1983 (11) TMI 7 - HC - Income Tax

Summary

Issues:
1. Validity of interest under section 214 of the Income-tax Act, 1961.
2. Admissibility of appeal against the levy of interest under section 139(8) of the Income-tax Act, 1961.
3. Treatment of advance tax paid for the purpose of interest levied under section 139(8) of the Income-tax Act, 1961.

Analysis:

The judgment delivered by the High Court of Karnataka addressed three questions referred by the Income-tax Appellate Tribunal regarding the Income-tax Act, 1961. The first issue involved the validity of interest under section 214 of the Act. The second issue concerned the admissibility of an appeal against the levy of interest under section 139(8) of the Act. The third issue focused on the treatment of advance tax paid for the purpose of interest levied under section 139(8).

The case involved an assessee, a private limited company manufacturing and selling beedies, who had remitted a sum towards advance tax due for the assessment year 1974-75. The Income-tax Officer levied interest under section 139(8) but did not give deduction to the advance tax paid towards the last instalment due. The assessee claimed interest under section 214 on the excess tax paid. The Income-tax Officer denied interest on the excess advance tax, considering the payment belated.

The Appellate Assistant Commissioner upheld the assessee's claim for interest under section 139(8) and section 214. The Tribunal also supported this decision and dismissed the appeal by the Department, leading to the reference to the High Court by the Revenue.

The High Court determined that the payment made by cheque on March 13, 1974, towards the advance tax due on March 15, 1974, was valid in law. Citing the principle that a payment by cheque relates back to the date of receipt, the Court held that the assessee made a valid payment on March 13, 1974. Consequently, the Court ruled in favor of the assessee, canceling the interest levied under section 139(8) and allowing interest under section 214 on the excess tax paid.

Regarding the admissibility of an appeal against the levy of interest under section 139(8), the Court referred to a previous decision and confirmed that the appeal challenging the levy of interest was maintainable. Therefore, all three questions raised by the Tribunal were answered in the affirmative and against the Revenue, affirming the decisions of the Appellate Assistant Commissioner and the Tribunal.