TMI Blog1978 (3) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... he refund due interest amounting to Rs. 5,557 due to the assessee under s. 214 of the I.T. Act was included. The ITO assessed the interest forming part of the refund of tax for the assessment year 1964-65 as income for the assessment year 1969-70 under the head " Other sources ". This was confirmed both by the AAC and the Tribunal. The first question referred to us questions the correctness of these orders. The assessee paid advance tax during the financial years 1964-65 and 1965-66. When the relevant assessments for the assessment years 1965-66 and 1966-67 were completed, it was found that the tax in advance already paid by the assessee was in excess and this resulted in a refund. While granting the refund of the amount due to the assessee, interest on it amounting to Rs. 3,811 pertaining to the assessment year 1965-66 and Rs. 2,386 pertaining to the assessment year 1966-67 amounting in all to Rs. 6,197, was actually paid to the assessee under s. 214 of the Act during the previous year relevant to the assessment year 1970-71. The ITO treated this amount of Rs. 6,197 as the assessee's income under the head "Other sources". This order was confirmed by the AAC and the Tribunal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility to pay advance tax is with reference to the income chargeable to tax. Any amount paid in excess is, therefore, not paid for income chargeable to tax. The concept of remission or relief necessarily implies that there must have been a liability to tax. The excess amount found refundable on assessment cannot be said to be paid as tax or collected as tax. It may be it was paid or collected by way of tax. It may also be not a voluntary payment and it is a forced payment by virtue of the provisions of the Act. But since in the assessment, it is found as not referable to any income chargeable to tax, in our view, it could not be treated either as tax paid or its refund or the interest paid on that amount as a remission or rebate in tax. Nor can we accept the argument that it becomes payable as a result of income-tax assessment. It became payable because the amount paid was found not referable to any income chargeable. While we agree that the use of the word " interest " in section 214 of the Act is not decisive of the question whether that amount is refund of tax or a remission in tax, we are of the view that the original character of the amount paid or the interest paid under s. 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess of what was actually due. This is really a case of over-assessment though only provisional and not of under-assessment at all. The payment of interest was in no sense a relief granted in computing income. " Again in a later portion, the Supreme Court observed : " It cannot obviously be suggested that the interest payable by the Government to the assessee for amounts paid by the assessee as tax in advance is a tax paid by the assessee. " Though the decision related to the provisions under s. 18A of the Act and the language used in s. 34 of the old Act and those provisions were not in pari materia with the present Act, the ratio of the judgment is clear that payment of interest was in no sense a relief granted in computing the income. Nor could it be said that the excess amount paid by the assessee is a tax paid by the assessee. We are, therefore, unable to agree with this part of the contentions of the learned counsel. It was then contended by the learned counsel that the amounts in question were paid on capital account, though estimated in terms of interest and that they were not income assessable to tax. The payment of interest relates to the amounts of advance tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut that given to him for the deprivation of the use of the money representing the compensation for the land acquired. While so holding, the Supreme Court referred to the decision of the Allahabad High Court in Behari Lai Bhargava v. CIT [1941] 9 ITR 9 and held that that decision was wrongly decided. But the learned counsel for the assessee contended that though the Allahabad decision was expressly overruled, the ratio of the decision of the Kerala High Court in P. V. Kurien v. CIT [1962] 46 ITR 288 had not been overruled and in fact the Kerala decision was distinguished by the Supreme Court on the ground that the interest paid referred to a period between the date of dispossession on and the date on which the title of the property acquired vested in the State. Though apparently the Kerala High Court's judgment was distinguished, it is seen from a later judgment of the Supreme Court in T. N. K. Govindaraju Chetty v. CIT [1967] 66 ITR 465 that Shamlal Naruda's case [1964] 53 ITR 151 (SC) is an authority for the proposition that : " ... if the source of the obligation imposed by the statute to pay interest arises because the claimant is kept out of his money, the interest received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to agree with the learned counsel that the interest received by the assessee is in the nature of a capital receipt. It was then contended by the learned counsel for the assessee that the question whether interest received is an income or not would depend on the subject-matter of the receipt. Income-tax means a personal tax. The character of the interest paid on the excess amount of the advance tax is in the nature of a personal compensation, like compensation paid for an injury by the insurance company or compensation paid for any inconvenience in travelling in a plane, etc. It is not an interest received as a result of any income earning activity, business or investment. In this connection, he referred to ss. 216 and 217 of the Act and the decision in Balmer Lawrie Co. Ltd. v. CIT [1960] 39 ITR 751 (Cal). Sections 216 and 217 of the Act relate to payment of interest by the assessee in the case of underestimate, etc. The decision of the Calcutta High Court in Balmer Lawrie Co. Ltd. v. CIT [1960] 39 ITR 751 relied on by the learned counsel for the assessee related to the question whether the interest paid on such underestimate was allowable expenditure. In that case, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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