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1987 (12) TMI 2 - SC - Income TaxInterest on the refund of tax - assessments were made under the Indian Income-tax Act - since 1922 did not provide for interest, assessee cannot claim for interest
Issues Involved:
1. Jurisdiction of the court to try the suit. 2. Applicability of the provisions of the Income-tax Act, 1961, or the Indian Income-tax Act, 1922, to the claim. 3. Entitlement to interest on refunds of income-tax and excess profits tax. 4. Maintainability of a civil suit for recovery of interest. Detailed Analysis: Issue 1: Jurisdiction of the Court to Try the Suit The High Court framed issue No. 4 to determine whether the court had jurisdiction to try the suit. The learned single judge held that the civil court had no jurisdiction to substitute its discretion to grant interest in place of the discretion vested in the Commissioner under section 66(7) of the 1922 Act. The judge stated, "the civil court in this suit has no power to override him and grant interest." Consequently, the suit was dismissed on this ground. Issue 2: Applicability of the Provisions of the Income-tax Act, 1961, or the Indian Income-tax Act, 1922 The High Court also framed issue No. 6 to decide whether the claim was governed by the provisions of the 1961 Act or the 1922 Act. The learned single judge initially held that the case was governed by the provisions of the old Act (1922 Act), stating, "the rights of the parties will, therefore, be governed by the provisions of the old Act and it cannot be said that the assessment had been completed." However, the Division Bench of the High Court reversed this finding, holding that the provisions of the 1922 Act did not govern the claim. The appellate finding was deemed sufficient to support the dismissal of the suit. Issue 3: Entitlement to Interest on Refunds of Income-tax and Excess Profits Tax The plaintiff-assessee claimed interest on refunds of income-tax and excess profits tax under section 66(7) of the 1922 Act. The Division Bench of the High Court held that the claim for interest on the refund of income-tax did not survive under the 1961 Act. The Supreme Court affirmed this view, stating that "an assessment would be 'completed assessment' within section 297(2)(i) if the Income-tax Officer had passed the order of assessment prior to the coming into force of the 1961 Act." Therefore, the claim for Rs. 1,17,358.87 was rightly rejected. However, the claim for Rs. 12,282.11 representing interest on the refund of excess profits tax was considered separately. The Supreme Court noted that section 21 of the Excess Profits Tax Act, 1940, incorporated section 66 of the 1922 Act, and thus, the claim for interest on excess profits tax could survive. The Court stated, "the distinctive nature of this part of the suit claim pertaining to the interest on excess profits tax has not been specifically dealt with by the High Court." Issue 4: Maintainability of a Civil Suit for Recovery of Interest The maintainability of the civil suit was questioned, particularly in light of the exclusionary clauses in the statute. The Supreme Court discussed the general principle that where a right and remedy are created by statute, the civil court's jurisdiction is impliedly barred. However, the Court also noted that the appellants could have recourse to proceedings under article 226 of the Constitution if the civil suit was not maintainable. To avoid further litigation, the Supreme Court decided to grant relief in these proceedings without pronouncing on the maintainability of the suit. Conclusion: The Supreme Court upheld the dismissal of the claim for Rs. 1,17,358.87 as interest on the refund of income-tax but allowed the claim for Rs. 12,282.11 as interest on the refund of excess profits tax. The Court directed the respondent to pay the appellants Rs. 12,282.11 with pendente lite and further interest at 6% per annum from the date of the institution of the suit till realization. The appellants were entitled to costs in proportion to their success in the suit, while the respondent was left to bear its own costs throughout. Judgment: - Appeal allowed in part. - Claim for Rs. 1,17,358.87 dismissed. - Claim for Rs. 12,282.11 allowed with interest and costs.
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