1978 (2) TMI 72 - HC - Income Tax

Summary

Issues Involved:
1. Constitutional validity of section 217(1A) of the Income-tax Act, 1961.
2. Computation of interest u/s 217(1A) for late filing of estimates and payment of advance tax.

Summary:

1. Constitutional Validity of Section 217(1A):
The petition initially challenged the constitutional validity of section 217(1A) of the Income-tax Act, 1961. However, the petitioners did not press this challenge, and the court proceeded on the basis that there was no challenge to the constitutional validity of section 217(1A).

2. Computation of Interest u/s 217(1A):
The main issue was whether the amounts of advance tax paid before the first day of April next following the financial year in which the advance tax was payable should be credited while computing interest u/s 217(1A).

- Relevant Provisions:
- Section 212(3A) mandates filing estimates of advance tax.
- Section 217(1A) imposes interest for failure to file estimates as required.
- Section 215(2) and (5) are relevant for calculating interest under section 217(1A).

- Court's Analysis:
- The court noted that interest u/s 217(1A) is to be calculated from the first day of April next following the financial year in which the advance tax was payable.
- The court emphasized that any tax paid before this date must be credited when computing interest.
- The court clarified that interest under section 217(1A) is compensatory for the delay in tax realization, not penal.

- Decision:
- The court found that the Commissioner of Income-tax erred in not giving credit for the amounts paid before the first day of April next following the financial year.
- The orders rejecting the revision petitions were quashed and set aside.
- The respondents were directed to calculate interest u/s 217(1A) for the assessment years 1970-71 and 1971-72 in accordance with the court's interpretation.

Conclusion:
The Special Civil Application was allowed, and the respondents were directed not to enforce the demand notices contrary to the provisions of law as explained. The orders passed in the revision petitions were quashed, and the respondents were instructed to recalculate the interest correctly. Rule was made absolute with costs.