Kangundi Industrial Works Pvt. Ltd. vs Income Tax Officer

P. Ramachandra Raju, J.—Section 214 of the income tax Act in its material portions reads as under: The Central Government shall pay simple interest at twelve per cent per annum on the amount by which the aggregate sum of any installments of advance tax paid during any financial year in which they are payable under sections 207 to 213 exceeds the amount of the tax determined on regular assessment, from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year.

The main question posed for determination is whether such interest is payable to the assessee on the excess amount paid during the financial year on dates subsequent to the dates fixed u/s 211 of the income tax Act for payment of such installments.

Shri Y.V. Anjaneyulu, the learned Counsel appearing for the assessee contends that if such excess amount was paid during the financial year, interest is payable to the assessee. Shri P. Rama Rao, the learned Standing counsel appearing for the Revenue contends that the excess amount does not earn interest when once the installments were paid on dates subsequent to the dates fixed for payment of the installments and it should be so because when the assessee failed to pay the installments of advance tax by the due dates fixed u/s 211 of the income tax Act, he is deemed to be an assessee in default in respect of such instalment or installments incurring the risk of payment of penalty u/s 221 of the income tax Act.

The petitioner-company is an income tax assessee. We are concerned with the financial year 1974-75. The accounting year of the company is from 1-4-1974 till 31-3-1975. The respondent by his order, dated 16-8-1974 u/s 210(1) of the income tax Act directed the petitioner to pay Rs. 5,254 as advance tax. u/s 211 of the Act, the advance tax is payable in three equal installments, the due dates being 15-9-1974, 15-12-1974 and 15-3-1975. The petitioner paid Rs. 1,752 on 13-9-1974 and Rs. 1,751 on 16-12-1975. On 14-3-1975 the petitioner gave a revised estimate of advance tax payable by him at Rs. 2,10,003. The balance amount of Rs. 2,06,500 was payable as the last instalment of advance tax by 15-3-1975. The petitioner, however, paid Rs. 1,06,500 on 25-3-1975 and the balance amount of Rs. 1,00,000 on 29-3-1975. It is thus clear that though the petitioner paid the entire advance tax during the financial year 1974-75, he has not paid the second and third installments on the due dates, viz., 15-12-1974 and 15-3-1975. The regular assessment of the company for the financial year 1974-75 was made on 20-1-1976 and the tax payable was determined at Rs. 62,908. Refund of excess of Rs. 1,47,095 was given to the petitioner. The petitioner by a letter, dated 19-4-1976 addressed to the respondent, claimed interest on this amount. The respondent by his reply, dated 26-7-1976 informed the petitioner that the claim is not admissible.

After hearing the contentions urged by the learned Counsel appearing for the assessee and the Revenue, we are inclined to agree with the contentions urged by Shri P. Rama Rao. According to us, the assessee can claim interest u/s 214 of the Act only if he has complied with the requirement specified u/s 211 of the Act. A careful reading of section 214 of the Act will indicate that the stress is not on the question that all the installments of advance tax were paid during the financial year, but the stress is that the installments must have been paid before the due dates fixed for payment if the assessee was to be given the right to claim interest u/s 214 of the income tax Act. Section 214 of the income tax Act has to be read along with section 218 of the Act. u/s 218 of the income tax Act, if the instalment of advance tax was not paid by the specified date, the assessee shall be deemed to be an assessee in default in respect of such instalment and the Revenue is given the right to impose penalty on such assessee for not paying the instalment before the due date. It is not disputed that the Department could have proceeded against the petitioner and levied the penalty for the delay. But Shri Y.V. Anjaneyulu, the learned Counsel for the petitioner contends that the right of the Revenue to impose penalty for the delay has nothing to do with the right of the assessee to claim interest on the excess payments made by him as advance tax and that even if the Revenue had such a right, the petitioner is entitled to interest from 1-4-1975, as before any penalty proceedings were taken against him, the company has deposited the entire advance tax as per its estimate. We do not feel persuaded to accept this contention. Under Explanation to section 221 of the income tax Act, an assessee shall not cease to be liable to any penalty merely by reason of the fact that before the levy of such penalty he has paid the tax. When once the company committed default in paying the installments before the specified dates, it cannot claim interest on the excess of tax paid over the tax determined on a regular assessment.

The petitioner has also claimed interest u/s 243 of the income tax Act. According to the learned Counsel for the petitioner, interest payable to him u/s 214 of the income tax Act amounts to refund and that as the same is delayed, the petitioner is entitled to claim interest u/s 243 of the Act. We find no force in this contention. The refund contemplated is refund of excess amount paid as tax. Interest payable on the excess amount u/s 214 of the income tax Act does not amount to refund of any amount paid as tax. The claim made by the petitioner u/s 243 of the income tax Act is, therefore, negatived.

The respondent has informed the petitioner by a letter that the claim for interest is not admissible. It does not amount to an order which the petitioner could have carried the matter in revision before the CIT. Being so, we find no merit in the objection taken by the Revenue that no relief should be given to the petitioner while exercising our jurisdiction u/s 226 of the Constitution. The writ petition is accordingly dismissed. Having regard to all the circumstances of the case, we direct the parties to bear their respective costs.