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TMI Blog1984 (3) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee had filed an appeal before the Commissioner (Appeals), who by an order dated7-3-1981allowed certain relief to the assessee. The ITO gave effect to the order of the Commissioner (Appeals) on31-3-1981. 3. The assessee approached the ITO with an application under section 154 of the Act and requested for correction of those mistakes. The ITO passed a rectification order on27-3-1982and worked out the total relief allowed by the Commissioner (Appeals) at Rs. 3,08,65,132 which reduced the total income to Rs. 5,41,87,768. The ITO then proceeded to work out the assessee's liability and adjusted the advance tax paid and found that there was a refund of Rs. 3,52,593 after adjustment of advance tax paid by the assessee. Apart from the above, credit was given for other collections as adjustments. The ITO further worked out interest under section 244(1A) of the Act at Rs. 8,71,456 and worked out the total refund at Rs. 16,47,145, after adjustment of the refunds already adjusted earlier. 4. The assessee filed an appeal before the Commissioner (Appeals) and took the following grounds : "(i) not allowing interest under section 214 of the Act in respect of an amount of Rs. 3,52, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, to which provisions of section 214 are not applicable. He submitted that there were certain decisions on the question of the meaning of words 'regular assessment' and certain High Courts have held that interest under section 214 was payable after the passing of the appellate order. He, however, strongly relied on the decision of the Delhi High Court in the case of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928. In this case it was held that the expression 'regular assessment' in section 214 should be construed as referring only to the first or initial regular assessment and not to subsequent modifications thereof. In this case it was further held that the payment of advance tax has material significance only till the initial regular assessment is made add thereafter it had no separate existence by itself but gets merged in the tax demand payable by the assessee. The Delhi High Court had further held that when the regular assessment is made in the first instance, the advance tax paid earlier is treated as having been paid in pursuance of the regular assessment and in satisfaction thereof. The advance tax paid earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the provisions of section 244(1). He pointed out that interest under that sub-section was on all refunds and there was no description of refund and interest, if any, which has become payable would also be a part of refund. He, therefore, submitted that if the ITO has not allowed any interest which is due to the assessee under law, the ITO is bound to pay him a further interest on the whole amount of refund under section 244(1A). In this connection, he drew our attention to the various dates on which various orders had been passed and also explained the assessee's claim in respect of interest. He contended that section 244 does not exlude the possibility of interest on interest, if such interest has become due as refund to the assessee. 12. We have carefully considered the rival arguments and we have gone through various judgments in this connection. There is no doubt that regarding the scope of section 214, there has been considerable difference of opinion between the High Courts. This difference of opinion has been brought out in the judgment of the Bombay High Court in the case of CIT v. Carona Sahu Co. Ltd. [1984] 146 ITR 452. This is a judgment of the Full Bench of the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Lordships would have had to reject the claim. However, their Lordships considered the provisions of section 214(2) as well as section 244(1A) and held that the assessee becomes entitled to interest up to the date on which the refund is made. Their Lordships have considered the provisions as follows : "The second provision to which we would like to refer is the provision contained in section 244(1A) which has also been extracted earlier. This is a new provision introduced by the Finance Act of 1975. It provides that where payments of tax are made by an assessee after March 31, 1975, he would be entitled to interest in respect of such payments to the extent they are refunded on being found to be in excess of the amount of tax ultimately found due as a result of an appeal, revision, reference or rectification. Such interest is payable from the date of the payment of the excess amounts right up to the date of refund. This has altered the previous position as stated in the earlier part of the discussion. It would be recalled that while dealing with the interpretation of the expression 'regular assessment', we have laid emphasis on the important consideration that it would be anomalo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t right up to the date of actual refund. In either view of the matter, an assessee placed in the circumstances in which he is placed in the present case, would be entitled to claim interest on the excess advance tax paid by him from the date of payment up to the date of refund. In the present case, though the advance tax was originally paid during the financial year 1972-73 the initial assessment was made in 1976, and for the reasons which we have mentioned above, this should be treated as having been converted into a tax payment on the date of the initial regular assessment.Reading, therefore, sections 214 and 244(1A) together, the assessee would be entitled to interest on the refund due to him from the date of the initial payment right up to the date on which the refund is actually made. We are conscious that there is a strain on the language of section 244(1A) in giving the interpretation referred to above. We have also pointed out the difficulties in the way of the interpretation of section 214(2) as a solution to the issue in the present case. However, the above interpretations of sections 214 and 244(1A) would be justified on the principle of equity and equality. Moreover, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would be entitled to interest on the refund due to him from the date of initial payment right up to the date on which the refund is actually made. Thus, according to their Lordships, interest under section 214 gets extended up to a later date in view of the provisions of section 214(2) and section 244(1A). There is some basic difference between section 214 and section 244(1A). While section 214 grants refund on the advance tax paid found in excess of the actual demand from 1st April following the financial year, section 244(1A) refers to the refund which is granted as a result of an appellate order and where the amount had been paid by the assessee after 31-3-1975. It is also provided that the amount must have been paid in pursuance of an order of assessment or penalty and such amount having been found in excess of the amount which such assessee is found liable to pay as tax or penalty. According to their Lordships of the Delhi High Court, whereas under section 214(1) interest works up to the date of regular assessment under section 214(2) read with section 244(1A), further interest has to be granted on the excess worked out in accordance with the provisions of section 244(1A). I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1A). According to the learned counsel for the assessee, such interest comes to Rs. 3,59,669. He submitted that this interest has become due under section 244(1) from1-7-1981after the end of three months from7-3-1981, i. e., the date of the appellate order up to the date of grant of refund voucher, whenever it is granted. He has also referred to an earlier order of the Tribunal in IT Appeal No. 2378 (Delhi) of 1982 in the assessee's case relating to the assessment year 1971-72. 17. We have carefully considered the rival contentions. For deciding this issue, we have to consider the background of the provisions of sections 244(1) and 244(1A). Under section 244(1) interest was payable by the Central Government to the assessees for the period of delay in the grant of refund in such cases beyond three months from the end of the month in which the appellate order, etc., giving rise to the refund is passed. Thus, prior to the introduction of section 244(1A), a person who pays the disputed amount of tax found his money locked up with the Government without interest as long as his appeal remained undecided. After the appeal was disposed of, no interest was payable for three further months ..... X X X X Extracts X X X X X X X X Extracts X X X X
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