COMMISSIONER OF Income Tax vs FORBAS EWART and FIGGIS (PRIVATE) LTD.

ANSARI C.J. - The facts in the reference can be briefly narrated. The assessee had paid the advance tax of Rs. 1,00,431-7-0 for the assessment year 1952-53, and October 10, 1952, the assessment u/s 23(3) of the Indian Income Tax Act was finalised. The Income Tax Officer then allowed Rs. 1,879-1-0 as interest on the advance tax; but on May 24, 1953 the aforesaid provision relating to interest was amended; and, according to the amendment, the assessee would only be entitled to interest till the last date of the year of assessment, which, in this case, would be March 31, 1952; and not till the date of assessment as the Income Tax Officer had done. It is common ground that this amendment to section 18A of the Income Tax Act had been given retrospective operation, and was deemed to have come in effect on April 1, 1952. Consequently the Income Tax Officer issued notice u/s 34 of the Act and found the assessee to be entitled to only Rs. 839-11-0 as interest instead of Rs. 1,879-1-0, which had been allowed earlier. The assessee was, therefore, asked to repay Rs. 1,039-6-0, and an additional demand for that sum was made u/s 34. The assessee objected, and finally the Appellate Tribunal has allowed the appeal, holding that section 34 of the Act cannot be relied on for the purpose. There after, a petition u/s 66(1) of the Income Tax Act was made, and the following question of law has been referred to this court :

"Whether on the facts and in the circumstances of the case the provisions of section 34(1)(b) of the Income Tax Act were applicable and the reassessment u/s 34 in order."

There are decisions covering the question; for the Bombay High Court has in Simplex Mills Ltd. v. Subramanyam, Income Tax Officer, held that the payment of interest by the Central Government u/s 18A(5) on tax paid in advance, was neither a relief under the Act, nor attributable to income, profits or gains, chargeable to Income Tax, and through the excess payment of interest could be recovered u/s 35, it could not be recovered u/s 34. That decision has been followed by a Division Bench of this court in Commissioner of Income Tax v. Nonshi Devshi Kattawala (Private) Ltd. It follows that the rule is well settled that section 34 could not be relied upon to support proceedings to recover excess interest allowed in the original assessment u/s 18A(5). It further follows that the answer to the question referred to us is that the provisions of section 34(1)(b) of the Act were not applicable to the facts and circumstances of the case.

Therefore, let the aforesaid answer be sent to the department, and the assessee will be entitled to the costs of this reference, the counsel fee we fix at Rs. 100.

Question answered in the negative.