Calcutta H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is justified in directing the ITO to take the payment of Rs. 37,500 made on January 16, 1976, for the purpose of calculation of interest under s. 214 of the IT Act, 1961 ?

Counsel Appeared

R.C. Prosad led by H.M. Dhar for the Revenue

AJIT KUMAR SENGUPTA, J. :

At the instance of the CIT, the following question of law has been referred to this Court under s. 256(1) of the IT Act, 1961, for the asst. yr. 1976-77 :

“Whether, on the facts and in the circumstances of the case, the Tribunal is justified in directing the ITO to take the payment of Rs. 37,500 made on January 16, 1976, for the purpose of calculation of interest under s. 214 of the IT Act, 1961 ?”

The facts shortly stated are that in respect of the asst. yr. 1976-77, the ITO found that the At the time of completion of the assessment, a question regarding the allowance of interest to the assessee under s. 214 of the IT Act, 1961, arose. The ITO felt that interest under s. 214 was not available to the assessee on the sum of Rs. 37,500 which had been paid on January 16, 1976, as it was paid after the last date for the payment of instalments which fell on December 15, 1975. He was, therefore, of the view that the amount paid after the date provided under law could not be eligible for allowance of interest under s. 214. Thus, though the ITO worked out a refund as due to the assessee, he declined to grant the assessee’s claim for interest under s. 214 on the above grounds. When he matter came before the AAC, he agreed with the ITO that interest under s. 214 could not be allowed on the amount paid on January 16, 1976, which was after the due date of December 15, 1975, though it was prior to the end, of the financial year.

The Tribunal, after considering the facts of this case and relying on the decision of the Gujarat High Court in the case of Bharat Textile Works vs. ITO 1978 CTR (Guj) 435 : (1978) 114 ITR 28, held that instalments of advance tax which had been paid from time to time and before the close of the financial year should be eligible for payment of interest under s. 214. The Tribunal, therefore, directed the ITO to take, the payment of Rs. 37,500 for the purpose of calculation of interest under assessee has paid advance tax on the following dates : s. 214.

6. Sec. 214 of the Act reads as follows : “214. Interest payable by Government.—(1) The Central Government shall pay simple interest at twelve per cent per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under ss. 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, and where any such instalment is paid after the expiry of the financial year during which it is payable by reason of the provisions of s. 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment.” (underlined by us).

6. To attract this provision, two conditions have to be satisfied. Firstly, instalments of advance tax must have been paid during the financial year in which they are payable under ss. 207 to 213. Secondly, the aggregate sum of instalments should exceed the amount of tax determined on regular assessment. If these two conditions are satisfied, interest becomes payable by the Central Government. The contention of the Revenue is that advance tax has to be paid under s. 211 in instalments and if they are not paid on or before the date(s) specified for that, such payment should not be treated as advance tax. It is submitted that though credit is given by the Department for the tax paid in the financial year beyond the stipulated date(s), the assessee cannot claim interest under s. 214 unless payments have been made in accordance with the provisions of the Act Within the time provided under the law. We are, however, unable to accept this contention.

There is no reference in s. 214(1) about the dates on which instalments are payable under s. 211 of the Act. This section does not prescribe that, to be eligible for interest, advance tax has to be paid on the date(s) stipulated under s. 211 for payment of such instalments. It only provides that instalments must have been paid during the financial year in which they are payable. It is true that s. 214 refers to instalments payable under ss. 207 to 213 which include s. 211 but there is no reference in s. 214 about the manner of payment of instalments. We cannot persuade ourselves to read the mandate of s. 211 in s. 214 which is only concerned with the payments made during the financial year and not payments made on the specified date(s) during the financial year. In our view, whatever is paid before the close of the financial year would qualify as advance tax. If credit is given by the Department for the belated payments made during the financial year in calculating the tax due on regular assessment, we fail to see how such tax would not be treated as advance tax. It is a payment in advance towards tax to be determined on regular assessment. If the Revenue, for the purpose of determining the tax due on regular assessment, cannot ignore such payment, then for the purpose of calculating interest also, such payment cannot be kept out of consideration.

Even otherwise, in view of the reference to the date from which interest is to be calculated, namely, 1st April next following the financial year in which the advance tax was payable, that tax must be given credit for in calculating the amount of interest. Any payment made prior to 1st April, i.e., before the commencement of the relevant assessment year, has to be taken into account.

For the reasons aforesaid, we are of the opinion that the assessee is entitled to interest if the conditions stated in s. 214 are satisfied even though the assessee might not have paid the advance tax by instalments on the due date(s).

We, therefore, answer the question referred to this Court in the affirmative and in favour of the assessee. There will be no order as to costs.

BHAGABATI PRASAD BANERJEE, J.:

I agree.

[Citation :181 ITR 454]