2005 (5) TMI 36 - HC - Income Tax

Companies (Profits) Surtax Act, 1964 - Whether Tribunal was legally correct in holding that the interest under section 7B of the Companies (Profits) Surtax Act, 1964 was admissible to the assessee, even though, the advance tax of Rs. 18,00,000 due on December 15, 1985, was paid on February 8, 1986, and there is no provision under the said Act entitling the assessee to claim interest where interest (sic) is paid after the statutory date, i.e., December 15, of the relevant previous year though before the March 31, of the relevant previous year? - hold that the amount of tax paid by way of an advance tax after December 15, 1985 but paid on February 8, 1986, during the financial year has been rightly treated as advance tax and has been taken into consideration for the purposes of granting interest under section 7B - we answer the question referred to us in the affirmative, i.e., in favour of the assessee and against the Revenue

Summary

Issues:
Interpretation of provisions of the Companies (Profits) Surtax Act, 1964 regarding payment of advance tax and interest under sections 7A and 7B.

Analysis:
The case involved a question of law referred by the Income-tax Appellate Tribunal regarding the admissibility of interest under section 7B of the Companies (Profits) Surtax Act, 1964 for the assessment year 1986-87. The issue arose due to the delay in payment of advance tax by the assessee, which led to a dispute on the applicability of interest under section 7B. The assessee had filed its estimate in time but failed to pay the consequential due tax of Rs. 18 lakhs by the stipulated date of December 15, 1985. Both the Assessing Officer and the Commissioner of Income-tax (Appeals) held that interest was not payable under section 7B due to the delayed payment.

The Tribunal, however, allowed the interest under section 7B, leading to the matter being brought before the High Court. The Revenue contended that interest was not payable since the due amount was not paid within the specified period. On the other hand, the assessee argued that any amount paid during the financial year constituted advance tax, making the interest under section 7B applicable. The Court examined the relevant provisions of sections 7A(4)(a) and 7B of the Act to determine the legality of granting interest in such cases.

After considering the submissions and various decisions of High Courts and the apex court, the Court noted that interest under section 7B is payable on the aggregate sum of advance tax paid during the financial year. It referenced multiple judgments from different High Courts affirming the entitlement of interest for excess payment of advance tax even if paid after the prescribed dates. The Court also highlighted a decision by the Gujarat High Court regarding the treatment of tax paid after the due date as valid advance tax for penalty computation under section 273(b) of the Act.

Relying on the precedents and decisions of various High Courts, the Court concluded that the amount paid as advance tax after the due date but within the financial year should be considered valid for interest calculation under section 7B. Citing its own previous decision in a similar matter, the Court ruled in favor of the assessee, holding that interest under section 7B was rightly granted based on the tax payment made during the financial year. Consequently, the Court answered the question referred in the affirmative, favoring the assessee and against the Revenue, with no order as to costs.