1997 (8) TMI 91 - AT - Income Tax

Summary

Issues:
1. Entitlement to interest under section 214 of the Income Tax Act.
2. Claim for interest on interest by the assessee.
3. Applicability of Supreme Court and Gujarat High Court decisions on interest calculations.
4. Interpretation of "regular assessment" and its implications on interest calculations.

Analysis:

1. The case involved a dispute regarding the entitlement of the assessee to interest under section 214 of the Income Tax Act. The Assessing Officer (AO) initially rejected the plea for interest under section 214, citing a decision of the Gujarat High Court. However, the Commissioner of Income Tax (Appeals) (CIT(A)) directed the AO to grant interest under section 214, leading to an appeal by the assessee on the issue of interest calculation.

2. The CIT(A) accepted the applicability of the Gujarat High Court decision in the case of Bardolia Textile Mills but did not grant the assessee's plea for interest on interest. The assessee contested this decision, leading to a further appeal on this specific account.

3. The Appellate Tribunal referred to the Supreme Court decision in Modi Industries Ltd. & Ors. vs. CIT, which overruled the Gujarat High Court decision in the case of Bardolia Textile Mills. The Tribunal held that the assessee was not entitled to interest on interest based on the Supreme Court ruling. However, the assessee's counsel argued that the decision in D.J. Works vs. Dy. CIT by the Gujarat High Court was still relevant and supported the claim for interest on interest.

4. The Tribunal analyzed the interpretation of "regular assessment" in the context of interest calculations under section 214. It referred to the legislative intent behind the term "regular assessment" and concluded that interest could only be granted until the date of the regular assessment. However, if the interest due on that date is not paid within the specified time limit, further interest can be allowed. The Tribunal also considered previous decisions of the Gujarat High Court, such as in the case of Chimanlal G. Patel, to support the assessee's entitlement to interest on the amount available based on the regular assessment.

In conclusion, the Tribunal allowed the appeal, affirming the assessee's entitlement to interest on the basis of the regular assessment.