1980 (1) TMI 45 - HC - Income Tax

Summary

Issues:
1. Entitlement to interest under section 214 of the Income Tax Act on correct refund figure up to the date of regular assessment.
2. Allowance of interest under section 214 on the amount of refund attributable to relief under section 80J in the revision order.

Analysis:
1. The High Court of Madras addressed the issue of entitlement to interest under section 214 of the Income Tax Act on the correct refund figure up to the date of regular assessment. The case involved an assessee running a textile mill whose assessment for the year 1968-69 resulted in a refund. The Income Tax Officer (ITO) calculated the interest due under section 214 to be Rs. 18,286.10. However, the Commissioner, in a suo motu revision under section 263, disagreed with the ITO's calculation and directed a modification. The Tribunal later held that the assessee should be entitled to interest on the correct refund figure up to the date of regular assessment. The Court examined the provisions of sections 214, 215, and the overall scheme of the Act to conclude that the assessee should receive interest up to the date of regular assessment, even after a rectification order. The Court rejected the Commissioner's argument that the absence of a specific provision similar to section 215(3) precluded further interest, emphasizing the need to interpret the Act to make provisions workable and effective.

2. The second issue involved the allowance of interest under section 214 on the amount of refund attributable to relief under section 80J in the revision order. The assessee had initially claimed a deduction under section 80J, which was later granted by the Appellate Assistant Commissioner (AAC). A rectification order was passed to grant the relief under section 80J and adjust the assessment accordingly. The Commissioner contended that interest had already been granted in the regular assessment, and no further interest should be awarded post-rectification. However, the Court held that the rectification of the assessment aimed to make the initial assessment correct, and the assessee should be entitled to interest on the correct refund figure up to the date of regular assessment. The Court distinguished between rectification and modification on appeal, emphasizing the assessee's right to interest based on the final refund amount.

In conclusion, the High Court of Madras ruled in favor of the assessee, affirming their entitlement to interest under section 214 on the correct refund figure up to the date of regular assessment, even after a rectification order. The Court interpreted the provisions of the Income Tax Act to ensure fairness and upheld the assessee's right to interest in line with the Act's scheme of payment and recovery of taxes.