COMMISSIONER OF INCOME TAX Vs. RANE MADRAS LIMITED

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following question for the opinion of this court under section 256(1) of the Income-tax Act, 1961 :"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the payment of tax not in excess of 1/3rd of the tax demanded under section 210 should be considered to be an advance tax payment made under section 212(3A) and interest under section 214 should be granted on the excess amount so paid?"The assessee was required to pay advance tax of Rs. 20, 85, 000 for the assessment year 1978-79 under section 210 of the Act in three instalments. It paid two instalments amounting to Rs. 13, 90, 000. Then it filed an upward estimate under section 212(3A) and paid Rs. 12 lakhs.

(2.) THUS the total tax paid was Rs. 25, 90, 000, which was in excess of the advance tax demanded by Rs. 5, 05, 000. The Income-tax Officer in the assessment proceedings treated this entire amount of Rs. 25, 90, 000 as advance tax and on that basis granted interest under section 214 on the refund of tax. Subsequently, the Commissioner of Income-tax found that the grant of interest under section 214 to the assessee on the sum of Rs. 5, 05, 000 being the excess tax paid by it than demanded under section 210 was not correct and, therefore, the order of the Income-tax Officer was erroneous and prejudicial to the interests of the Revenue. According to him, the amount in excess of Rs. 20, 85, 000 demanded under section 210 is not advance tax, because the assessee was not obliged to file an upward estimate inasmuch as the tax payment of Rs. 25, 90, 000 did not exceed Rs. 20, 85, 000 demanded under section 210 by 33-1/3 per cent. He also held that the excess payment is in the nature of deposit, which does not have the stamp of a payment under sections 210 to 213 of the Act to make it eligible for interest under section 214. Accordingly, he issued a notice to the assessee under section 263 and after hearing the assessee, concluded that the interest granted under section 214 on the sum of Rs. 5, 05, 000 should be withdrawn. He accordingly set aside the assessment and directed the Income-tax Officer to withdraw the interest under section 214 granted wrongly.The assessee appealed to the Tribunal, the Tribunal held that even though the assessee is not obliged to furnish an upward estimate, the payment is certainly relatable to the provisions of section 212(3A) and, therefore, it should be treated as an advance tax paid under section 212(3A) or under section 210. In this view, it held that the assessee would be entitled to interest under section 210 on the refund of excess tax. The Tribunal further observed that there was no provision in the Income-tax Act for making a deposit of any amount and the payment can be construed as the payment of third instalment of advance tax with something in excess of what is liable to be paid.

(3.) THUS, the assessee filed an upward estimate and paid tax more than what was demanded under section 210 of the Act. Even if the assessee paid the advance tax as demanded by the Department under section 210 of the Act, then also, after the assessment was completed, the assessee would be compelled to pay the difference between Rs. 24, 70, 114 and Rs. 20, 85, 000. It also remains to be seen that when a sum of Rs. 12 lakhs was paid under section 212(3A), the Department accepted such payment as advance tax.In New India Maritime Agencies P. Ltd. v. CIT 1995 (216) ITR 76, 1996 (130) CTR 543 this court, while considering the interest payment under section 139(8) of the Act, held that:"So long as the payment was accepted, it could only be towards advance tax. Any payment made before the end of the accounting year for which assessment was made should be taken as advance tax. Since the amount paid by the assessee was accepted by the Income-tax Officer as advance tax and the amount paid was over and above what was due by way of tax, no interest under section 139(8) could be levied." In the case of CIT v. Ajoy Paper Mills Ltd. 1990 (181) ITR 454, 1990 (51) TAXMAN 228 the Calcutta High Court, while considering the provisions of sections 211 and 214, held that:"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, there is no reason why such tax should not be treated as advance tax."In the case of T. V. Srinivasan v. CWT 1985 (152) ITR 599, 1985 (22) TAXMAN 545 this court, while considering the provisions of section 2(m)(ii) of the Wealth-tax Act, 1957, held that:".... having regard to the statutory provisions which compel an assessee to pay advance tax and make the non-payment of advance tax penal, the amount of advance tax or excess advance tax paid in pursuance of a statutory compulsion cannot be taken to be a deposit. The entire advance tax paid will be an asset of the assessee and the entire accrued income-tax liability for the relevant accounting year will be debt owed by the assessee to the Government with the result that the excess advance tax will continue to have the character of an asset of the assessee."According to the facts arising in the present case, under section 210 the Department demanded advance tax of Rs. 20, 85, 000.