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2016 (11) TMI 804 - HC - Income TaxGrant of interest on refund - Whether, the amendment made by insertion of subsection (1A) in Section 214 by Direct Tax Laws (Amendment) Act, 1984 providing for grant of interest is clarificatory and in any event applicable to the facts of the present case? - Held that - In the present facts, all orders including the order passed in the regular assessment proceedings by the Assessing Officer were passed after the amended subsection 1A of Section 214 of the Act came into force w.e.f. 1st April, 1985. Moreover, the decision of this Court in Carona Sahu Co. Ltd. (1983 (10) TMI 44 - BOMBAY High Court ) was rendered in the context of Section 214 of the Act prior to the introduction of the amended subsection (1A) in Section 214 of the Act.Therefore, the issue raised herein on merits, stands concluded in favour of the applicant assessee by the decision of this Court in Godrej & Boyce Manufacturing Co. Ltd. (2005 (8) TMI 69 - BOMBAY High Court ) wherein held Section 214 deals with payment of interest on the amount of tax found to have been paid in excess of the tax determined as payable on the regular assessment. Interest will have to be paid from the first day of the relevant assessment year to the date of the regular assessment, i.e., the first assessment. - Decided in favour of assessee
Issues:
1. Interpretation of amendment to Section 214 of the Income Tax Act, 1961. 2. Justification of the order passed by the Commissioner of Income Tax under section 263. Analysis: Issue 1: Interpretation of amendment to Section 214 of the Income Tax Act, 1961 The case involved a dispute regarding the applicability of subsection (1A) of Section 214 of the Income Tax Act, 1961, introduced by the Direct Tax Laws (Amendment) Act, 1984. The Tribunal upheld the revisional order of the Commissioner of Income Tax, which directed the withdrawal of interest granted under section 214. The Tribunal held that the amendment was substantive and not clarificatory, and thus could not be applied to the period before 1st April, 1985. However, the High Court, citing the case of Godrej & Boyce Manufacturing Co. Ltd. Vs. P.K. Gupta, Commissioner of Income Tax, held that the amendment was procedural and would apply to all pending proceedings. The Court emphasized that all orders in the present case were passed after the amendment came into force, and therefore, the applicant was entitled to the interest under subsection (1A) of Section 214. Consequently, the Court answered this question in favor of the applicant assessee. Issue 2: Justification of the order passed by the Commissioner of Income Tax under section 263 The Commissioner of Income Tax, through an order under Section 263, revised the order passed by the Assessing Officer to deny the applicant interest under subsection (1A) of Section 214. The Tribunal dismissed the applicant's appeal, relying on the decision in Carona Sahu Co. Ltd., and held that the amendment was not clarificatory. However, the High Court, after analyzing the relevant dates and legal precedents, concluded that the applicant was indeed entitled to the interest under the amended provision. Consequently, the Court answered this question in favor of the applicant assessee, thereby overturning the decision of the Tribunal. In conclusion, the High Court ruled in favor of the applicant assessee on both issues, holding that the amendment to Section 214 was applicable to the case and that the order passed by the Commissioner of Income Tax under section 263 was not justified. The Reference was disposed of accordingly, with no order as to costs.
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