Advance tax - payment of interest u/s 214 - Income Tax - 889/CBDT

INSTRUCTION NO. 889/CBDT Dated : October 10, 1975 Section(s) Referred: 214 Statute: Income - Tax Act, 1961 The Audit has pointed out a case where an assessee after filing a nil estimate, had paid the advance-tax as demanded by the Department. It was found on regular assessment that the amounts so paid exceeded the tax demanded on regular assessment. The Department had allowed interest to the assessee u/s 214. It has also come to the notice of the Board that payments made after the last date of advance-tax installment have been taken into consideration for calculation of interest u/s 214. The allowance of interest in such cases is incorrect. 2. In order to qualify for payment of interest u/s 214 of the Income-tax Act, it is necessity that the advance-tax paid during any financial year should be payable u/s 207 to 213 of the Act, and should be in excess of the amount of tax determined on regular assessment. It is, therefore, necessary that what has been paid should have been paid as advance-tax. 3. Section 212, however, provides that if the assessee, who is required to pay advance-tax by an order u/s 210 estimates at any time before the last installment is due that his income would be less than the income which he is required to pay, then he may send to the Income-tax Officer, an estimate of the total income and also the estimate of the advance-tax payable by him and then shall pay such amount as accords with his estimate in equal instalments on such of the dates which are specified u/s 211 as have not expired, or in one sum if only the last of such date has not expired. The effect of filing such an estimate is that it supplants the original demand notice of the Income-tax Officer and the assessee is required to pay tax in accordance with his estimate in place of the sum demanded of him in the Section 210 notice. In place of the sum demand made by the Income-tax Officer, is wiped out by the submission of such estimate and the quantum of advance-tax is altered thereby. To put it differently, the demand made by the Income-tax Officer ceases to be payable, and in a case where a nil estimate is filed, the legal position is that no demand of advance-tax is outstanding against the assessee, unless he revises the estimate before the date of the last installment. In C.T. Dwadesh shreni and Company Limited Vs. Income-tax Officer (46 ITR 586). it has been observed that unless payment of the demand of advance-tax is made in the manner provided for in the Act, it shall be deemed that no advance-tax payment has been made. 4. Any payments made after the last date of the installment would also not be considered as advance-tax and therefore, would not qualify for payment of interest u/s 214 Sub-section (1) of Section 207 read with sub-section (2) refers to "advance-tax" as tax which "shall be payable in advance in accordance with the provisions of Section 208 to 219". The scheme of Section 210. 211 and 212 shows that subject to the fulfillment of certain conditions, the notice of demand issued u/s 156 in respect of the advance-tax shall specify the instalments in which the advance-tax is payable under section 211. The dates of these instalments have been statutorily fixed u/s 211. There is no enabling been fixed by any relaxation of these dates and since the dates have been fixed by the law itself, it would follow that the said dates have to be relaxed, in the absence of any enabling provision to that effect in the Act. 5. The Board desire that the Officers working in your charge may be apprised of the correct legal position. They may also be advised that they should verify whether all the conditions referred to above are fulfilled before interest u/s 214 is allowed.