1976 (12) TMI 41 - HC - Income Tax

Summary

Issues:
Interpretation of section 214(1) of the Income-tax Act, 1961 prior to and after amendment by Taxation Laws (Amendment) Ordinance, 1967.
Calculation of interest payable by the Government to the assessee on excess advance tax paid.
Jurisdiction of the Income-tax Officer to award interest at the correct rate as per the amended provision.
Contrasting the amendment to section 18A(5) of the Indian Income-tax Act, 1922 with the amendment to section 214(1) of the Income-tax Act, 1961.

Analysis:

The judgment discussed the interpretation of section 214(1) of the Income-tax Act, 1961 before and after its amendment by the Taxation Laws (Amendment) Ordinance, 1967. The amendment substituted 9 per cent. for 6 per cent. as the interest rate payable by the Central Government to the assessee on excess advance tax paid. The court emphasized that the liability to pay interest and the right of the assessee to receive interest arises only upon completion of assessment. Therefore, the provision in force at the time of assessment completion applies to the interest calculation.

Regarding the calculation of interest, the court highlighted a case where the Income-tax Officer incorrectly applied 6 per cent. interest for the period before October 1, 1967, and 9 per cent. thereafter. The court clarified that once the liability to pay interest arises after October 1, 1967, the interest must be calculated at 9 per cent. for any period, including before the amendment date, as there was no provision to restrict the rate to 6 per cent. for the period before the amendment.

The judgment also contrasted the amendment to section 18A(5) of the Indian Income-tax Act, 1922 with the amendment to section 214(1) of the Income-tax Act, 1961. It highlighted that the amendment to section 18A(5) specifically provided for different interest rates for periods before and after the effective date of the amendment, unlike section 214(1) where no such provision existed. The court rejected the argument that applying the amended section to the period before its enactment would give it retrospective effect, emphasizing that it was a correct interpretation.

In conclusion, the court upheld the decision of the Tribunal, ruling in favor of the assessee. It affirmed that the amended provision of section 214(1) applied to the entire period, including before the effective date of the amendment, and awarded costs to the assessee.