High Court Of Bombay
Godrej & Boyce Mfg. Co. Ltd. vs. P.K. Gupta, CIT
Sections 214, 244(1A)
Asst. Years 1982-83, 1983-84
Dr. S. Radhakrishnan & J.H. Bhatia, JJ.
Writ Petn. No. 2777 of 1988
10th August, 2005
Counsel Appeared
P. Pardiwala with Ms. Samidha Vedpathak, for the Petitioner : Dr. P. Daniel & Harishankar, for the Respondent
JUDGMENT
Dr. S. Radhakrishnan, J. :
In this petition, the petitioner has challenged the order dt. 14th June, 1988 passed by the first respondent–the CIT with regard to the asst. yr. 1982-83 and the asst. yr. 1983-84 for the claim of interest. The brief facts are that on 8th Oct., 1982, the petitioner-company had filed a return of income for the asst. yr. 1982-83 declaring a loss of Rs. 23,82,75,310. It appears that prior to that, the petitioner-company had already paid a sum of Rs. 6,30,00,000 as an advance tax. Over and above, a sum of Rs. 8,44,150 was also deducted at source and paid as tax to the respondents. On 5th June, 1984 the IAC, Asst. Range-II(B), Bombay, had computed the total income of the petitioner-company at Rs. 7,93,48,600. The IAC determined a refund of Rs. 1,19,78,111 together with the interest at Rs. 31,14,306 under s. 214 of the IT Act and the amount of Rs. 4,80,000 was also charged as an interest under s. 216. The total amount of refund was computed at Rs. 1,46,12,470 and it appears that the part thereof was adjusted towards the pending tax demands. On 2nd July, 1985, further order was passed under s. 154 of the IT Act rectifying certain mistake in the assessment order and further refund was granted. Finally, the CIT(A) allowed the appeal partly. Based on the same, the IAC by his order dt. 19th Feb., 1987 passed the assessment order giving effect to the order of the CIT(A) and computed the total refund at Rs. 4,87,92,034. There is no dispute that the entire refund amount has either been adjusted towards the pending tax demands or the balance has been paid to the petitioner. The only grievance is with regard to the nonpayment of interest on the amount refunded to the petitioner. The assessment order did not grant any interest. The petitioner, therefore, filed an application on 10th April, 1987, against the order dt. 19th Feb., 1987, passed by the IAC, before the CIT, under s. 264 of the IT Act seeking such an interest under ss. 214 and 244(1A) of the said Act. Similarly, for the asst. yr. 1983-84, the petitioner-company had filed a return of income on 29th June, 1983 showing a loss of Rs. 21,83,75,509. On 25th Feb., 1986, the IAC completed the assessment under s. 143(3) and computed the total income at Rs. 3,47,58,742. There was a demand of Rs. 1,52,61,596 by way of tax, after giving credit to the advance tax paid in the sum of Rs. 1,02,50,000. Over and above, a sum of Rs. 59,032 was deducted at source. Aggrieved thereby the petitioner had filed an appeal before the CIT(A) which was partly allowed on 5th Jan., 1987. Thereafter, on 17th March, 1987, the IAC passed an order giving effect to the order of the CIT(A), by which he determined the total income of the petitioner-company at nil and granted a refund of Rs. 1,03,07,855. The IAC however, did not grant any interest on the refund so determined, and, therefore, the petitioner-company filed an application under s. 264 of the IT Act claiming for such an interest under ss. 214 and 244(1A) of the IT Act.
In support of both the aforesaid applications filed by the petitioner, the petitioner had appeared before the concerned authority–respondent No. 1 (the CIT) on 2nd June, 1988 and had made his submissions. Finally, the respondent No. 1–CIT, by his order dt. 14th June, 1988 had declined to grant any interest for the asst. yrs. 1982-83 and 1983-84. We have perused the order dt. 14th June, 1988 passed by the CIT declining to grant such an interest.
Mr. Pardiwala, the learned counsel for the petitioner has brought to our notice that the CIT has erroneously proceeded on the basis that the petitioner’s case would be covered by the provisions of law as it stood prior to the amendment which came into effect on 1st April, 1985. Mr. Pardiwala, therefore, contended that as far as the petitioner’s case is concerned, the CIT ought to have considered the case in view of the changed law and not by applying the law as it stood prior to the amendment of 1985. Mr. Pardiwala has contended that the order of the CIT declining to grant such an interest suffers from an error apparent on the face of the record. Mr. Pardiwala has contended that the provisions of s. 214 as well as s. 244(1A) of the IT Act have not been properly and correctly construed by the CIT in the aforesaid order dt. 14th June, 1988 and that he has wrongly construed the same.
In support of his submissions, Mr. Pardiwala, referred to and relied upon the Division Bench judgment of our High Court, with regard to the interpretation of s. 214 of the IT Act in the case of CIT vs. Saswad Mali Sugar Factory Ltd. (2001) 168 CTR (Bom) 337 : (2001) 249 ITR 756 (Bom). In that case, the assessment year was 1980-81 and the assessment was completed on 25th July, 1983. The assessee had appealed against the same and the appeal was allowed in December, 1987. Based on the same, the assessment order was passed on 24th Oct., 1988, granting refund to the assessee including the interest from 1st April, 1980 till 24th July, 1983 being the date of completion of the assessment. Thereafter, the CIT had approached this Court by way of an appeal. It was argued on behalf of the appellant-Department that the amendment of s. 214 which came into force from 1st April, 1985, by Taxation Laws (Amendment) Act, 1984 has no retrospective effect and as such, the interest could not have been granted w.e.f. 1st April, 1980. This Court considered the said objection and observed as under : “We do not find any merit in this appeal. In this appeal, we are concerned with the asst. yr. 198081. Sub-s. (1A) was substituted in s. 214 w.e.f. 1st April, 1985. It not only refers to the appellate orders under s. 250 and s. 254 but it also refers to several other orders like orders under ss. 147, 154, 155, 260, 262, 263, 264 and 245D. In the case of Modi Industries Ltd. vs. CIT (1995) 128 CTR (SC) 361 : (1995) 216 ITR 759 (SC), at p. 805, it has been held that even after the amendment of s. 214 w.e.f. 1st April, 1985 the period for which the interest has to be paid remains the same, i.e., from the first day of the relevant assessment year upto the date of the regular assessment (first assessment). In the aforestated judgment, the Supreme Court has confirmed the decision of this Court in the case of CIT vs. Carona Sahu Co. Ltd. (1984) 38 CTR (Bom)(FB) 219 : (1984) 146 ITR 452 (Bom)(FB). However, it is urged on behalf of the Department that in the present matter the Taxation Laws (Amendment) Act, 1984, has no application. That, the said amending Act does not operate retrospectively. That in the present matter, the regular assessment was completed on 2nd July, 1983. That, since the Taxation Laws (Amendment) Act, 1984, has been brought into force w.e.f. 1st April, 1985, i.e., after the passing of the regular assessment order, the AO erred in granting interest to the assessee w.e.f. 1st April, 1980. We do not find any merit in this argument.
The Taxation Laws (Amendment) Act, 1984, is procedural in nature and, therefore, it will apply to all pending actions. Secondly in the present matter, the right to receive the interest accrued to the assessee only on 24th Oct., 1988, when the AO gave effect to the order of the first appellate authority dt. 11th Dec., 1987, by which the assessee’s appeal came to be allowed. Therefore, the amending Act, 1984, would apply to this case. Lastly, a bare reading of s. 214(1A) indicates that the said s. 214(1A) would apply to all cases where interest becomes payable as a result of an order under s. 147 or s. 154 or s. 250 or s. 254 or s. 262 or s. 263. Therefore, the Taxation Laws (Amendment) Act, 1984, is applicable to this case and we do not find any merit in the contention of the Department that the said amending Act is not applicable to the facts of this case. Accordingly, the above question is answered in the affirmative, i.e., in favour of the assessee and against the Department.” In the aforesaid judgment, this Court has very clearly held that the Taxation Laws (Amendment) Act, 1984 is procedural in nature and, therefore, it will apply to all the pending actions, and as far as assessee in the said case was concerned, the assessment year started from 1st April, 1980 and accordingly, this Court found that there was nothing wrong in the order granting the interest from 1st April, 1980 till the date of the assessment order.
7. Mr. Pardiwala also referred to and relied upon the judgment of the Hon’ble Supreme Court in the case of Modi Industries Ltd. vs. CIT (1995) 128 CTR (SC) 361 : (1995) 216 ITR 759 (SC) wherein the Supreme Court was dealing with the scope of sub-s. (1A) of the s. 244 of the IT Act, and while interpreting the same, has observed as under : “Sub-s. (1A) of s. 244, does not affect the operation of s. 214 in any manner whatsoever. The period during which interest has to be paid under s. 214 is the first day of the relevant assessment year to the date of the assessment order. The period covered by s. 244(1A) is the period commencing from the date of payment of tax or penalty. Under Chapter XVII of the Act, tax may be collected from an assessee by way of deduction at source,
advance payment and by a notice of demand under s. 156. But, the amount of tax deduced at source is treated as income-tax paid by the assessee upon the completion of the assessment proceedings [s. 199(1)]. Similarly, the amount of advance tax paid has to be treated as payment of tax and credit for this amount has to be given to the assessee in the regular assessment (s. 219). Any excess amount remaining to the credit of the assessee thereafter will have to be refunded to the assessee. The amount which was retained by the ITO and adjusted against the tax demand must be treated as payment of tax pursuant to the assessment order by the assessee. Advance tax or tax deducted at source loses its identity as soon as it is adjusted against the liability created by the assessment order and becomes tax paid pursuant to the assessment order. Therefore, the phrase ‘any amount having been paid…….. after 31st March, 1975’ occurring in sub-s. (1A) of s. 244 must be construed to mean not only the amount which has been paid directly pursuant to the order of assessment but will also include the amount of tax deducted at source and advance tax, which were lying to the credit of the assessee and were ultimately adjusted and set off against the tax demands raised in the assessment order. The excess amount of tax paid under sub-s. (1A) of s. 244 must be calculated by treating the amount of tax deducted at source and the amount of advance tax which were adjusted against the assessee’s liability to pay tax as well as the amount of tax paid directly upon the assessment under Chapter XVII of the IT Act. In other words, so far as the amount of advance tax is concerned, it must be understood to have been paid ‘in pursuance of any order of assessment’ only on the date of the original order of assessment and not on the date of actual payment. The reason is obvious, on the day the advance tax amount is paid there is no assessment and, hence, it cannot be said to have been paid ‘in pursuance of any order of assessment’. This view was also taken by the Punjab & Haryana High Court in the case of CIT vs. Leader Engineering Works (1990) 81 CTR (P&H) 222 : (1989) 178 ITR 529 (P&H).
Interest under sub-s. (1A) of s. 244 is payable when the tax or penalty paid by an assessee pursuant to an order of assessment has been reduced in appeal or any other proceeding. In such a case an excess amount of tax or penalty paid by the assessee will have to be refunded and the Central Government has to pay interest on the excess amount from the date on which such amount was paid to the date on which the refund was granted. Of course, there can be no question of paying interest both under s. 214(1A) and s. 244(1A) simultaneously. The rate of interest being the same under both the provisions, there would be no difference in the actual amount of interest payable, whichever provision is applied. This sub-section substantially alters the scheme of payment of interest on refund contained in ss. 243 and 244 of the IT Act, but does not affect the scope of s. 214 in any way. Sec. 214 deals with payment of interest on the amount of tax found to have been paid in excess of the tax determined as payable on the regular assessment. Interest will have to be paid from the first day of the relevant assessment year to the date of the regular assessment, i.e., the first assessment. If the amount on which the interest was payable was varied subsequent to the first assessment, then the quantum of interest had also to be increased or decreased accordingly. But the period for which the interest had to be paid was not altered by the newly substituted sub-s. (1A) of s. 214.” Mr. Pardiwala has, therefore, contended that both the above judgments have very clearly laid down the law as far as s. 214 as well as s. 244(1A) of the IT Act are concerned. He, therefore, submitted that based on the said provisions of law, the petitioner is entitled to interest. Mr. Pardiwala produced before us two charts showing the calculations of the interest to which the petitioner is entitled to, for both the asst. yrs. 1982-83 as well as 1983-84. Both the charts are taken on record and marked as “X” and “Y” for identification. Mr. Daniel, the learned counsel who appeared on behalf of the respondent-Department, could not dispute the propositions of law as laid down by this Court in the case of Saswad Mali Sugar Factory Ltd. (supra) while interpreting s. 214 of the IT Act, as well as by the Supreme Court in the case of Modi Industries Ltd. (supra) while interpreting s. 244(1A) of the IT Act.
10. Having regard to the facts and circumstances of the case, we are not going to determine the exact amount of interest payable to the petitioner. However, we make it clear that the law has been very clearly laid down by the Division Bench of this Court in the aforesaid case of Saswad Mali Sugar Factory Ltd. (supra) so far as s. 214 of the IT Act is concerned, and by the Supreme Court in the aforesaid case of Modi Industries Ltd. (supra) so far as s. 244(1A) of the IT Act is concerned. Under these circumstances, we direct the respondent No. 1 to compute the interest payable to the petitioner as indicated in the two charts produced before us by the learned counsel for the petitioner for both the asst. yrs. 1982-83 and 1983-84, in accordance with law, as expeditiously as possible, preferably within a period of three months from today. Rule is accordingly made absolute in the above terms.
[Citation : 284 ITR 85]
