1991 (3) TMI 198 - AT - Income Tax

Additional Demand, Advance Tax, Interest Payable By Government, Original Assessment, Tax Deducted At Source

Summary

Issues:
Non-allowance of interest under sections 244 and 214 of the Income-tax Act.

Analysis:
The appellant, in this case, contested the denial of interest under sections 244 and 214 of the Income-tax Act. The appellant had initially paid a total tax amount, including advance tax and tax deducted at source. Following the assessment, additional tax was demanded, which was subsequently rectified, resulting in a refund to the appellant. The appellant then claimed interest under sections 214 and 244(1A) of the Act. The Assessing Officer allowed interest under section 244(1A) but rejected the claim under section 214, stating that interest is calculated based on the initial refund granted after assessment, not the appellate order. The appellant's claim was supported by legal precedents but was rejected by the CIT(A) due to a stay on a relevant High Court decision.

The appellant's counsel argued that section 219 of the Act treats advance tax as payment towards tax liability, and any refund is considered a payment made after assessment. Refunds granted by appellate authorities fall under section 240, with provisions for interest under section 244(1A) for excess amounts paid post-March 31, 1975. The Tribunal agreed with the appellant's interpretation, emphasizing that taxes paid or recovered before assessment are considered payments made after assessment, eligible for interest under section 244(1A) if the assessment is post-March 31, 1975.

Regarding interest under section 214, the Tribunal noted that the section, as amended from April 1, 1985, allows interest on refunds post-appellate order. As the appellant had no refund post-regular assessment and was demanded additional tax, they were not entitled to interest under section 214. The Tribunal upheld the appellant's claim for interest under section 244(1A) but rejected the claim under section 214, allowing the appeal in part.