounts:
The court determined that the date of regular assessment for the purpose of Section 214 in this case was August 4, 1989, when the Assessing Officer gave effect to the appellate order dated October 6, 1988. The court directed the respondents to pay interest on the refunded amount as prayed for by the petitioner, setting aside the orders dated March 28, 1988, August 4, 1989, and November 29, 1989, which had refused the payment of interest.

4. Regular Assessment and Its Implications on Interest Calculation:
The court discussed the meaning of "regular assessment" and concluded that the order passed by the Income-tax Officer finally giving effect to the appellate order is considered a regular assessment within the meaning of Section 214(1). This view was supported by the Division Bench decisions in CIT v. Chloride India Ltd. [1990] 186 ITR 217 and CIT v. Pixray (India) Ltd. [1993] 201 ITR 785. The court dismissed the appeal, affirming that the Rs. 30,00,000 paid during the relevant financial year should be treated as advance tax eligible for interest under Section 214.

Conclusion:
The court allowed the writ petition, directing the respondents to pay interest on the refunded amount as per the petitioner's claim. The decision was based on the interpretation that payments made during the financial year, even if not by the due dates, qualify as advance tax for the purpose of calculating interest under Section 214. The appeal by the Commissioner of Income-tax was dismissed, and the judgment was stayed for four weeks to address potential conflicting decisions.

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