2011 (12) TMI 366 - HC - Wealth-tax

Whether the rejection of their claim for interest on refund of the tax paid under the Wealth Tax Act, stating that the tax paid was not in response to any demand raised, but by way of self-assessment, is justified or not - the income of the firm was given, as estimated, since the accounts of the firm were not finalized. But, subsequently, a revised return was filed on 22.03.1992, declaring the net wealth as Rs. 87,88,200/- based on the actual facts and figures - The absence of issuance of any notice under Section 30 will not or cannot tilt the balance in any manner as the liability to pay the amount is not on the basis of the demand notice, but on the basis of the assessment - The protracted litigation became inevitable, only because of the wrong course pursued by the respondents and later, the version of the petitioner/assessee came to be accepted, as per Ext. P3, which became final, as the department- did not pursue the matter any further - the said excess amount was being wrongfully retained by the Revenue, virtually preventing the petitioner/assessee from obtaining the refund at proper time - Decided in favor of the assessee

Summary

Issues Involved:
1. Eligibility for interest on refund of tax paid under the Wealth Tax Act.
2. Interpretation of self-assessment tax payments under Section 15B of the Wealth Tax Act.
3. Application of judicial precedents from the Income Tax Act to the Wealth Tax Act.

Issue-wise Analysis:

1. Eligibility for Interest on Refund of Tax Paid under the Wealth Tax Act:
The primary issue was whether the petitioners were entitled to interest on the refund of tax paid under the Wealth Tax Act, even though the tax was paid via self-assessment rather than in response to a demand notice. The court noted that the petitioners had filed a revised return reflecting the actual net wealth, which was initially ignored by the Assessing Officer. The court emphasized that the correct position of law should have been applied at the initial stage, which would have led to an immediate refund. The court concluded that the petitioners were entitled to interest on the refund as per Section 34A(4B)(a) of the Wealth Tax Act, 1957.

2. Interpretation of Self-assessment Tax Payments under Section 15B of the Wealth Tax Act:
The court examined whether payments made under self-assessment (Section 15B) could be considered for interest on refunds. The Assessing Officer had rejected the claim for interest, stating that the payment was not made in response to a demand notice under Section 30. However, the court clarified that self-assessment is a recognized mode of assessment, and any tax paid under self-assessment should be deemed paid towards regular assessment once finalized. The absence of a demand notice under Section 30 did not negate the liability for interest on refunds, as the payment was made based on the assessment.

3. Application of Judicial Precedents from the Income Tax Act to the Wealth Tax Act:
The petitioners argued that the principles established under the Income Tax Act regarding interest on refunds should apply similarly under the Wealth Tax Act. The court referred to decisions by the Supreme Court in cases such as Modi Industries Ltd. v. CIT and Sandvik Asia Ltd. v. CIT, which supported the entitlement to interest on excess tax payments. The court found the reasoning in these cases applicable, despite the respondents' argument that these precedents were specific to advance tax and TDS. The court held that the principles of paying interest on sums wrongfully retained by the Revenue applied equally to self-assessment tax under the Wealth Tax Act.

Conclusion:
The court set aside the impugned orders and declared that the petitioners were entitled to interest on the refund as provided under Section 34A(4B)(a) of the Wealth Tax Act, 1957. The respondents were directed to compute and disburse the due amount of interest within three months. The writ petitions were allowed, emphasizing the importance of applying correct legal principles and ensuring timely refunds with interest for excess tax payments.