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TMI Blog1972 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... the allegations of the plaintiffs are that they formed a Hindu undivided family in respect of which assessment proceedings under the Indian Income-tax Act, 1922, were taken for the year 1946-47. The assessment was made for the assessment year 1946-47 by the Income-tax Officer under the Income-tax Act and Excess Profits Tax Act some time in 1951. An appeal was preferred to the Appellate Assistant Commissioner in 1952, and the order of the Income-tax Officer was partly varied and as a result the amount of tax was reduced. In March, 1955, the appeal of the plaintiffs to the Income-tax Appellate Tribunal was dismissed. In September, 1955, the income-tax department took coercive proceedings against the plaintiffs under section 46(5A) of the Indian Income-tax Act of 1922 and attached the immovable properties of the plaintiffs situated at Lucknow. The plaintiffs borrowed the amount from the Central Bank of India, Lucknow, and paid a sum of Rs. 2,57,583.87 to the income-tax department on March 22, 1957. The plaintiffs allege that they paid interest to the Central Bank of India on this loan ranging between 6 per cent. and 9 1/2 per cent. Dissatisfied with the order of the Income-tax Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The Union of India resisted the claim. It is pleaded that the plaint did not disclose any cause of action inasmuch as the plaintiffs' claim to interest was not allowed by the Commissioner of Income-tax. It was pleaded that, as the Commissioner of Income-tax, U.P. II, Lucknow, has not been impleaded as a party, Delhi courts have no jurisdiction to try the suit. The suit was said to be barred by limitation. On merits it was contended that the relevant provisions of law applicable to the facts of this case were contained in the Income-tax Act of 1961 and not in the Act of 1922. It was said that under section 297(2)(i) of the present Act, as the assessment of the plaintiffs for the year 1946-47 was completed prior to the commencement of the present Act the refund in respect of such assessment fell due only on the 16th of September, 1966, upon the passing of the order by the Income-tax Appellate Tribunal (Delhi Bench) under section 66(5) of the old Act. As the refund was paid to the plaintiffs within six months from the order of the Income-tax Tribunal dated the 16th of September, 1966, the defendants submitted that they were not liable to pay any interest to the plaintiffs as clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of Rs. 2,57,000 was paid by the Central Bank to the income-tax department on account of income-tax dues from the plaintiffs. The bank paid this amount after the plaintiffs had mortgaged the property in favour of the bank. The bank charged interest from the defendants at the rate ranging from 6 to 9 1/2 per cent. Issues Nos. 6 and 7 : First of all it has to be determined whether the Indian Income-tax Act of 1922 (referred to hereinafter as the old Act) or the Income-tax Act, 1961. (referred to hereinafter as the present Act) applied to the facts of this case. Under the old Act it was provided in section 66 that a reference may be made to the High Court on any question of law arising out of the order of the Appellate Tribunal. Sub-section (7) of section 66 provided as under : " (7) Notwithstanding that a reference has been made under this section to the High Court, income-tax shall be payable in accordance with the assessment made in the case : Provided that, if the amount of an assessment is reduced as a result of such reference, the amount overpaid shall be refunded with such interest as the Commissioner may allow unless the High Court, on intimation given by the Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of the month in which such order is passed." In 1967, the rate of interest was 6 per cent. which was later on increased to 9 per cent. It was contended by the learned counsel for the plaintiffs that this case was governed by the provisions of the old Act. It was urged that sections 240 and 244 of the present Act govern appeal or proceeding under the present Act. But, if the appeal or reference is under the old Act, then section 240 has no application and the relevant provision applicable is section 66(7) of the old Act. It was further maintained that the reference to the High Court was pending when the present Act came into force. The present Act came into force on April 1, 1962, and the reference was decided under section 66 of the old Act on April 7, 1966. Reliance was also placed on the Income-tax (Removal of Difficulties) Order, 1962, and in particular on paragraph 2 of the said order which runs as follows : " 2. Registration and refund proceedings to be regarded as part of assessment proceedings.-For the purpose of clauses (a) and (b) of sub-section (2) of section 297 of the Income-tax Act, 1961 (XLIII of 1961) (hereinafter referred to as the repealing Act), proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner was right in passing orders of refunds under the proviso to sub-section (7) of section 66 of the old Act. The contention of the income-tax department that the case was governed by the present Act was rejected : In Pandyan Insurance Co. Ltd. v. Commissioner of Income-tax and Hira Lal Jagarnath Prasad v. Commissioner of Income-tax, a contrary view was taken. In the first case it was held by a Division Bench of the Madras High Court that as the assessment was completed before the commencement of the new Act of 1961 and the refund, in consequence of the Supreme Court decision, fell due after the commencement of the new Act, section 297(2)(i) of the Income-tax Act of 1961 applied. Therefore, the interest payable on such refund was governed entirely by the provisions of the new Act of 1961 relating to interest payable on refund, and as the refund was granted to the assessee within six months of the order directing refund, there was no liability on the part of the department to pay interest. Similarly, in the case of Hira Lal Jagarnath Prasad, a Division Bench of the Allahabad High Court held that the petitioner became entitled to refund by virtue of the answer given by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund for the period from March, 1957, to December, 1966, which proceeds on the erroneous presumption that the claim for interest has to be considered under the provisions of the Income-tax Act, 1922. The Board felt that the claim for interest in this case can be considered only under section 244 of the Income-tax Act, 1961, and as the refund order was issued by the Income-tax Officer within six months of the date of the Tribunal's order giving rise to the refund, no interest was payable in this behalf. " The counsel for the Union of India relied on the cases of Pandyan insurance Co. Ltd. and Hira Lal Jagarnath Prasad in support of his proposition. In my judgment the present case is governed by the provisions of the old Act and I prefer to follow Raja Jagdambika Pratap Narain Singh v. Income-tax Officer, Faizabad. In the cases of Pandyan Insurance Co. Ltd. and Hira Lal Jagarnath Prasad it will be noticed that the Removal of Difficulties Order was not brought to the notice of the court in those two cases. Sub-section (2)(c) of section 297 provides that if any proceeding is pending on the commencement of the present Act before the income-tax authority, the Appellate Tribunal or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Under articles 19 and 31 of the Constitution of India if the plaintiffs have been deprived by the Government of their property, then under the Constitution even a temporary deprivation of the property has to be compensated. At the outset, it must be observed that there is no plea of ultra vires in the plaint (though these grounds are taken in the replication) and, therefore, this case of the plaintiffs that certain provisions of the Income-tax Act of 1961 are ultra vires cannot be entertained. Taxation is not deprivation of property and is not governed by clause (1) of article 31 of the Constitution, nor is it acquisition or requisitioning of property within the meaning of clause (2)(ii). The object of taxation is to collect funds for the public treasury. A taxing statute will not fall within the purview of clause (2). This position is made further clear by clause (5)(b)(i). The article applicable to taxation power of the State is article 265. Under that article no tax shall be levied or collected except by an authority of law. As pointed out in Ramjilal v. Income-tax officer, Mohindergarh, there was no provision corresponding to article 265 in the Government of India Act of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l court is not excluded, the learned counsel for the plaintiffs relied on a number of decisions of the Supreme Court, namely, Addanki Tiruvenkata Thata Desika Charyulu v. State of Andhra Pradesh, Provincial Government of Madras v. J. S. Basappa, Commissioner of Income-tax v. National Storage Pvt. Ltd., S. Kirpal Singh Duggal v. Municipal Board, Ghaziabad and Union of India v. A. V. Narasimhalu. On the other hand, Mr. R. M. Lal, the learned counsel for the Union of India, submitted that the jurisdiction to grant interest and the power to determine the rate of interest are invested in the Commissioner and that no suit is maintainable in this respect. It was a discretionary power under the old Act which was invested in the Commissioner of Income-tax and the civil court has no jurisdiction. Section 67 of the old Act provides that no suit shall be brought in any civil court to set aside or modify any assessment made under that Act. Section 67 reads as under : " 67. Bar of suits in civil court.-No suit shall be brought in any civil court to set aside or modify any assessment made under this Act, and no prosecution, suit or other proceeding shall lie against any officer of the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant, but is not decisive to sustain the jurisdiction of the civil court. Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the Tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not. (3) Challenge to the provisions of the particular Act as ultra vires cannot be brought before Tribunals constituted under that Act. Even the High Court cannot go into that question on a revision or reference from the decision of the Tribunals. (4) When a provision is already declared unconstitutional or the constitutionality of any pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax over-paid together with such interest as the Commissioner may grant in the circumstances of the case. The Commissioner ordered that the excess amount of tax should be refunded, but declined to pay interest. Against this order the petitioners obtained a rule from the High Court calling upon the respondent to show cause why a writ under article 226 of the Constitution should not be granted for quashing the order of the Commissioner of Income-tax and for directing him to deal with the claim of the petitioners in accordance with law. It was urged before the High Court in support of the rule that under section 66(7) of the Income-tax Act, the Commissioner was bound, as a matter of law, not only to order refund of the amount of tax paid in excess, but also to pay reasonable amount of interest on the amount of tax paid in excess. The High Court accepted the contention of the assessee. The Division Bench (Ramaswami C.J. and Raj Kishore Prasad J.) observed as follows : " On behalf of the assessee the contention was put forward that the true interpretation of the section is that the Commissioner is under a duty to pay the amount of tax over-paid together with some amount of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is worthwhile to mention here that all the three decisions reported as Pandyan Insurance Co. Ltd. v. Commissioner of Income-tax, Hira Lal Jaragarnath Prasad v. Commissioner of Income-tax and Raja Jagdambika Pratap Narain Singh v. Income-tax Officer, Faizabad were cases of writ petitions under article 226 of the Constitution of India. The plaintiffs have not claimed a mandamus against the Commissioner of Income-tax. What has been claimed is a decree for money. The civil court will not have jurisdiction to grant interest at the rate of 6 per cent. as claimed by the plaintiffs as that power is only with the Commissioner of Income-tax. Faced with this difficulty, the learned counsel for the plaintiffs submitted that the remedy as provided in the old Act is a summary remedy and is not an adequate remedy and, therefore, the jurisdiction of the civil court has not been taken away. For this submission the learned counsel relied on Pabbojan Tea Co. Ltd. v. Deputy Commissioner, Lakhimpur. In that case the employer's claim was that he had been called upon to pay wages and compensation to persons who are governee by the Notification under the Minimum Wages Act. The employer instituted a su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be payable in all cases in which it is now payable by law'. This proviso applies to cases in which the court of equity exercises jurisdiction to allow interest. As observed by Lord Tomlin in Maine and New Brunswick Electrical Power Co. v. Hart. 'In order to invoke a rule of equity it is necessary in the first instance to establish the existence of a state of circumstances which attracts the equitable jurisdiction, as, for example, the non-performance of a contract of which equity can give specific performance.' The present case does not, however, attract the equitable jurisdiction of the court and cannot come within the purview of the proviso. " In my view, this argument is unsound. There is no question of award of interest on equitable grounds in this case as there are statutory provisions regarding the grant of interest on refund contained in the old Act as well as the present Act and where the statute contains specific provisions equitable considerations have no place in the decision of the controversy. The learned counsel for the Union argued that the plaint did not disclose the ground on which claim to interest was made and it was, therefore, submitted that the plai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fits tax. On the other hand, the plaintiffs have claimed interest in the plaint from March 27, 1957, to December 17, 1966, on Rs. 2,01,146.62 paid by them on account of income-tax and from March 27,957, to December 9, 1967, on Rs. 19,126.16 paid by them on account of excess profits tax. The plaintiffs cannot claim interest from the date of the payment of the amount till the date of refund. If at all any claim can be made it can be from the date of the order of the Tribunal dated September 16, 1966, till the date of refund. How the plaintiffs are entitled to interest from the date of the payment has not been stated in the plaint. In my opinion whether the old Act applies or the present Act governs this case, the plaintiffs are not entitled to interest from the date of payment, that is, March 27, 1957. An order of assessment will be held to be binding on the assessee until set aside, or modified in appeal or reference. It is the order passed on reference which entitled the plaintiffs to ask for refund. For any date anterior to the order of reference, there can be no claim as to interest as there is no provision in the statute for award of interest. The legislature has made it plain i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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