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Issues:
1. Interpretation of section 66(7) of the Income-tax Act regarding the payment of interest on excess tax refund. Analysis: The petitioners, acting as joint liquidators of a company in voluntary liquidation, were assessed by the Income-tax Officer for profits on the sale of machinery and stores under the Income-tax Act. The assessment was upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The Tribunal referred two questions to the High Court regarding the taxability of the profits. The High Court ruled against the petitioners on the first question but in favor of them on the second question. The Supreme Court later ruled in favor of the petitioners on the first question as well. Subsequently, the petitioners sought a refund of the excess tax paid along with interest. The Commissioner of Income-tax ordered the refund but declined to pay any interest, citing the controversial nature of the case. The petitioners challenged this decision by filing a writ petition under Article 226 of the Constitution. The main issue before the High Court was the interpretation of section 66(7) of the Income-tax Act, which governs the payment of interest on excess tax refunds. The petitioners argued that the Commissioner was obligated by law to not only refund the excess tax but also pay a reasonable amount of interest. The Court analyzed the language of section 66(7) and held that it entitles the assessee to a refund of the overpaid tax along with some interest. The Court emphasized that the Commissioner has the discretion to determine the rate of interest, but cannot refuse to pay any interest at all. The discretion to fix the interest rate must be exercised reasonably in each case, in accordance with the law. Consequently, the High Court found the Commissioner's order refusing to pay interest to be illegal and beyond his authority. The Court quashed the order through a writ of certiorari and directed the Commissioner to reconsider the matter of interest payment in compliance with the law. The Court allowed the petition, with no costs imposed on either party.
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