1992 (6) TMI 10 - HC - Income Tax

Summary

Issues Involved:
1. Entitlement to Interest under Section 214 of the Income-tax Act, 1961, on Excess Advance Tax Paid.
2. Interpretation of Sections 207 to 213 and their Relevance to Section 214.
3. The Impact of Payment Dates on the Entitlement to Interest.
4. Judicial Precedents and Divergent Views from Various High Courts.
5. The Role of Section 218 and Section 221 in Interpreting Section 214.

Detailed Analysis:

1. Entitlement to Interest under Section 214 of the Income-tax Act, 1961, on Excess Advance Tax Paid:
The primary issue was whether the assessee was entitled to interest under Section 214 of the Income-tax Act, 1961, on Rs. 4,29,219, which was the excess amount of tax paid in the financial year 1971-72 over the tax determined on regular assessment for the assessment year 1972-73. The Tribunal had held against the assessee, relying on the precedent set in Kangundi Industrial Works (P.) Ltd. v. ITO [1980] 121 ITR 339.

2. Interpretation of Sections 207 to 213 and their Relevance to Section 214:
The court examined the interpretation of "the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 to 213" in Section 214(1). The court noted that Sections 207 to 213 are referenced to identify the financial year in which the instalments are payable. The court emphasized that the requirement is that the instalments should be paid during the relevant financial year, irrespective of the specific dates mentioned in Section 211.

3. The Impact of Payment Dates on the Entitlement to Interest:
The court disagreed with the Division Bench's view in Kangundi Industrial Works' case that the instalments must be paid before the due dates fixed for payment to claim interest under Section 214. The court highlighted that Section 214 provides for interest from the first day of April following the financial year, not from the date of actual payment of each instalment. The court found no justification for interpreting Section 214 in conjunction with Sections 218 and 221 to deny interest on instalments paid after the specified dates but within the financial year.

4. Judicial Precedents and Divergent Views from Various High Courts:
The court reviewed various high court decisions that dissented from the view in Kangundi Industrial Works' case. High Courts of Gujarat, Kerala, Madhya Pradesh, Madras, Gauhati, Karnataka, Calcutta, and Punjab and Haryana had taken a different view, holding that interest under Section 214 should be paid on excess advance tax paid during the financial year, even if not paid on the specified dates. The court agreed with these views, emphasizing that the language of Section 214 does not support the requirement that instalments must be paid on the specified dates to earn interest.

5. The Role of Section 218 and Section 221 in Interpreting Section 214:
The court clarified that Sections 218 and 221, which deal with defaults in payment and penalties, should not influence the interpretation of Section 214. The court noted that these sections address the consequences of not paying instalments on specified dates, but they do not imply that payments made after the specified dates cannot be treated as advance tax for the purpose of earning interest under Section 214.

Conclusion:
The court overruled the decision in Kangundi Industrial Works' case and held that under Section 214(1), any amount paid towards advance tax during the financial year should be taken into account for calculating interest on the excess amount. The court concluded that the assessee was entitled to interest on the refundable amount of Rs. 4,29,219, as the payments were made within the financial year, even though not on the specified dates. The question referred to the court was answered in the affirmative, in favor of the assessee and against the Department.