TMI Blog2002 (6) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax due of an assessee would be liable to attract interest for the period it was lying in deposit? The petitioner is a partnership business which was running a cardamom and tea estate known as Kurumber Betta Estate in the Nilgiris. The partnership consisted of three partners, one of whom, S. Chenniah, was a resident of Mysore, Karnataka and the other two partners were residents of Kerala State. The said Chenniah was a defaulter of tax and accumulated income-tax arrears. All his properties in Karnataka were subjected to recovery proceedings by the income-tax authorities. A notice dated December 28, 1968, was issued by the Tax Recovery Officer, Mysore, addressed to Kurumber Betta Estate ordering that the share of the said S. Chenniah in Kurumber Betta Estate and the profits of the said property were charged with the payment of amount of Rs. 7,41,678.10 as certified to the Tax Recovery Officer by the Income-tax Officer, Central Circle-I Bangalore, together with interest payable under section 220(2) of the Income-tax Act, 1961 (hereianfter referred to as "the Act"). The notice also directed that no amount due or payable on any account should be paid without a written order from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the Tax Recovery Officer, Mysore, which would be kept in deposit "to be appropriated towards income-tax after final settlement of the liability of S. Chenniah, towards the firm of Kurumber Betta Estate". (Though this document is not on record, at our request, learned counsel for the appellant produced it and we have perused it). The position was clarified by the Kurumber Betta Estate by a further letter dated July 5, 1987 (vide exhibit P-5) addressed to the Tax Recovery Officer, Mysore. This letter is crucial, in our view, and bears reproduction in full. The letter reads as under: "As per your communication No. TRO/MYS/S. Chenniah of 1986-87, dated 24th March, 1987, and subsequent correspondence on the subject we are enclosing DD No. 1818, dated 6-7-1987, for Rs. 11,67,000 drawn on Canara Bank, Mysore, in your favour to be kept in deposit for appropriation towards income-tax after settlement of the matter of liabilities of Sri S. Chenniah towards the firm of Kurumber Betta Estate. In other words only after settlement of the legal position relating to the share of the late Sri S. Chenniah in the proceeds of the estate--whether it is 1/3 of the total sale price, or only 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 from July 6, 1987 to February 17, 1989. This claim was rejected. Kurumber Betta Estate brought O.P. No. 3579 of 1995 (Kurumber Betta Estate v. ITO [1996] 217 ITR 631), claiming the aforesaid amount. The learned single judge who heard the petition dismissed the petition by holding that there was no liability to pay interest. Being aggrieved, the estate is in appeal before us. The crucial question on which the appeal turns is, what was the nature of the amount retained in the hands of the Income-tax Department from July 6, 1987, to February 16, 1989. The material on record to which we have referred in extenso clearly indicates that, in proceedings other than the proceedings pertaining to the tax liability of the deceased, S. Chenniah, a partner of the appellant firm, as a condition for granting permission for sale of the firm's immovable property, the Income-tax Department required security to the extent of one-third of the gross sale proceeds. They gave two options to the appellant firm, either to make a cash deposit or furnish a bank guarantee in equivalent amount. It is the appellant which chose to make a cash deposit. Thereafter, the appellant's correspondence with the Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasury, the bank holds it as an agent of the treasury for the purpose of holding the money. Such amounts which are held as security cannot be utilised by the bank, would not bear any interest, and the Revenue also would not be entitled to any interest on such amount held. All amounts which are collected otherwise than by way of tax or penalty are credited to this personal deposit account. Amounts such as seized cash are also credited to this account. Learned counsel for the appellant strenuously contended that, irrespective of any other provision of law, if the Revenue held excess money to the tune of Rs. 10,01,311 from July 6, 1987 to February 16, 1989, then equity demands that the Revenue should be directed to pay interest at the same rate as paid subsequent to February 17, 1989. It is an accepted proposition in tax jurisprudence that tax laws know no equity. There cannot be a direction to the Revenue to pay interest in equity, when there is no such provision in the Income-tax Act. (See in this connection, the judgment of the Supreme Court in Modi Industries Ltd. v. CIT [1995] 216 ITR 759, 790). What learned counsel really wants is that the Revenue should be directed to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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