1993 (9) TMI 166 - AT - Income Tax

Summary

Issues:
Grant of interest under section 214 and section 244 for the assessment year 1983-84.

Analysis:
The appeal concerns the grant of interest under section 214 and section 244 for the assessment year 1983-84. The assessee, a registered firm engaged in manufacturing, had claimed investment allowance which was initially disallowed by the Income-tax Officer. However, on appeal, the ITAT allowed the claim, resulting in a refund. The Assistant Commissioner of Income-tax, while determining the refund, did not grant interest under section 214 on the excess advance tax paid or interest under section 244(1A) on the total amount paid or adjusted in pursuance of the assessment order. The Dy. Commissioner (Appeals) reversed this decision, holding that the assessee was entitled to interest under both sections. The Revenue appealed this decision before the Tribunal.

The main contention was whether the assessee was entitled to interest under section 214 and section 244(1A) on the excess advance tax paid and the total amount paid in pursuance of the assessment order. The Revenue argued that the Dy. Commissioner (Appeals) erred in directing the grant of interest under these sections. The Revenue relied on a decision by the Andhra Pradesh High Court, which held that interest under section 214 does not apply when a refund is to be made due to an appellate order. However, the assessee cited a decision by the Delhi High Court, which clarified that interest on advance tax is payable up to the date of refund. The assessee also referred to a decision by the Punjab & Haryana High Court, which emphasized that once advance tax is adjusted towards the tax liability, it loses its identity and is treated as payment of tax.

The Tribunal upheld the decision of the Dy. Commissioner (Appeals), stating that the assessee was entitled to interest on the excess advance tax paid and the total amount paid in pursuance of the assessment order. The Tribunal found support in the decisions of the Delhi High Court and the Punjab & Haryana High Court, which emphasized the entitlement of interest in such cases. Therefore, the Tribunal dismissed the appeal of the Revenue, affirming the grant of interest under section 214 and section 244(1A) to the assessee for the assessment year 1983-84.