1. The petitioner is a public limited company carrying on the business of manufacturer and dealer of cotton textile goods. The petitioner was assessed under the Excess Profits Tax Act, 1940 (hereinafter referred to as 'the Act'), and the dispute in this petition relates to the chargeable accounting period for the calendar year ending on December 31, 1942. The petitioner filed before the 1st respondent a return under the Act for the relevant year showing turnover in the taxable territories of Rs. 28,397 and according to the petitioner no tax was payable under the Act. However, the 1st respondent made a provisional assessment under s. 14A of the Act and demanded by way of tax a sum of Rs. 2,20,000. The petitioner paid the amount under protest and requested the 1st respondent to cancel the notice issued under s. 14A of the Act. The 1st respondent passed an assessment order on October 31, 1962, holding that the excess profit that accrued in the taxable territories was Rs. 1,62,868 and the tax thereon under the Act was Rs. 1,08,579. The 1st respondent thereupon directed refund of the sum of Rs. 1,11,421 out of Rs. 2,20,000 paid by the petitioner.
2. The petitioner carried an appeal against the said final assessment order disputing the liability to be assessed under the Act. The AAC allowed the appeal and directed the 1st respondent to determine the profit that accrued in the taxable territories as determined by the Income-tax Appellate Tribunal in collateral proceedings. Thereafter, as per the order of the AAC, the 1st respondent passed an order on April 25, 1968, holding that no tax was payable under the Act by the petitioner-company. The 1st respondent, in pursuance of this order, refunded the balance sum of Rs. 1,08,579 to the petitioner.
3. Section 14A(7) of the Act provides that when the regular assessment is made in due course, under s. 14, the amount of excess profits tax payable thereunder is found to be less than that determined as payable by the provisional assessment, any excess tax paid as a result of the provisional assessment shall be refunded to the assessee together with interest at 5% per annum calculated from the date of payment of such excess tax to the date of the order of refund, both days inclusive. The petitioner, accordingly, by an application dated December 18, 1968, requested the 1st respondent to grant interest on the amount of refund. The petitioner simultaneously filed a revision application to the 2nd respondent to direct the 1st respondent to grant interest as provided by the Act. The 2nd respondent, accordingly, gave direction to the 1st respondent to award interest as was due under the law. The 1st respondent, thereafter, by an order dated April 30, 1970, granted interest on Rs. 1,11,421 from September 16, 1943, to October 31, 1963. As the interest for the remaining amount was not awarded, the petitioner filed an application on April 29, 1971, before the 2nd respondent seeking interest on Rs. 1,08,579 from September 16, 1943, till 1968, when refund was granted. The petitioner also made representation in this connection to the 3rd respondent and the respondent rejected the application of the petitioner on the ground that there was no refund due on the date of regular assessment and, therefore, no interest was payable on Rs. 1,08,579. The petitioner has filed the present proceedings under art. 226 of the Constitution of India to challenge the legality and validity of the said order.
4. Mr. Patil, the learned counsel appearing in support of the petition, contended that in view of the clear provisions of s. 14A(7) of the Act, the petitioner is entitled to interest on the amount of Rs. 1,08,579 also. Mr. Patil submits, and in my judgment rightly, that the words 'regular assessment' include all assessments under s. 14 of the Act and are not confined only to first assessment. Mr. Patil submits that the material dates for the purpose of the interest are the date of payment of the excess tax and the date on which excess tax is ordered to be refunded.
5. Mr. Joshi, the learned counsel appearing for the revenue contended that the amount of Rs. 1,08,579 was not found due on the date when final assessment was made and the said amount was found due only by the appellate authorities. According to Mr. Joshi, the crucial date for determination of payment of interest is the date of regular assessment and that being October 31, 1962, the petitioner would not be entitled to the interest as claimed in the petition. It is not possible to accept this submission on behalf of the revenue. In my judgment, the words 'regular assessment' refer not only to the initial order of assessment but also cover the assessment orders passed by the appellate authorities. The provisions of s. 14A(7) are attracted not only when the regular assessment is made but also when directions are given by the higher authorities and in consequence of such directions, orders of refund are passed by the officer who has passed the initial assessment order. In any judgment, the order of rectification passed with a view to give effect to the orders of the higher authorities results into a fresh order of assessment and the assessee would be entitled to refund in consequence of such rectification order which is really in the nature of a regular assessment order.
6. A reliance in this connection by Mr. Patil on the decision of the Punjab High Court in thc case of CIT v. R. B. Jodhamal Kuthiala is very appropriate. The Punjab High Court took the view that as s. 14A(7) provides that the calculation of the interest is to be 'from the date of payment of such excess tax to the date of the order of refund, both days inclusive 'the expression' regular assessment 'in that section can only mean the last assessment made by the EPTO under s. 14, for only then can an order for refund be made in favour of an assessee, and the second point of time for calculation of interest comes to bo fixed. I am in agreement with the view taken by the Division Bench of the Punjab High Court and, in my judgment, the order passed by respondent No. 3 declining to grant interest on the amount of Rs. 1,08,579 is entirely illegal.
7. In the result, the petition succeeds and the rule is made absolute in terms of prayers (a) and (b). The respondents are directed to pay the amount of interest to the petitioner within a period of eight weeks from today. The respondents shall also pay the costs of the petitions.