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TMI Blog2014 (1) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... reading of Sections 237, 240 and 244(1A) casts a duty on the Assessing Officer to charge that much of tax which the assessee is liable to pay and mandates the refund of the excess amount along with interest - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... r to spread the interest amount in the respective years in issue. He would rely on the judgment of the Calcutta High Court reported in CIT Vs. Hindustan Motors Ltd., 202 ITR P. 839 @ page 845 for the proposition that "Accrual of interest takes place normally on day to day basis. Where there is no due date fixed for payment of interest, interest accrues on the last day of the previous year. Accrual of interest does not depend upon making up of the accounts." He would also further rely on the judgment of Kerala High Court reported in Peter John Vs. CIT 157 ITR Page 711 @ 715(Ker), for the proposition that "Interest is separate from refund. Interest whether statutory or contractual represents profit the creditor might have made if he had used on money or loss he suffered because he had not that use. It is something in addition to the refund (capital amount) though it arises out of it." He would also rely on the judgment of the Supreme Court reported in Ramabai Vs. CIT (1990) 181 ITR 401 (SC). 4) On the other hand Sri J.V. Prasad, learned Senior Standing Counsel for Income Tax would submit that the right to claim interest by the assess is dependent on an order being passed under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t shall be calculated at the rate of one half per cent for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted. Explanation- for the purposes of this clause, "date of payment of tax or penalty" means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 156 is paid in excess of such demand." 10) Section 244(A) (2) of the Act reads as under: "If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded from the period for which interest is payable and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner of Commissioner whose decision thereon shall be final." 11) Section 244(A) (3) of the Act is omitted as not relevant for the purpose of this case. 12) Section 244(A) (4) of the Act, reads as under: "The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its power under Section 257 of the Act, referred the question to the opinion of the Supreme Court. The question referred to the Hon'ble Supreme Court is as follows: "Whether, on the facts and in the circumstances of the case, the interest received by the assesses as per the City Civil Court's award for the period commencing from the date of possession till March 31, 1968, was entirely assessable for the assessment year 1968-1969?" 15) The Hon'ble Supreme Court had answered the question in the affirmative in favour of assessee and against the revenue by following its earlier judgment in the case of Commissioner of Income-tax Vs. Govindarajulu Chetty (T.N.K.) (1987) 1651 ITR 231 (SC). When we peruse the judgment of T.N.K. Govindarajulu Chetty (9th supra), the same is a short judgment, which simply approved the judgment of the Madras High Court reported in T.N.K. Govindarajulu Chetty Vs. Commissioner of Income-tax (1973) 87 ITR 22 (Mad.). In the Madras Judgment after thoroughly analyzing the various legal principles with regard to system of accounting and also the concepts of accrual the Court held.- "11. In this case the liability to pay interest would arise when the compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was considered was "Whether, on the facts and in the circumstance of the case, the Appellate Tribunal was right in law in holding that the entire interest amount of Rs.87,265/- was not assessable in the assessment year 1962-63 and that only the proportionate interest referable to the assessment year 1962-63 was assessable in that year?" The Karnataka High Court also answered the question in the affirmative and in favour of the assessee and against the revenue. In the light of the judgment of Ramabai case (3rd Supra), wherein T. N. K. Gonvidarajulu Chetty's case (Madras) (9th supra) has been approved. The law laid down by our High Court in Sankar Manikyam's case (7th Supra) is no longer good law. In all the above cases, the principle which can be culled out is that once the income has legally accrued to the assessee, i.e. the assessee has acquired a right to receive the same, though its valuation may be postponed to future date, the determination or quantification of the amount does not postpone the accrual. In other words, if the right has legally accrued to the assessee, the right should be deemed to have accrued in the relevant year even though the dispute as to right is se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich were considered were as follows: "(1) Whether, on the facts and in the circumstances of the case, the Income-tax Officer rightly assumed jurisdiction under section 147 (a) of the Income-tax Act, 1961, for the assessment year 1957-58? (2) Whether, on the facts and in the circumstances of the case, the payments of the amount of Rs.9,696 for 1951-52 on March 20, 1956, and of Rs.5,083 for 1952-53 on March 29, 1956, representing interest under section 18A(5) of the Indian Income tax Act, 1922, could be treated as income of the assessment year 1957-58 only?" 19) Firstly, the statutory provisions which were discussed therein were with respect to the provisions contained in Indian Income Tax Act, 1922, and there is a difference in the statutory scheme with the Indian Income Tax Act, 1961. Further, in the process of interpreting the provisions in 1922 Act, the Court had taken into consideration that interest became payable to the assessee only when the assessments for the years in dispute were made which were in fact made in 1956, though the assessments were 1951-1952 and 1952-1953. As a matter of fact, the Court while agreeing with the law laid down in Sapangai Ramayya's case (12t ..... 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