1978 (12) TMI 23 - HC - Income Tax

Summary

Issues involved: Assessment of advance tax, validity of interest granted under section 214, applicability of section 217 for recovery of interest.

Assessment of advance tax: The assessee, a film producer firm, filed an estimate under section 212(3) of the Income-tax Act, 1961, estimating a tax payable at Rs. 4,200 for the assessment year 1965-66. The return later admitted an income of Rs. 18,383, resulting in a tax demand of Rs. 532. The Addl. CIT, Madras, revised the ITO's order under section 263, stating that the advance tax payment made on March 15, 1965, was not in accordance with the law applicable, and directed cancellation of interest granted under section 214. The Tribunal, however, held that the ITO was correct in granting interest under section 214, and set aside the Commissioner's order to recover the interest.

Validity of interest under section 214: The question raised was whether the assessee was entitled to the grant of interest of Rs. 1,313 under section 214 for the assessment year 1965-66. The contention was that section 214 applies only to advance tax paid in accordance with sections 207 to 213, and the payment made on March 15, 1965, did not qualify as advance tax under the statute. The Tribunal's decision favored the assessee, stating that the ITO was right in granting interest under section 214.

Applicability of section 217 for recovery of interest: Section 217 enables the Government to recover interest from an assessee who had not paid advance tax as per statutory provisions. The Commissioner concluded that no proceedings were necessary for collecting interest under section 217, as the amount had been paid before the end of the financial year. The judgment highlighted the similarity between sections 214 and 217, emphasizing that if the payment on March 15, 1965, was not advance tax for section 214, it could not be considered as such for section 217. The decision emphasized the mandatory nature of interest payment under both sections, leading to the affirmation in favor of the assessee.