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2012 (8) TMI 740 - SC - Income TaxClaim of interest payable by the Revenue - aggregate of instalments of Advance Tax/TDS paid exceeds the assessed tax - Held that - As decided in Modi Industries Limited And Others Versus Commissioner of Income-Tax And Another 1995 (9) TMI 324 - SUPREME COURT holds that Advance Tax or TDS loses its identity as soon as it is adjusted against the liability created by the Assessment Order and becomes tax paid pursuant to the Assessment Order, thus, the assessee not entitled to interest under the relevant provisions of the Act - for purpose of calculating interest u/s 214, the regular assessment means original assessment made u/s 143/144. Section 214 does not provide for payment of compensation by the Revenue to the assessee in whose favour a refund order has been passed and as that Sandvik Asia Limited Versus Commissioner Of Income-Tax And Others 2006 (1) TMI 55 - SUPREME COURT has not been correctly decided relied by assessee for claim of interest - direction to the Registry to place this matter before Hon ble the Chief Justice on the administrative side for appropriate orders - against assessee.
Issues:
Character of Tax Deductible at Source (TDS)/Advance Tax under the Income Tax Act, 1961. Interest payable by the Revenue to the assessee if the aggregate of instalments of Advance Tax/TDS paid exceeds the assessed tax. Analysis: 1. Character of Tax Deductible at Source (TDS)/Advance Tax: The Supreme Court addressed the issue of the character of Tax Deductible at Source (TDS) and Advance Tax under the Income Tax Act, 1961. Both Advance Tax and TDS are levied based on the estimation of income by the assessee. Advance Tax is payable in the year in which income accrues or arises, usually in three instalments. Similarly, TDS, also known as 'Withholding Tax' under Section 195 of the Act, is deducted at the source based on the income estimation by the assessee. 2. Interest Payable on Excess Instalments of Advance Tax/TDS: The controversy arose whether interest is payable by the Revenue to the assessee if the aggregate of instalments of Advance Tax/TDS paid exceeds the assessed tax. The Court referred to a previous judgment in the case of Sandvik Asia Limited vs. Commissioner of Income Tax & Ors., where the issue of entitlement to compensation for delay in payment of amounts due to the assessee was discussed. The Division Bench held that the assessee was entitled to interest for the delay in payment, but the current Court expressed doubts about the correctness of this judgment. 3. Relevant Provisions of the Act: The Court examined various sections of the Income Tax Act, including Sections 195(1), 195A, 214, 219, 237, 243, and 244. These sections deal with aspects such as deduction of income tax, payment of simple interest on excess advance tax paid, treatment of advance tax as tax paid, entitlement to a refund, and payment of interest on delayed refunds. The Court highlighted the importance of these provisions in determining the rights of the assessee in cases where Advance Tax or TDS exceeds the assessed tax. 4. Judicial Interpretation: The Court referred to the judgment in Modi Industries Limited vs. Commissioner of Income Tax, which held that Advance Tax or TDS loses its identity upon adjustment against the liability created by the Assessment Order, becoming tax paid pursuant to the Assessment Order. The Court questioned whether the assessee is entitled to interest under the relevant provisions of the Act once Advance Tax or TDS loses its identity. The Court expressed reservations about the reasoning in the Sandvik Asia case and directed the matter to be placed before the Chief Justice for appropriate orders. In conclusion, the Supreme Court's judgment delves into the nature of TDS and Advance Tax under the Income Tax Act, the entitlement to interest on excess payments, and the interpretation of relevant provisions to determine the rights of the assessee in such scenarios. The Court's analysis provides clarity on the treatment of Advance Tax and TDS, emphasizing the importance of statutory provisions in resolving disputes related to tax payments and refunds.
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