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TMI Blog1972 (9) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... this court at the instance of the petitioners. This court on reference held by its judgment dated December 7, 1960, in T. C. No. 74 of 1959 that the petitioners were not liable to be assessed on the profit on the sale of building, plant and machinery under the second proviso to section 10(2)(vii). Consequent on the said decision of this court, the Tribunal passed the consequential order on May 30, 1961, under section 66(5) holding that the total income assessable for the assessment year 1956-57 was "nil" and directing the refund of the whole of the tax paid by the petitioners. The amount of tax paid by the petitioners on various dates in pursuance of the assessment order as confirmed by the Tribunal before this court passed the order on reference was Rs. 2,04,160.31. Subsequently, the revenue obtained special leave to appeal to the Supreme Court against the decision of this court but that appeal came to be dismissed by a judgment dated 8th October, 1964, in C.A. No. 1093 of 1963. While the appeal was pending before the Supreme Court, the revenue applied to that court for withholding the refund due to the petitioners in consequence of the decision of this court and the follow up or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the interest is payable, that interest is payable under the proviso from the date of the over-payment and not from the date of the consequential order of the Tribunal passed under section 66(5) and that the view of the respondent that interest is payable only from the date of the consequential order of the Tribunal is quite arbitrary. The revenue, on the other hand, contends that the discretion given to the Commissioner under the proviso to section 66(7) extends not only to the rate of interest but also to the fixation of the date from which such interest is payable and that the order passed by the respondent in this case is quite in accordance with the statute as also the relevant instructions that had been issued by the Central Board of Revenue. Our attention has been drawn to the instructions issued by the Central Board of Revenue bearing F. No. 75/60-61 ITJ (20) dated May 26, 1967. The relevant portion of the said Board's instructions is extracted below : "The Board have received some references recently seeking instructions as to what should be the date from which interest should be allowed to an assessee as provided by the proviso to section 66(7) of the Indian Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ostpone payment of such refund until the disposal of the appeal to the Supreme Court." It is significant that there is considerable departure between the other provisions of the Act relating to refund and this provision, Chapter VII deals with refund of tax paid under various circumstances, Section 48(1) provides that if the amount of tax paid by a person for any year exceeds the amount with which he is properly chargeable under the Act for that year, he shall be entitled to a refund of any such excess. Section 48(2) directs the Appellate Assistant Commissioner or the Tribunal while exercising their appellate powers to cause a refund to be made by the Income-tax Officer of any amount found to have been wrongly paid or paid in excess. Section 49E provides that where under any of the provisions of the Act, a refund is found to be due to any person, the Income-tax Officer, the Appellate Assistant Commissioner, or the Commissioner, as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded against the tax, interest or penalty, if any, remaining payable by the person to whom the refund is due. Section 50 provides for a time limit within which claims fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to the High Court. We have to, therefore, construe section 66(7) as giving a special privilege to the assessee as a result of the matter being taken to the High Court on reference. In our view the object of the provision in section 66(7) appears to be that where by an erroneous order of the Tribunal in appeal, amounts found legally due to the assessee by the High Court on reference had been withheld by the revenue, such amounts are to be refunded with interest. It is in this background the question whether interest is payable from the date of over-payment as contended by the assessee or from the date of the consequential order passed by the Tribunal under section 66(5) of the Act as contended by the revenue is to be considered. The proviso to section 66(7) does not say from which date the interest is payable. Though the revenue contends that the Commissioner has got a discretion to fix the date from which interest is to be paid we are not inclined to accept that contention. If we construe the proviso as conferring an absolute discretion on the part of the Commissioner to fix the date from which the interest was to be paid without any guidelines given in the proviso, it will sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them to get interest for the period before the order of the Tribunal which right they would not have, if they have obtained the relief from the Tribunal. As per section 66(5) as soon as the High Court passes an order on reference, the Tribunal should dispose of the case conformably to that order. But that does not mean that the assessee gets a right to refund in pursuance of the consequential order of the Tribunal. The consequential order of the Tribunal under section 66(5) takes the place of the original order it had passed. It is as if the Tribunal rectified its earlier order which was found to be erroneous by passing the correct order in its stead. Section 66(7) when it says that if the amount of tax assessed is reduced as a result of the reference, the amount over-paid shall be refunded with interest, seems to proceed on the basis that excess amounts had been withheld or collected by an erroneous order of the Tribunal and that, therefore, the assessee is entitled to interest. The interest has to run, therefore, from the date of the original, order of the Tribunal. We, therefore, hold that the petitioners in this case are entitled to interest at 3% on Rs. 2,04,160.31 from the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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