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TMI Blog2004 (12) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the following question of law under section 27(1) of the Wealth-tax Act, 1957 (hereinafter referred to as "the Act"), for the opinion to this court: "Whether, on the facts and circumstances of the case, the Appellate Tribunal was correct in holding that interest under section 34A(3A) of the Wealth-tax Act is allowable on refunds paid after March 31, 1975, where the payment made prior to March 31, 1975, under section 15B of the Wealth-tax Act are adjusted against the wealth-tax demands on the completion of assessments?" Whereas in Wealth-tax Reference No. 124 of 1988 which relates to the assessment years 1971-72, 1975-76 to 1977-78, the Income-tax Appellate Tribunal, New Delhi, has referred the following questions of law under section 27(1) of the Act for the opinion to this court: "1. Whether the Tribunal was correct in holding that the payments made under section 15B should be deemed to be payment in pursuance of the orders of assessments and will qualify for interest under section 34A(3A) of the Wealth-tax Act in respect of the assessment years 1971-72, 1975-76 to 1977-78? 2. Whether, on the facts and circumstances of the case, the Tribunal was legally correct in holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year Amount of refund Date of revision 1971-72 17,315 21-1-1984 1975-76 45,879 -do- 1976-77 41,037 13-8-1984 1977-78 31,015 27-1-1984 The respondent applied for payment of interest under section 34A(3A) 8 of the Act but was allowed interest only for the assessment year 1975-76 on the amount which was deposited in pursuance of the assessment order after March 31, 1975. For the remaining assessment years, the claim was declined on the ground that the payments had not been made in pursuance of the assessment orders but under section 15B of the Act. The Commissioner of Wealth-tax (Appeals) had upheld the order passed by the Assessing Officer. This time he did not follow 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 as he was of the view that the Bombay High Court in the case of CIT v. Carona Sahu Co. Ltd. [1984] 146 ITR 452 [FB] and the Gujarat High Court in the case of Bardolia Textile Mills v. ITO [1985] 151 ITR 389 [FB] had taken a different approach and he preferred to foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies we find that under section 34A of the Act the provision has been made for granting of refund and interest. Sub-section (3A) of section 34A of the Act provides for payment of interest on refunds which reads as follows: "(3A) Where the whole or any part of the refund referred to in subsection (3) is due to the assessee as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (3) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted: Provided that, were the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even the payment of advance tax can be worked into the provisions under section 244(1A). On the language of section 219, the advance tax paid is treated as a payment of tax for the assessment year and is given credit for at the time of the regular assessment. This means 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. Thus, the advance tax paid earlier will get converted into a payment on the date of the initial assessment of the tax due for the assessment year. Carrying this fiction to its logical extent the Delhi High Court has held that the assessee must be held entitled to interest on the amount of advance tax also to the extent it is found refundable from the date of the excess payment right up to the date of the actual refund. In the case of Carona Sahu Co. Ltd. [1984] 146 ITR 452 the Full Bench of the Bombay High Court has held that interest is compensatory in character but there is no right to receive interest other than by a right created by statute which depends upon the construction of the statute. It has further held that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Bardolia Textile Mills v. ITO [1985] 151 ITR 389 [FB]. It has held that the regular assessment means the first assessment made by the assessing authority and not the assessment passed pursuant to an order in appeal or revision. It has further held that the amount of advance tax and the amount of tax deducted at source must be treated as payment of tax pursuant to an order of assessment and will have to be similarly treated. The apex court has approved the view taken by the Punjab and Haryana High Court in the case of CIT v. Leader Engineering Works [1989] 178 ITR 529 that the advance tax paid lost its identity when it was adjusted towards tax liability accrued under the regular assessment and takes the shape of payment of tax in pursuance of the order of assessment. While summing up the apex court at page 808 of the report has summed up as follows: "If any tax is paid pursuant to an assessment order after March 31, 1975 (which will include tax deducted at source and advance tax to the extent the same has been retained and treated by the Income-tax Officer as payment of tax in discharge of the assessee's tax liability in the assessment order), becomes ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vance tax as also the tax deducted at source is to be treated as payment of tax pursuant to an order of assessment on and from the date when these amounts were set off against the tax demand raised in the assessment order, i.e, from the date of the assessment order, the self-assessment tax paid by the respondent either before March 31, 1975, or prior to the passing of assessment orders has to be treated as tax paid on the date of the relevant assessment orders which have been passed after March 31, 1975, in view of the express provision of section 15B of the Act. In coming to the above conclusion we are not placing any equitable construction on the two provisions referred to above. We further find that the Delhi High Court in the case of Director of Income-tax v. Escorts Employees Welfare Trust [2002] 124 Taxman 340; [2002] 177 CTR 494 has upheld the view taken by the Tribunal wherein a direction was issued by the Assessing Officer to allow to the assessee interest under section 34A(3A) of the Act by following the decision of the apex court in the case of Modi Industries Ltd. [1995] 216 ITR 759. We are in respectful agreement with the view taken by the Delhi High Court in the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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