1982 (7) TMI 105 - AT - Income Tax

Summary

Issues:
1. Charging of interest under section 220(2) of the Income-tax Act, 1961 for non-payment of demand raised in assessment year 1977-78.
2. Application of section 154 for rectification of interest charged under section 220(2) due to assets retained under section 132(5) of the Act.
3. Interpretation of section 132B(4) regarding payment of interest by Central Government on retained money or proceeds of assets sold.

Analysis:
1. The appeal was against the order of the AAC related to the assessment year 1977-78 where the ITO charged interest under section 220(2) for non-payment of the demand raised. The assessee objected to the interest charged due to assets retained under section 132(5) of the Act. The ITO rejected the application under section 154 stating no mistake was apparent, as per section 132(5) provisions. The ITO clarified that interest is payable only on retained money or assets sold for demand satisfaction, leading to the rejection of the assessee's claim.

2. The assessee relied on a brochure issued by the Directorate of Inspection claiming interest payment on excess asset value over liabilities. However, the AAC upheld the ITO's decision, citing section 132B(4) provisions that allow interest only on retained money or sale proceeds. The appellant argued for cancellation of interest charged and claimed interest under section 132B(4) on asset value. The tribunal found no grounds for rectification under section 154, as the interest was not due based on the section's clear provisions.

3. The tribunal referred to commentary by Chaturvedi and Pithisaria on Income-tax Law, explaining section 132B(4) provisions for interest payment by the Central Government on retained money or asset sale proceeds exceeding liabilities. It emphasized that interest is not payable on unsold assets and covers liabilities beyond taxes, including penalties and interest. The tribunal highlighted that rectification under section 154 for interest under section 220(2) was not applicable, and the matter should be pursued independently under section 132B(4).

4. The tribunal acknowledged the confusion caused by the brochure's language, suggesting interest payment on excess asset value. It recommended the department to clarify intentions and issue instructions if interest on retained assets was intended. The tribunal dismissed the appeal, emphasizing adherence to legal provisions and advising the assessee to approach the ITO directly for interest under section 132B.