1966 (4) TMI 16 - HC - Income Tax

ITO demanded advance payment of income-tax u/s 18A - assessee contend that the sum of Rs. 7,415-5-0 out of the amount which the company was entitled to receive as refund was adjusted by the ITO towards the payment of advance tax - ITO levied interest for default in payment of advance tax - held that interest charged on balance due after adjustment of refund was justified

Summary

Issues: Interpretation of section 18A(8) of the Income-tax Act, 1922 regarding the payment of interest by a company for default in advance income tax payment.

Analysis:
The judgment of the High Court of Allahabad pertains to a special appeal against the dismissal of a writ petition filed by a company regarding the demand for advance payment of income tax under section 18A of the Income-tax Act, 1922. The company contended that no interest was liable to be paid and that the interest amount was not chargeable without a specific order determining the amount. The court analyzed the relevant provisions of section 18A, particularly subsections (6) and (8), which deal with the payment of interest in case of default. The court rejected the company's arguments, emphasizing that the expression "no payment of tax has been made" in section 18A(8) encompasses cases of partial non-payment, making the company liable for interest on the unpaid amount.

The court addressed the company's argument that subsection (6) provisions should apply to subsection (8) proceedings, stating that subsection (8) only requires interest to be calculated in the manner laid down in subsection (6) without making subsection (6) govern or control subsection (8) proceedings. The court clarified that the intention of subsection (8) was to charge simple interest on the unpaid advance income tax amount, and the reference to subsection (6) was for the calculation method only, not to alter the application of subsection (8). Therefore, the court dismissed the company's contention regarding the application of subsection (6) to subsection (8.

The court also disagreed with a previous judgment that adjustment of refundable amounts did not constitute payment, asserting that the adjusted amount should be treated as payment made by the company. The court cited a precedent to support its interpretation that interest liability is clearly imposed by section 18A(8) and that no separate order awarding interest is required. The court concluded that the law does not necessitate a distinct order for interest and that including the calculated interest amount in the assessment form suffices for compliance. Ultimately, after thorough consideration, the court found the special appeal devoid of merit and dismissed it with costs, upholding the company's liability to pay interest on the balance of the unpaid advance income tax amount.