1994 (2) TMI 85 - AT - Income Tax

Issues Involved:
1. Withdrawal of part interest under Section 214.
2. Applicability of Section 214(1A) and its retrospective amendment.
3. Interpretation of "regular assessment" for the purposes of Section 214.
4. Applicability of Section 154 for rectification of mistakes.
5. Relevance of various High Court decisions and Board's Circular.

Issue-wise Detailed Analysis:

1. Withdrawal of part interest under Section 214:
The appeal concerns the withdrawal of part interest under Section 214. Initially, the assessee's claim for depreciation, including Rs. 10,93,080 on interest capitalized, was allowed. Due to a retrospective amendment by insertion of Explanation 8 below Section 43(1) by the Finance Act of 1986, this depreciation amount was withdrawn, increasing the tax liability and reducing the excess advance tax paid. Consequently, the Assessing Officer withdrew interest under Section 214 amounting to Rs. 2,03,346.

2. Applicability of Section 214(1A) and its retrospective amendment:
The CIT(A) treated the order for withdrawal of part interest under Section 214 as an order under Section 154 for rectification of mistakes, dismissing the assessee's appeal. The assessee argued that Section 214(1A), substituted w.e.f. 1st April 1985, was prospective and applied from the assessment year 1985-86 only. The assessee contended that the original Section 214 did not authorize the reduction of interest under Section 214 payable to the assessee.

3. Interpretation of "regular assessment" for the purposes of Section 214:
The assessee referred to various High Court decisions, including CIT vs. Tata Chemicals Ltd. and Bardolia Textile Mills vs. ITO, to argue that the term "regular assessment" did not include subsequent orders giving effect to appellate orders. The Departmental Representative emphasized that the Full Bench decision of the Gujarat High Court in Bardolia Textile Mills was binding in Gujarat and supported the withdrawal of part interest under Section 214. The Tribunal agreed with the Departmental Representative, stating that the term "regular assessment" included subsequent orders giving effect to appellate/revisional orders.

4. Applicability of Section 154 for rectification of mistakes:
The assessee argued that the issue was debatable and hence beyond the purview of Section 154, which authorizes rectification of mistakes apparent from the record. The Tribunal, however, held that after the pronouncement of the Full Bench decision of the Gujarat High Court in Bardolia Textile Mills, the issue ceased to be debatable in Gujarat. Therefore, the withdrawal of interest under Section 214 was justified under Section 154.

5. Relevance of various High Court decisions and Board's Circular:
The Tribunal considered the relevance of various High Court decisions and the Board's Circular. The Bombay High Court decision in Tata Chemicals Ltd. was based on the Board's Circular, which envisaged alteration (increase or decrease) of interest under Section 214. The Gujarat High Court decision in Cibatul Ltd. was found inapplicable as it pertained to Section 244, not Section 214. The Delhi High Court decision in CIT vs. Dalmia Cement (Bharat) Ltd. was also found inapplicable as it was decided before the Gujarat High Court's decision in Bardolia Textile Mills.

Conclusion:
The Tribunal concluded that Section 214(1A) specifically authorized the reduction of interest under Section 214 upon completion of the regular assessment. The interpretation of "regular assessment" as including subsequent orders giving effect to appellate/revisional orders was binding in Gujarat. Therefore, the withdrawal of part interest under Section 214 was justified, and the provisions of Section 154 were applicable. The assessee's appeal was dismissed.

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