1. The Central board of Direct Taxes, the 3rd respondent herein, in response to the petitions dated January 22, 1973, and July 7, 1973, filed by the petitioner for payment of interest on the amount of the tax paid in excess, decided that no interest was payable to the petitioner for the year 1943-44, in terms of the proviso to s. 66 (7) of the Indian I. T. Act, 1922, the provisions of which, so far as they are relevant for our purpose, are as follows :
'66. (7) Notwithstanding that a reference has been made under this section to the High Court, income-tax shall be payable in accordance with the assessment made in the case :
Provided that, if the amount of an assessment is reduced as a result of such reference, the amount overpaid shall be refunded with such interest as the Commissioner may allow......'
2. The contention raised by the petitioner in the present writ petition is that the Commissioner is bound, as a matter of law, not only to order refund of the amount of tax paid in excess but also to pay interest on the amount of tax paid in excess. It is not open to the Commissioner to say that no interest at all would be paid. Therefore, the Commissioner to say that no interest at all would be paid. Therefore, the respondents, refusing to pay interest to the petitioner, are illegal and ultra vires and liable to be quashed.
3. The 1st respondent is the 3rd ITO, A-I Ward, Bombay. The 2nd respondent is the Commissioner of Income-tax, Bombay City III, Bombay, and the 3rd respondent is the Central board of Direct Taxes, New Delhi.
4. The brief background of the case is that the petitioner is a partner in several firms, registered and unregistered. For the assessment year 1941-42, the 1st respondent set off the petitioner's share of profits in an unregistered firm amounting to Rs. 1,75,256 against the petitioner's loss amounting to about Rs. 2,50,000. The 1st respondent passed an order determining the loss of Rs. 53,840 to be carried over and set off against the income of the subsequent assessment years. The petitioner did not file any appeal against the said assessment order of the 1st respondent, determining the loss to be carried over for the assessment year 1941-42.
5. However, when it came to the assessment years 1942-43 and 1943-44, the petitioner contended that the loss of Rs. 53,840, determined by the 1st respondent and allowed to be carried forward from the previous assessment year, was not correct. Ultimately, the matter reached the Tribunal and the Tribunal referred certain questions of law to this court [See Seth Khushalchand Daga v. CIT . The questions, under reference, were answered in favour of the petitioner. The 2nd respondent carried the matter to the Supreme Court and the Supreme Court, CIT v. Khushal Chand Daga : 42ITR177(SC) , by its order dated March 7, 1961, confirmed the judgment of this court. As per the directions of the Tribunal, the 1st respondent did not give effect to the order of the High Court. It is in these circumstances that the petitioner seeks to be paid interest for the assessment year 1943-44, as it is not in dispute that, for the assessment year 1942-43, the amount overpaid has been refunded with interest.
6. The learned advocate for the petitioner contended that the proviso to sub-s. (7) of s. 66 does not say that the reference must be for the same year, but, if the amount of an assessment is reduced as a result of a reference, then the petitioner is entitled to a refund of the overpaid amount with interest, although a reference may not have been made to the High Court as provided under s. 66. The learned advocate pointed out that effect was given to the judgment of the High Court after a period of about 10 years in the case. The order under s. 66 (5) was made on January 22, 1957. The Supreme Court decided the appeal on March 7, 1961, whereas the effect to the judgment was given on December 10, 1968. Having regard to these circumstances also, the petitioner is entitled to interest as contemplated under the proviso.
7. Shri Joshi, learned counsel appearing for the respondents, pointed out that, for the assessment year 1943-44, the amount of Rs. 30,293 overpaid by the petitioner has been ordered to be refunded to him. The refund in respect thereof was granted on December 23, 1968. As regards the interest, there was no reference made to his court for the assessment year 1943-44, and, therefore, having regard to the proviso to sub-s. (7) of s. 66, the petitioner was not entitled in law to any interest and that the impugned order of the 3rd respondent dated July 17, 1975, Exhibit I (Colly.), at page 46 of the petition, was passed in accordance with law. I think this proposition is irrefutable having regard to the clear provisions quoted above. An assessee is not entitled to interest on the amount overpaid, which is ordered to be refunded as a result of the reference to the High Court, unless a reference for that particular assessment year had been made.
8. Shri Joshi relied upon the decision of the Madras High Court in S. V. P. N. Sithambara Nadar Sons v. CIT : 67ITR45(Mad) , in which case, the Division Bench of the Madras High Court has considered the provisions relating to s. 66 (7) and the proviso in s. 66 (7) of the Indian I. T. Act, 1992, and the subject-matter of the reference. It will, therefore, be inappropriate to say that if as a result of principle settled by the High Court in a reference in respect of one year, a relief by way of refund is granted for other years by applying that principle, such refund results from the reference itself. The construction placed by the Division Bench is that sub-s. (7) of s. 66 refers to the assessment which is the subject-matter of a reference and enjoins that, in spite of the fact that a reference has been made, the income-tax should be paid in accordance with the assessment made in the case. In view of this main provision, a provision has to be made for refund of the overpaid amounts with interest in a revision of the assessment. This is what is provided for by the proviso. For the first part of the proviso to apply, there must be certain conditions : (1) there must be an assessment; (2) it should be the subject-matter of a reference; (3) the tax payable in accordance with the assessment must have been paid; (4) the reference must have resulted in the reduction of the amount of income chargeable to tax. Lastly, in consequence, a refund of the overpaid amount of tax must have become due. When such a refund is made, it has to be made with interest. As a result of this interpretation, the view expressed is that both s. 66 (7) and the proviso thereto deal with the same assessment which formed the subject-matter of a reference. The proposition propounded on behalf of the petitioner is not acceptable. What is urged on behalf of the petitioner amounts to that the result of the reference for a particular assessment year should be extended to subsequent assessment years. To put it differently, the principle settled by the High Court in a particular reference should been followed in the subsequent years. This is held by the Division Bench of the Madras High Court not to be permissible in view of the construction put by them on the relevant provisions coming up for consideration in the present petition.
9. On behalf of the petitioner, reference was made to a decision of the Patna High Court in the case of Liquidators of Pursa Ltd. v. CIT : 32ITR603(Patna) . This ruling is of no help to the petitioner because it merely construed the provisions of s. 66 (7). This authority would be applicable to the assessment year 1942-43, and not to the assessment year 1943-44, which is the subject-matter of this petition. So far as the assessment year 1942-43 is concerned, it is common ground that the overpaid tax had been refunded with interest and there is no grievance.
In the result, the petition is dismissed. Rule discharged. No order as to costs.