COMMISSIONER OF INCOME TAX Vs. JAIPUR UDYOG LIMITED

JUDGEMENT

(1.) THIS is a reference under S. 256(1) of the INCOME TAX ACT, 1961 (for short "the Act") for answering the following question of law :

(2.) THE relevant assessment year is 1965 -66. The assessee is a public limited company engaged in manufacuturing cement at Sawami Madhopur in Rajasthan. The assessee was required to pay by way of advance tax a sum of Rs. 29,45,365 by virtue of the order passed by the ITO. This sum was arrived at on the basis of provisional assessment made under S. 141 of the Act for the asst. yr. 1964 -65. The assessee paid a sum of Rs. 12.12 lakhs towards the demand of advance tax in March, 1965, during the relevant financial year and the legality of the remaining demand was challenged by a writ petition filed in this Court. On 26th Feb., 1965, a stay order was passed by this Court in that writ petition directing the assessee to furnish a bank guarantee for the remaining amount which was done by the assessee. The writ petition was ultimately dismissed by this Court and the assessee then went in appeal to the Supreme Court. The Supreme Court by an order dt. 6th/8th Oct., 1965, permitted the assessee to pay a sum of Rs. 11 lakhs in cash towards the advance tax within the time specified and to furnish a bank guarantee for the remaining amount demanded as advance tax. This order was also complied with by the assessee and the amount of Rs. 11 lakhs was deposited towards the advance tax in November, 1965, in accordance with the stay order passed by the Supreme Court. Ultimately, the total tax liability of the assessee was computed for that year at the sum of Rs. 19.99 lakhs resulting in excess deposit made by the assessee amounting to Rs. 3.13 lakhs. The assessee accordingly claimed interest on this excess amount under S. 214 of the Act. The ITO disallowed the assessee's claim for interest. The same view was taken on appeal by the AAC. However, on further appeal by the assessee, the Tribunal accepted the assessee's contention and held that the assessee was entitled to interest w.e.f. 1st April, 1966, and not w.e.f. 1st April, 1965, as claimed by him under S. 214 of the Act. This conclusion was reached on the ground that the amount of Rs. 11 lakhs paid by the assessee in November, 1965, must be deemed to be a payment towards advance tax by virtue of the aforesaid stay order of the Supreme Court in accordance with the provisions of Ss. 207 to 213 of the Act. Aggrieved by the view taken by the Tribunal, the Revenue applied for reference of the above question of law to this Court for its decision. This is how the question comes up for decision by us.