TMI Blog1983 (10) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... ar assessment. If the answer is that " regular assessment " means the last operative order of regular assessment, the Central Government would be liable to pay to the assessee interest oil the amount by which the advance tax paid by him during any financial year exceeds the amount of tax determined upon such last operative order of regular assessment from 1st April next following the said financial year to the, date of such last operative order of regular assessment. For the assessment year 1970-71, the assessee herein paid advance tax in the sum of Rs. 12,37,500. The ITO passed the first order of regular assessment on 21st March, 1972, and assessed tax liability at Rs. 12,17,600. He granted interest under s. 214 upon the refund amount of Rs. 19,900. The AAC in appeal reduced the tax liability to Rs. 11,61,402. In giving effect to the appellate order, the ITO granted refund of Rs. 56,198 but did not grant interest thereon. In appeal therefrom, the AAC confirmed the finding of the ITO relating to non-allowance of interest. For the assessment year 1971-72 the full particulars of which are not available, the ITO passed the first order of regular assessment on 30th March, 1973. Bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 214(2). Being of opinion that the principles enunciated in Associated Cement Companies' case required reconsideration, the Division Bench directed that the papers be placed before the learned Chief justice so that the reference could be placed before a Full Bench. Upon directions of the learned Chief justice, the Full Bench was constituted. There are, as we have said, numerous decisions upon the principal point that we have to consider. Some take one view and some take the other. We think it best, in the circumstances, first to discuss our interpretation of the relevant provision of the Act and to refer to the decisions thereafter. Section 214 reads thus: " Interest Payable by Government.-(1) The Central Government shall pay simple interest at twelve per cent. per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 to 213 exceeds the amount of the tax determined on regular assessment, from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Tribunal would partake of the character of a fresh assessment order and would be no less an order made under s. 23(3) within the ordinary acceptation of the term, from which an appeal would lie to the AAC. P. B. Mukharji J., in the same matter, observed that the ITO's duty to assess the total income of the assessee and to determine the sum payable by him on the basis of the return under s. 23 of the Act was the whole process of assessment which may end with his order or may be revised by the AAC and/or the Tribunal. If such higher appellate authorities directed the ITO to do something again with regard to the assessment he had already made and that by way of revision or amendment, the ITO must be held to be still under s. 23 of the Act on the process of assessing the total income of the assessee and determining the sum payable on the basis of the return already filed by him. He was under the Act revisable by the AAC and the Tribunal and both these authorities could direct him to revise and amend his assessment and that he did and could only do as part of his duty and obligation under s. 23 of the Act. The court concluded that the order of the, ITO giving effect to the directions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable by assessee.-(1) Where, in any financial year, ail assessee has paid advance tax under section 212 on the basis of his own estimate, and the advance tax so paid is less than seventy-five per cent. of the assessed tax, simple interest at the rate of twelve per cent. per annum from the 1st day of April, next following the said financial year up to the, date, of the regular assessment shall be payable by the assessee upon the, amount by which the advance tax so paid falls short of the assessed tax. (2) Where before the date of completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise, (i) interest shall be calculated in accordance with the foregoing provision up to the date on which the tax is so paid; and (ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax as so paid (in so far as it relates to income subject to advance tax) falls short of the assessed tax. (3) Where as a result of an order under section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 264, the amount on which interest was payable under this section has been reduced, the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the contrary by placing emphasis on sub-s. (3). Under sub-s. (1) of s. 215 interest is payable by the assessee upon the amount by which the advance tax paid falls short of the assessed tax. Under sub-s. (3), if, pursuant to an order in appeal or revision, the amount paid under sub-s. (1) is reduced, interest shall be reduced accordingly and the excess interest paid shall be refunded. Sub-section (1) provides the basis of computation of the interest payable by the assessee. Sub-section (3) comes into operation if the amount so paid is reduced pursuant to an order in appeal or revision. Sub-section (3) creates the obligation to refund the excess interest paid if the amount computed under sub-s. (1) is reduced consequent upon an order in appeal or revision. There is no such obligation, express or implied, under sub-s. (1) or anywhere else. Sub-section (3) is, hence, not clarificatory nor has it been inserted out of abundant caution. That it was necessary by sub-s. (3) to provide for the contingency that might arise if the amount computed under sub-s. (1) was reduced consequent upon an order in appeal or revision is clear indication that the words " regular assessment " in s. 215 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the original order : Provided that in every case where an assessment of the assessee (or of the registered firm of which he is a partner) is completed in respect of previous year later than that referred to in the order of the Income-tax Officer and the advance tax payable on the basis of such assessment is less than the advance tax determined as payable in accordance with the original order under sub-section (1), the Income-tax Officer shall make an amended order determining the advance tax on the revised basis and refund the amount already paid, if any, in excess of the advance tax so determined. " Where a refund had been made of advance tax in the contingency provided for by the proviso to sub-s. (3) of s. 210 as it stood and it had been found on regular assessment that the amount of advance tax originally paid was in excess of the tax assessed by the amount refunded or more, interest was payable upon the amount refunded but by reason of sub-s. (2) of s. 214, it was payable only until the date of the refund. This interpretation of sub-s. (2) is most satisfactory in that it gives the meaning to the words " on any portion under this chapter " and " only ". The poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-s. (4) and sub-s. (1A) of s. 214, there can be little doubt that the proviso to sub-s. (1) was intended by the Legislature to create an obligation to pay interest at the time of making refund of advance tax on a provisional assessment. Reading the proviso thus does not render otiose any word or words and enables every piece of the section to fall into place. Upon this construction of the proviso, " regular assessment " ill subss. (1) and (1A) of s. 214 must be read to mean the first order of regular assessment and not the last operative order of regular assessment. The scheme of ss. 214 and 215 now appears to us to be eminently reasonable and consistent. If the amount of advance tax paid by an assessee for an assessment year is equal to the tax assessed by the order of first regular assessment, no interest is payable. If the amount of advance tax paid is greater than the tax assessed by the order of first regular assessment the Government pays, under s. 214, interest to the assessee on the excess amount up to the date of the first order of regular assessment. If the amount of advance tax paid is less than the tax assessed by the first order of regular assessment, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission would render the words " completion of " otiose which a court should be most reluctant to do. As we have said, the words " completion of regular assessment " are used in relation to a provisional assessment and mean the completion of the first order of regular assessment following upon a provisional assessment. Mr. Dastur's alternative argument was that the excess of interest paid to an assessee became tax payable by him under sub-s. (1A) only when the regular assessment became final, i.e., when the matters therein were finally concluded by reason of appeals, etc. The words " completion of regular assessment " do not lend themselves to such a construction. Referring to the contention that sub-s. (2) of s. 214 is linked only to s. 210(3), Mr. Dastur pointed out that all assessments under s. 210(3), which was deleted with effect from 1st April, 1963, would have been completed on or before 31st March, 1967, and that sub-s. (2) of s. 214 would by now have been deleted. That it had not been deleted, in Mr. Dastur's submission, indicated that it was not linked to s. 210(3). That it has not been deleted is not, in our view, good reason to read sub-s. (2) of s. 214 in manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Under s. 240, where, as a result of any order passed in appeal or other proceedings, refund of any amount becomes due to the assessee, the ITO shall refund the amount to the assessee without his having to make a claim in that behalf. Sub-section (1) of s. 244 provides that where a refund is due to the assessee in pursuance of an order referred to in s. 240 and the ITO does not grant the refund within a period of three months from the end of the month in which such order 1s passed, the Central Government shall pay to the assessee interest on the amount of refund due from the date immediately following the expiry of the said period of three months to the date on which the refund, is granted. It was submitted by Mr. Joshi that it was s. 244 which provided for the payment of interest on an amount required to be refunded consequent upon an appeal or revision and that, therefore, s. 214 could not, and was not intended to operate in respect of interest due upon amounts ordered to be refunded consequent upon an appeal. We do not considers. 244 to be determinative of the construction to be placed upon s. 214. Having regard to the conclusion to which we have already come in regard to the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee. The scheme seemed to be that interest was payable for the period during which there was no liability to pay upon the assessee. But, once the order of assessment was made, the liability to pay arose and, even though the order might be subsequently set aside, there was no obligation upon the Revenue to pay any interest in respect of the amount which they had recovered as tax under the original assessment order. In the result, the court came to the conclusion that the company was entitled to claim interest under s. 18A in respect of the advance tax paid from the date of payment only until 30th March, 1948, when the order of assessment had been originally made by the ITO. By the time the issue came up for consideration again, s. 18A(5) of the 1922 Act had been amended by the addition of a proviso which reads thus: " Provided further that for any period beginning with the 1st day of April, 1952, interest shall be payable only on the amount by which the aggregate sum of any instalments paid during any financial year in which they are payable under this section exceeds the amount of the tax determined on regular assessment calculated as hereunder: " (i) in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period during which there was no obligation to pay tax and the assessee did so only because of the scheme providing for recovering the tax in advance. The judgments in Kooka Sidhwa and Co. v. CIT [1964] 54 ITR 54 (Cal) and Gopi Lal v. CIT [1967] 65 ITR 477 (Punj), which we have already referred to in the course of this judgment, were cited before the court. The court concluded that the observations therein were made while discussing the proposition whether an appeal lay against an assessment order which was made consequent upon an appellate order and had no validity in considering the interpretation of s. 18A(5). An argument was advanced before the court based on the third proviso to sub-s. (6) of s. 18A. Sub-section (6) of s. 18A corresponds to s. 215 of the present Act and the third proviso thereto corresponds to sub-s. (3) of s. 215. The court noted that sub-s. (6) was a provision converse to s. 18A(5), and observed that, normally, it would have been expected that the same principle would be adopted, namely, that for the purpose of determining the quantum of interest payable, reference must be made to the first or original assessment order. The Legislature, however, depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it was decided, the 1922 Act had been amended but that the court had overlooked the amendment and the difference it made. Perusal of the judgment shows that the court took the amendment into account and, in its light, considered the import of the words " the date of assessment " in s. 18A(5). We are much fortified in the conclusion that we have reached by the judgment in Sarangpur Cotton Manufacturing Co. Ltd.'s case [1957] 31 ITR 698 (Bom), and in Sir Shadilal Sugar General Mills Ltd.'s case [1972] 85 ITR 363 (All). The question arose again before the Allahabad High Court, but in the context of s. 214 of the present Act. In Lala Laxmipat Singhania v. CIT [1977] 110 ITR 289 (All), the court held that as s. 214 was in pari materia with s. 18A(5) of the 1922 Act, the rulings in Sarangpur Cotton Manufacturing Co. Ltd.'s case [1957] 31 ITR 698 (Bom) and in Sir Shadilal Sugar General Mills Ltd.'s case [1972] 85 ITR 363 (All), were applicable. The case of Chloride India Ltd. v. CIT [1977] 106 ITR 38 (Cal), decided by the Calcutta High Court, was brought to the court's notice (we shall discuss this case anon). It was unable to see any material distinction between the expression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different context because the court was not there concerned with the question as to whether regular assessment was confined to the first assessment. Similarly, in Sir Shadilal Sugar General Mills Ltd.'s case [1972] 85 ITR 363 (All), the court was not concerned with the question as to the tax determined on regular assessment. The context in "Which the expression "the date of assessment, hereinafter referred to as regular assessment " in s. 18A(5) of the 1922 Act had been used was different. In General Fibre Dealers Ltd. v. ITO [1979] 116 ITR 40 (Cal), also arising out of a writ petition, Sabyasachi Mukharji J. followed his earlier decision. His attention was drawn to the judgment of the Division Bench of the Allahabad High Court in the case of Lala Laxmipat Singhania [1977] 110 ITR 289 ; he said he preferred to adhere to his earlier view. We have already held the decisions in Sarangpur Cotton Manufacturing Co. Ltd.'s case [1957] 31 ITR 698 (Bom) and in Sir Shadilal Sugar General Mills Ltd.'s case [1972] 85 ITR 363 (All), to be of relevance and assistance in the determination of the point before us. With great respect, it does not appear to us that these decisions were concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile we are broadly in agreement with the Kerala High Court in regard to sub-s. (1) of s. 214, we take, with respect, a different view of sub-s. (1A). As we have pointed out, the phrase " on completion of the regular assessment " therein, must be read as meaning the completion of the first order of regular assessment following upon provisional assessment. There are two judgments of the Madras High Court which have bearing on the point under consideration. The first is in CIT v. Rajalakshmi Mills Ltd. [1980] 125 ITR 141. This was a case in which the ITO himself modified an order of assessment. The question was whether the assessee was entitled to interest up to the date of the rectified order. The court observed that the scheme of the Act was this: If the assessee had paid advance tax in excess of the tax due under regular assessment, then, on the excess so paid, he was entitled to interest. Similarly, where the payment of advance tax by the assessee was less than seventy-five per cent. of the assessed tax, he had to pay interest to the Government. The scheme was to see that neither the Government nor the assessee lost interest on the amount underpaid or overpaid. The scales were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-s. (1) did not, however, provide for any refund to the assessee. It was only designed to grant a right to interest on the advance tax paid. Section 219 provided for adjustment of the advance tax paid against the tax demand and a refund in consequence of the credit would follow. In other words, while sub-s. (1) gave a right to the assessee to interest from the 1st day of April, next following the financial year in which the advance tax was paid, it did not provide for any refund as such. With reference to the amount that was refunded under the chapter, i.e., by virtue of the credit contemplated by s. 219, sub-s. (2) of s. 214 provided that interest had to be paid up to the date on which refund was made. In National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928 (Delhi), the provisions of s. 214 were analysed in the light of the judgments of the various High Courts. The Delhi High Court came to the conclusion that the view taken in Bombay, Allahabad and Kerala in regard to the meaning to be given to the expression " regular assessment " was to be preferred for a number of reasons. Firstly, the general scheme of the Act was to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vance tax, which ceased to run upon a regular assessment being completed, could not be revived merely because the assessment underwent some modification. For these reasons it appeared to the court that the expression " regular assessment " should be construed as referring only to the first regular assessment and not to subsequent modifications thereof. If the claim to interest before the court had depended only on the interpretation of the expression, it would have had to reject it but sub-s. (2) of s. 214 threw a different light. The court referred to the judgment of the Madras High Court in the case of Rayon Traders Pvt. Ltd. [1980] 126 ITR 135. Despite some difficulties and with some hesitation, the court agreed that the interpretation of the Madras High Court was the only practical and plausible interpretation to be given to sub-s. (2) of s. 214. There was, accordingly, no escape from the conclusion that the assessee was entitled to refund along with interest up to the date of the refund. In Associated Cement Companies Ltd. v. CIT [1983] 141 ITR 318 (Bom), two questions were posed to a Division Bench of this court. The second question was whether the assessee was entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der this chapter " are of particular import. The refunds mentioned in sub-s. (1) of s. 214 are not refunds "under this chapter ", Chap. XVII. As Chap. XVII now reads, there is no provision in it for refund; but the proviso to sub-s. (3) of s. 210 as it stood prior to 1963 made provision for refund of advance tax. In our view, sub-section (2) must be read in the context of the proviso to sub-s. (3) of s. 210 as it stood. Where refund had been made of advance tax in the contingencies provided for by the proviso to sub-s. (3) of s. 210 as it stood, and it had been found on regular assessment that the amount of advance tax originally paid was in excess of the tax assessed by the amount refunded or more, interest was payable upon the amount refunded, but, by reason of sub-s. (2) of s. 214, it was payable only up to the date of the refund. This interpretation of sub-s. (2) is, in our view, the most satisfactory in that it gives meaning to the words " on any portion ", " under this chapter " and " only ". Consequently, we overrule the judgment of the Division Bench of this court in Associated Cement Companies Ltd. v. CIT [1983] 141 ITR 318, in so far it interprets sub-s. (2) of s. 214. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation laws. Parliament had laid down the rights and liabilities of assessees and of assessing officers and one had to look into the statute to find out up to what date interest had to be paid. There would be, no anomalous situation if regular assessment was taken to mean only the first order of regular assessment even in ss. 209 and 210. The court was not inclined to adopt the view taken by Sabyasachi Mukharji J. sitting singly in Chloride India Ltd.'s case [1977] 106 ITR 38 (Cal) and in General Fibre Dealers Ltd.'s case [1979] 116 ITR 40 (Cal). The court relied, inter alia, upon the judgment of this court in Sarangpur Cotton Mfg. Co. Ltd.'s case [1957] 31 ITR 698 (Bom) and of the Allahabad High Court in Sir Shadilal Sugar and General Mills' case [1972] 85 ITR 363 (All). Two decisions of this court may be briefly adverted to. In Binod Mills Co. Ltd. v. S. A. Kadre, EPTO, [1980] 122 ITR 778, a learned single judge of this court took the view that the words " regular assessment " used in the Excess Profits Tax Act, 1940, referred not only to the initial order of assessment but also covered orders passed by the appellate authority and orders passed in consequence of directions c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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