Andhra Pradesh : Whether revenue is entitled to collect only tax, interest, penalty etc., within four corners of Act

High Court Of Andhra Pradesh

Sirpur Paper Mills Ltd Vs. JCIT, Hyderabad

Section 244A

Assessment Year 1984-85

G. Chandraiah And Challa Kodanda Ram, JJ.

Writ Petition No. 5807 Of 1999

March 20, 2014


Challa Kodanda Ram, J. – This writ petition has been filed seeking to declare the action of the 1st respondent in not paying the interest from 1.4.1987 to 22.12.1998 to the petitioner under Section 214 read with other provisions of the Income Tax Act (for short, the Act) for the income-tax assessment year 1984-85 in the consequential order dated 22.12.1998 as unconstitutional, illegal and consequently prays the Court to direct the respondents to pay the interest for the above said period.

2. For the assessment year 1984-85, the petitioner/assessee had paid an advance tax of Rs.22,55,000/- and had also paid an amount of Rs.50,881/- to his credit by way of T.D.S. Assessee was finally assessed to income under the head Long Term Capital Gains for a sum of Rs.3,28,732/-. Thus, the assessee became eligible for refund of an amount of Rs.19,77,149/- along with interest under Section 214 of the Act. By order dated 22.12.1998, the assessee was determined to be entitled for a refund of Rs.19,77,149-, on which he was also entitled to be paid interest under Section 214 of the Act for the period from 01.04.1984 to 31.03.1987 as per the applicable rates and finally the same was arrived at Rs.8,35,325/-. These facts as set out in the affidavit filed along with the writ petition are not in dispute. In the present writ petition, the claim of the assessee is for payment of compensation on account of the delay in payment of the interest amount for the period from 31.03.1987 to 22.12.1998. The assessees claim for interest came to be rejected by the Deputy Commissioner of Income Tax (Asset), Special Range, Hyderabad, through the letter No.S-2/SR.3 dated 18.05.1998 on the ground that there was no provision in the Act to grant interest on interest. It was also further stated that in terms of the judgment of the Supreme Court reported in Modi Industries Ltd. v. CIT [1995] 216 ITR 759/82 Taxman 377, interest is allowable only from the 1st day of April of the assessment year to the date of making an order of assessment.

3. A detailed counter-affidavit has been filed by the 1st respondent Joint Commissioner of Income-tax (Assts.), Special Range-5, Hyderabad on his behalf and on behalf of other respondents as well, raising various contentions including the plea that the petitioner is not entitled for interest as the demand is hit by Order II Rule 2 of C.P.C. It was further contended that assuming, without conceding, that interest is payable, interest amount cannot be granted beyond the one contemplated by the Supreme Court in Modi Industries (supra). It was also further stated that the cause of action for the refund arose only when the Assessing Officer passed consequential order dated 07.10.1988 in pursuance of the appellate order of the CIT but not on any date anterior to it. It was further stated that the judgment of the Gujarat High Court reported in D.J. Works v. Dy. CIT [1992] 195 ITR 227/64 Taxman 91 was not accepted by the department as the same was contrary to the statutory provisions and the procedure contemplated under Section 214 of the Act and as such the assessee petitioner is not entitled to any relief based on the view expressed by the Gujarat High Court.

4. Having considered the rival submissions of the learned counsel and on perusal of the judgment of the Supreme Court reported in Sandvik Asia Ltd. v. CIT [2006] 280 ITR 643/150 Taxman 591, we are of the opinion that the issue involved in this case is not more res integra. The Apex Court in the above case while reversing the judgment of the Bombay High Court Sandvik Asia Ltd. v. CIT [2004] 267 ITR 78/137 Taxman 167 had extensively dealt with the issue and finally came to decide that under the Act, the Revenue is entitled to collect only tax, interest, penalty etc., within the four corners of the Act and any other amount which has been collected in excess would have the general character of the amount which amount if it is withheld beyond the period permissible under the statute, the taxpayer is entitled to be compensated for the deprivation of the said amount. In that context, the meaning that is required to be given to the word compensation has been considered extensively and finally the department was directed to pay interest @ 9% per annum within a period of one month from the date of receipt of copy of the order, failing which the department shall pay a penal interest @ 15% per annum for the period mentioned in the said judgment.

5. Respectfully following the above cited judgments of the Supreme Court, the writ petition is allowed directing the respondents to pay the simple interest @ 9% per annum for the period i.e., from 31.03.1987 to 22.12.1998 to the petitioner within a period of two months from the date of receipt of copy of this order, failing which the respondents shall pay the penal interest @ 15% per annum for the above said period. No order as to costs. Miscellaneous Petitions, if any pending, in this writ petition shall stand closed.

[Citation : 368 ITR 598]