Interest u/s 214(1). - Income Tax - 1683/CBDT

INSTRUCTION NO. 1683/CBDT Dated: January 24, 1986 Attention is invited to Board's Instruction No. 91 dated 2.8. 1969 (F. No. 568/69/ITA.II) wherein it was, inter-alia, clarified that on reading section 141A and the proviso to Section 214(1) together, there could be no doubt that the interest due to the assessee had to be allowed alongwith the refund determined at the time of provisional assessment under section 141A of the Act. 2. Sub-section (1A) of Section 214 prior to its amendment by the Taxation Lawa (Amendment) Act 1984, enjoined that where on completion of the regular assessment, the amount on which interest was paid under sub-section (1) had been reduced, the interest would be reduced accordingly. It could be construed to imply that the interest under section 214(1) was payable at the time of provisional assessment which had to be reduced on the reduction of the amount on regular assessment. This supported the view taken in the aforesaid instruction dated 2.8.1969. 3. The Taxation Laws (Amendment) Act, 1984 has amended sub-section (1A) of Section 214 so as to provide that where, as a result of an order under section 147 or Section 154 or Section 155 or section 250 or Section 254, or Section 260 or Section 262 or Section 263 or Section 264, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly. This makes it amply clear that the reduction or increase in the interest will be as a result of as per regular assessment, and not as a result of regular assessment itself. 4. It is, therefore, quite explicit from the law as it stands now that in cases where the amount of advance tax paid is found to exceed the amount of tax determined on regular assessment, the interest under section 214(1) would be allowable on the amount refunded on the provisional amount, if any, upto the date of such provisional assessment but this interest would be payable only at the time of regular assessment and not at the time of provisional assessment. 5.In view of the above, the Board's earlier Instruction No. 91 (F. No. 5/68/69-ITA.II) dated 2.8.1969 is hereby withdrawn with immediate effect. 6. These instruction may please be brought to the notice of all the officers working under you.