1993 (1) TMI 66 - HC - Income Tax

Summary

Issues:
Interpretation of section 18A(6) of the Indian Income-tax Act, 1922 regarding the calculation of interest payable by the assessee.

Analysis:
The judgment pertains to a reference under section 66(1) of the Indian Income-tax Act, 1922, regarding the chargeability of interest under section 18A(6) of the Act for the assessment year 1954-55. Section 18A(6) mandates the payment of interest if the tax paid by the assessee falls short of 80% of the tax determined on the basis of regular assessment. The interest rate is six percent per annum. The key question was whether interest should be calculated after deducting the double income-tax relief admissible to the assessee from the total income-tax demanded, even if the claim for relief was allowed subsequently by the Income-tax Officer under section 154 of the Act.

The court analyzed the provisions of section 18A(6) and emphasized that the tax determined on regular assessment should be the amount calculated by the Income-tax Officer as tax on the assessee's income at the rates specified in the Finance Act, reduced by the amount admissible as double income-tax relief. This interpretation was supported by section 49D of the 1922 Act, which deals with double taxation relief, allowing for a deduction from the Indian income-tax payable by an assessee. Therefore, the interest under section 18A(6) should be determined with reference to 80% of the tax amount reduced by the double taxation relief.

The court concluded that the Tribunal was correct in affirming the Appellate Assistant Commissioner's order that interest payable under section 18A(6) should be calculated after deducting the double income-tax relief from the income tax calculated on the assessee's income. The correctness of the calculation, whether in the original assessment or rectified later, does not alter the fact that the amount payable should be the correct amount determined by the Income-tax Officer on regular assessment. Therefore, the court answered the question in favor of the assessee and against the Revenue, finding no error in the Tribunal's conclusion. No costs were awarded in the case.