Commissioner of Income Tax vs Ambala Electric Supply Co. Ltd.

Prem Chand Jain, J.—The Ambala Electric Supply Company Ltd., Ambala, respondent (hereinafter referred to as "the assessee "), was carrying on the business of cold storage and supply of electrical energy under a licence obtained under the Indian Electricity Act, 1910. Its system of accounting was mercantile. The financial year immediately preceding 1st April, 1963, was the relevant previous year. The respondent-company was originally assessed by the ITO on 30th September, 1966, at a total income of Rs. 1,64,394 as against the declared loss of Rs. 1,52,420 as per the original return dated 1st January, 1964, and a declared loss of Rs. 2,79,534 as per the revised return dated 11th July, 1966.

On appeal, the AAC allowed the assessee certain reliefs to the total extent of Rs. 2,97,439 as regards the assessable income, vide his order dated 28th December, 1968. Thus, the income of the assessee as determined by the ITO at Rs. 1,64,394 got converted into a loss of Rs. 1,33,045. In addition, the assessee was also held entitled to certain further development rebate.

As a result of the AAC''s order dated 28th December, 1968, the assessee moved the ITO u/s 154 of the I.T. Act, 1961 (hereinafter referred to as " the Act "), for an amendment of the assessment order to the effect that an order for payment of interest by the Government u/s 214(1) should be made. The assessee''s case was that it had paid Rs. 35,670 by way of advance tax regarding the assessment year 1963-64, namely, the assessment year under consideration, and that in view of there being no assessable income in the light of the AAC''s order, the interest fell due by the Government u/s 214(1) of the Act. The ITO rejected the assessee''s said application for relief u/s 214(1) of the Act, on the ground that the question of payment of interest by the Government u/s 214(1) of the Act could arise only on the basis of the original assessment order as made by the ITO and not on any subsequent modification of such assessment order.

The assessee went up in appeal. The AAC, vide his order dated 11th April, 1972, allowed the appeal holding that the assessee was entitled to payment of interest u/s 214(1) of the Act.

Dissatisfied with the order of the AAC, the Revenue filed an appeal before the Tribunal but did not succeed. Thereafter, the Department filed an application requiring the Tribunal to refer certain questions of law which arose out of the order of the Tribunal. Finding some merit in the application, the Tribunal has referred the following questions for our opinion :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that on reduction or deletion of the assessable income in appeal, the Income Tax Officer had no power to refuse relief regarding the payment of interest by Government u/s 214(1), Income Tax Act ?

(2) There being no provision for appeal against order u/s 214(1), was the Tribunal right in sustaining the Appellate Assistant Commissioner''s order passed in appeal against an order made on an application u/s 154 after holding that no amendment as such was involved?"

On question No. 1, which involves a very interesting question of law, lengthy arguments were advanced by the learned counsel for the parties. Mr. D.N. Awasthy, learned counsel for the Revenue, had contended that the assessee is not entitled to claim interest u/s 214 of the Act on the amount which becomes refundable as a result of an order passed in appeal as it is only on that amount which becomes refundable as a sequel to the first original assessment made by the ITO u/s 143 of the Act that the interest is payable. Support was sought by the learned counsel from the judgments in Lala Laxmipat Singhania Vs. Commissioner of Income Tax and Others, SMT. KAMLA VATI Vs. COMMISSIONER OF Income Tax (CENTRAL), PATIALA., , Trustees of H.E.H. Nizam''s Religious Endowment Trust Vs. Income Tax Officer, A-Ward and Another, and Sir Shadilal Sugar and General Mills Ltd. Vs. Union of India (UOI) and Another, . On the other hand, Mr. B.S. Gupta, learned counsel for the assessee, submitted that an order passed by the ITO in pursuance of the order of the appellate authority would fall within the definition of "regular assessment" as defined in Section 2(40) of the Act and that there is no warrant or basis for contending that it is only the first original assessment made by the ITO which was to be covered by the provisions of Section 214 and not the subsequent assessments made as a result of an order passed in appeal. In support of his contention, the learned counsel had placed reliance on the judgments in Chloride India Ltd. Vs. Commissioner of Income Tax and Others, , General Fibre Dealers Ltd. Vs. Income Tax Officer and Others, , Triplicane Urban Co-operative Society Ltd. Vs. Commissioner of Income Tax, and RAYON TRADERS PRIVATE LTD. Vs. Income Tax OFFICER, COMPANIES CIRCLE I(2), MADRAS, AND ANOTHER., .

It may be observed at the outset that certain decisions which have a direct bearing and decided exactly a similar question in favour of the Revenue, were not cited before us at the time of arguments. The first case is of the Kerala High Court in N. Devaki Amma and Others Vs. Income Tax Officer, A-Ward, , and the second case is of the Delhi High Court in National Agricultural Co-operative Marketing Federation of India Ltd. Vs. Union of India and others, .

We have given careful thought to all the aspects raised before us in the light of the judicial pronouncements on the point in issue and we find that there is a conflict of opinion between the various High Courts. The Calcutta and Madras High Courts have taken a view favourable to the assessee, while the view of the Allahabad, Delhi and Kerala High Courts is in favour of the Revenue. Besides the judgments of the other High Courts referred to above, there is a binding precedent of this court itself in Commissioner of Income Tax Vs. Rohtak Delhi Transport P. Ltd., , wherein exactly on a similar question it has been observed thus (p. 780):

" As regards question No. 2, we are of the opinion that this question has to be answered in favour of the Revenue and against the assessee. We have very carefully perused Section 214 of the Act and find that the said provision deals with payment of interest on the excess amount paid by way of advance tax for the period from the 1st day of April next following the financial year during which the advance tax was due to the date of regular assessment. This section nowhere deals with the question of grant of interest to an assessee if the quantum of tax is reduced in appeal. In the present case, admittedly, the assessee had deposited advance tax of Rs. 1,06,702 against the demand of Rs. 1,06,828, which figure was arrived at during the regular assessment. ''Regular assessment'' has been defined in Section 2, Sub-section (10) of the Act. It is thus apparent that the provisions of Section 214 of the Act deal with the grant of interest for the period from 1st April next following the financial year during which the tax was paid up to the date of regular assessment and for no other period. In the present case the assessee did not pay advance tax more than what was determined to be payable at the regular assessment. It would, therefore, be apparent that the provisions of Section 214 of the Act will not entitle the assessee to get interest on an amount of Rs. 18,880, which amount became returnable in view of the reduction of tax in quantum appeal."

It may again be observed that even the aforesaid judgment was not cited before us. However, in view of the binding precedent in Commissioner of Income Tax Vs. Rohtak Delhi Transport P. Ltd., , the answer to the question has to be returned in favour of the Revenue and against the assessee. But on some occasion an argument may arise that in the aforesaid case the matter was decided ex parte, i.e., in the absence of the asses-see and has not been dealt with in depth, nor has any reference been made to various judgments for and against the proposition, with the result that the said judgment may need reconsideration. A bare perusal of the aforesaid observations may justifiably give rise to such an argument. Hence, in order to obviate any challenge to the aforesaid judgment on such a ground, we have independently applied our mind to all the aspects of the case and to the relevant provisions of the statute and have come to the conclusion that the aforesaid view finds full support from the judgments of the Allahabad, Delhi and Kerala High Courts where the point in issue has been dealt with in full detail. As we are in full agreement with the reasons given in those judgments, we do not propose to re-write the same here and adopt them for the purpose of supporting the view taken by the Division Bench in Commissioner of Income Tax Vs. Rohtak Delhi Transport P. Ltd., , with the result that with respect we are unable to agree with the views taken by the Calcutta and Madras High Courts. Consequently, it is held that the right of the assessee to interest in respect of the excess amount of advance tax paid by him must be determined by reference to the date of the first or original assessment made by the ITO and not the date of the order of the ITO, as a result of the order passed in appeal. The answer to this question is returned in favour of the Revenue and against the assessee.

In the view we have taken on question No. 1, it is not necessary to deal with the merits of question No. 2, and, consequently, the same is returned unanswered.

In the circumstances of the case, we make no order as to costs.

S.P. Goyal, J.

I agree.