COMMISSIONER OF INCOME TAX Vs. SUNDARAM CLAYTON LIMITED

JUDGEMENT

(1.) THE Revenue having failed to obtain a stated case under section 256(1) of the Income -tax Act, 1961 (hereinafter referred to as the "Act"), has filed these petitions under section 18 of the Companies (Profits) Surtax Act, 1964, read with section 256(2) of the Income -tax Act, seeking a direction from this court for reference on the following question of law

(2.) THE facts of the case are as follows The assessee (respondent) is assessed under the provisions of the Companies (Profits) Surtax Act, 1964. For the assessment years 1971 -72, 1972 -73 and 1973 -74, the assessee became entitled to refund of tax as result of revision of assessments consequent to the reliefs obtained in the computation of income under the Income -tax Act. The Surtax Officer granted the refund with interest worked out from the date of payment of tax to the date of refund. Subsequently, however, the Commissioner of Income -tax acting under section 263 of the Act considered that payment of interest to the assessee was erroneous in law and hence prejudicial to the interests of the Revenue. The Commissioner considered the provisions of section 244(1) and 244(lA) of the Act and held that in the light of the proviso to section 244(lA), the assessee will not get any interest if the refunds were made within one month from the date of the order giving rise to the refund. According to the Commissioner, the provisions of section 244(1) and 244(lA) should be given a harmonious construction and if so construed, it should be taken that any refund made within a period of one month will not carry any interest. In this view, the Commissioner directed the Surtax Officer to withdraw the interest paid for the assessment years 1971 -72 and 1972 -73 and reduced the interest payable in respect of the assessment year 1973 -74On appeal by the assessee, the Tribunal took the view that section 244 (1 A) is an independent provision which has to be construed on its own language. The Tribunal held that the refund was not under the provisions of the Companies (Profits) Surtax Act as a consequence of which the revision of the income -tax assessments would fall within the term "other proceedings" in section 244(l A) and under the proviso, what is excluded from payment of interest is the one month period and it cannot be construed as to provide for payment of interest Only when the refunds are belated, beyond one month from the date of the order giving rise to the refund. In other words, according to the Tribunal, the assessee would be entitled to interest from the date of the payment of tax to the date of refund and from that period, one month will be deducted. In this view, the Tribunal set aside the order of the Commissioner and restored the order of the Surtax Officer for all the three years. It is as against this, the Revenue has filed these petitions for a reference on the question of law set out above.

(3.) THERE was some discussion before this court as to whether the circular is binding on the revisional authority or not on the analogy of the appellate authorities on whom the circular is not binding. We are not expressing any view on this aspect as we are inclined to accept the construction placed by the Tribunal on section 244(1A). Learned counsel for the Revenue laid great stress on the second proviso to section 244(l A) reading.