1987 (7) TMI 156 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to interest under section 244(IA) of the Income-tax Act, 1961 on the refund due from self-assessment tax paid.

Issue-wise Detailed Analysis:

1. Entitlement to Interest under Section 244(IA) on Refund of Self-Assessment Tax:

*Assessee's Argument:*
The assessee claimed interest under section 244(IA) for the refund of self-assessment tax paid. The assessee argued that under section 140A(2), the amount paid as self-assessment tax should be deemed to have been paid towards the regular assessment. Therefore, the refund arising from this payment should attract interest under section 244(IA). The assessee relied on the Delhi High Court decision in National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928 to support their claim.

*Department's Argument:*
The department contended that self-assessment tax is not an amount paid as a consequence of an assessment order. Therefore, interest under section 244(IA) is not allowable on the refund of self-assessment tax. The department relied on the orders of the lower authorities which disallowed the interest.

*First Member's (Accountant Member) View:*
The Accountant Member found the assessee's claim reasonable. He noted that section 140A(2) provides that any amount paid as self-assessment tax shall be deemed to have been paid towards the regular assessment. Section 244(IA) talks about interest payable as a consequence of a refund granted in pursuance of an assessment order. Thus, reading these provisions together, the claim of the assessee for interest should be allowed. The decision in National Agricultural Co-operative Marketing Federation of India Ltd. supports this view.

*Second Member's (Judicial Member) View:*
The Judicial Member disagreed with the Accountant Member. He emphasized that section 244(IA) deals with interest on refunds arising from amounts paid in pursuance of an assessment or penalty order. Since the refund in this case was from self-assessment tax, it does not fit within the scope of section 244(IA). He maintained that self-assessment tax retains its character until the assessment is framed and does not qualify for interest under section 244(IA). He upheld the disallowance of interest by the Income Tax Officer (ITO) and the Commissioner of Income Tax (Appeals) [CIT (A)].

*Third Member's (Vice President) View:*
The Third Member was brought in to resolve the difference of opinion. He noted that section 140A(2) clearly states that self-assessment tax paid is deemed to be towards the regular assessment. He referred to the National Agricultural Co-operative Marketing Federation of India Ltd. case, which held that advance tax, once merged into the regular assessment, loses its separate identity and should be treated as tax paid towards the assessment. Applying this logic, the Third Member concluded that self-assessment tax should also be treated similarly. He disagreed with the department's reliance on the Bardolia Textile Mills case, noting that the Supreme Court's stay order on the National Agricultural Co-operative Marketing Federation of India Ltd. case did not nullify its applicability as binding precedent. Therefore, he agreed with the Accountant Member that interest on the refund of Rs. 61,800 (self-assessment tax) is due to the assessee under section 244(IA).

Conclusion:
The Third Member's decision aligned with the Accountant Member, leading to the conclusion that the assessee is entitled to interest under section 244(IA) on the refund of self-assessment tax paid. The matter was directed to be disposed of in accordance with this view.