2011 (8) TMI 386 - HC - Income Tax

Whether interest u/s 244A was payable to assessee even though the amount of tax paid by the assessee was credited to central government - Block assessment - assessing officer declined to grant interest for the month of December, 2003 - there is delay on the part of the authorized agent to credit that amount to the account of the Central Government, it cannot be said that the payment of tax is not made by the assessee, till the amount of tax is credited to the account of the Central Government - Once it is found that the tax was paid on 30th December, 2003, then as per the rule 119A(b), of the Income Tax Rules, on the tax becoming refundable, the assessee had to be refunded tax with interest for the entire month of December, 2003 - circular No.261 dated 8th August, 1979 issued by the Board to the effect that the date of presenting the cheque should be the date of payment supports the contention of the assessee - Decided in favor of the assessee

Issues:
1. Interpretation of Section 244A of the Income Tax Act, 1961 regarding interest payment.
2. Determining the date of payment of tax for the purpose of interest calculation.
3. Applicability of Rule 119A(b) of the Income Tax Rules in refund cases.
4. Comparison and distinction of judgments from Rajasthan High Court and Delhi High Court.
5. Consideration of circular No.261 dated 8th August, 1979 regarding payment of tax.

Issue 1: Interpretation of Section 244A of the Income Tax Act, 1961 regarding interest payment:
The case revolved around whether the ITAT was justified in holding that interest was payable to the assessee under section 244A of the Income Tax Act, 1961 for the month of December, 2003, even though the tax amount was credited to the Central Government Account on 1st January, 2004. The key point was to determine the correct interpretation of the provision regarding the payment of interest in such cases.

Issue 2: Determining the date of payment of tax for the purpose of interest calculation:
The court analyzed the events surrounding the payment of tax by the assessee, emphasizing that the tax amount was debited from the bank account of the assessee on 30th December, 2003, even though it was credited to the Central Government Account on 1st January, 2004. The crucial question was whether the debiting of the tax amount constituted payment under Section 244A(1)(b) of the Act, which determines the date for interest calculation.

Issue 3: Applicability of Rule 119A(b) of the Income Tax Rules in refund cases:
The judgment highlighted that as per Rule 119A(b) of the Income Tax Rules, once the tax was found to be paid on 30th December, 2003, the assessee was entitled to a refund with interest for the entire month of December, 2003. This issue clarified the procedural aspect of refunding taxes with interest in cases where the payment date is crucial for interest calculation.

Issue 4: Comparison and distinction of judgments from Rajasthan High Court and Delhi High Court:
The court distinguished the decisions from the Rajasthan High Court and the Delhi High Court cited by the revenue's counsel, stating that those cases did not directly address the interpretation of the expression 'payment of tax' under Section 244A(1)(b) of the Act. This analysis showcased the importance of context and specific legal provisions in determining the applicability of previous judgments to the current case.

Issue 5: Consideration of circular No.261 dated 8th August, 1979 regarding payment of tax:
The judgment referenced circular No.261 dated 8th August, 1979, issued by the Board, which supported the contention of the assessee regarding the date of payment of tax. This circular further reinforced the argument that the date of presenting the cheque should be considered as the date of payment, aligning with the assessee's position in the case.

In conclusion, the High Court of Bombay held in favor of the assessee, ruling that the tax was deemed paid on 30th December, 2003, entitling the assessee to a refund with interest for the entire month of December, 2003. The judgment provided a detailed analysis of the legal provisions, interpretations, and precedents to arrive at a decision that clarified the payment date for interest calculation in tax refund cases.

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