S.P. Bharucha, J.
1. This petition under article 226 raises an interesting question about the assessee's liability to pay interest under section 215 of the Income-tax Act, 1961.
2. We are here concerned with the assessment year 1972-73, the petitioner's previous year being December 1, 1970, to November 30, 1971. The petitioner was liable to pay advance tax on June 15, 1971, September 15, 1971, and December 15, 1971. The petitioner paid the first instalment of advance tax on June 14, 1971, in the sum of Rs. 51,98,705. It paid the second instalment on September 15, 1971 in the sum of Rs. 88,13,147. Its case is that it paid the third instalment of Rs. 88,13,148 on December 16, 1971. It is the respondents case, and I proceed upon this basis, that this payment was made on December 22, 1971. The petitioner also paid surcharge in the sum of Rs. 5,70,625. The petitioner's assessment for the assessment year was completed on December 31, 1974. There were two rectification orders. A sum of Rs. 2,48,32,212 was finally assessed as income-tax due by the petitioner.
3. On October 13, 1978, the petitioner was served with a notice to show cause why interest under section 215 should not be recovered from it. On November 20, 1978, the petitioner replied. On January 20, 1979, the Income-tax Officer held that the payment of Rs. 88,13,148 on December 22, 1971, was made beyond the date of the last payment of advance tax and should not be treated as advance tax. In the event of default in the payment of advance tax, the charging of interest was mandatory. An order charging interest under section 215 in the sum of Rs. 1,81,073 was, therefore, passed.
4. The petitioner, preferred a revision application. On March 30, 1981, the Commissioner of Income-tax held, 'Having regard to the fact that the last instalment of advance tax was paid after the due date, however short the delay is, the advance tax paid can be considered as advance tax only if it is paid on the dates prescribed in the Act, the provisions of section 215 have been rightly invoked... Nor does mere giving credit for certain payments of tax while computing the tax payable amount to treating belated payments as payments of advance tax as per the Act. The decision in the case of CIT v. Traub India Pvt. Ltd. : 118ITR525(Bom) , was on the facts and circumstances of that case and the court held the view it took because there was a finding of fact by the Income-tax Appellate Tribunal and according to the court, no question of law arose.' The Commissioner upheld the levy of interest but reduced the amount to 25 per cent. of that charged by the Income-tax Officer. This petition, filed on July 28, 1981, impugns the orders of January 20, 1979, and March 30, 1981.
5. Mr. Dalvi, learned counsel for the petitioner, submitted, first, that when, in making an assessment, an Income-tax Officer treats an amount paid during a financial year as a payment of advance tax, the payment has to be considered as a payment of advance tax for the purposes of charging or paying interest under sections 215 and 214 of the Act. He showed that in the assessment order dated December 31, 1974, credit has been given to the petitioner 'for advance payment of tax Rs. 2,33,95,625', i.e., that the payment of Rs. 88,13,148 on December 22, 1971, had been treated as a payment of advance tax.
6. In CIT v. Traub (India) P. Ltd. : 118ITR525(Bom) , this court was considering an application under section 256(2) of the Act for a reference. In rejecting the application, it observed that there was a clear finding by the Income-tax Appellate Tribunal that the payment that had been made by the assessee had been accepted by the Revenue as payment of an instalment of advance tax. The Tribunal had held that the assessee was entitled to interest in respect of the advance tax paid by it. In view of this factual finding that the payment, though belated by two days, was accepted by the Revenue as payment of an advance tax instalment, the conclusion that the assessee was entitled to interest did not give rise to any question of law.
7. The Madras High Court in Addl. CIT v. Chitra Sagar : 121ITR699(Mad) held that what is treated by the Revenue as a payment of advance tax under one provision of the Act must be treated as a payment of advance tax for other provisions of the Act.
8. The payment of Rs. 88,13,148 having been treated by the Revenue as a payment of advance tax, the Revenue cannot for the purposes of section 215 exclude that payment from the computation of the advance tax paid and claim that there was an under-payment of advance tax which attracted the provisions of section 215. If the amount of Rs. 88,13,148 is included in the computation of the advance tax paid, the provisions of section 215 are not attracted.
9. This conclusion can dispose of the petition in favour of the petitioner but since a question of some importance arises, I propose to deal with the other arguments.
10. It was urged by Mr. Dalvi that every amount paid by an assessee during a financial year, though it be paid after the due date of payment of an instalment of advance tax, is a payment of advance tax.
11. Mr. Dalvi cited the judgment of the Gujarat High Court in Chandrakant Damodardas v. ITO : 123ITR748(Guj) . It was observed there that what was required was that before the end of a financial year, advance tax should be paid. So far as the failure to pay an instalment of advance tax was concerned, the liability to pay a penalty might arise. The concept of section 214 of the Act, which has been held by a Full bench of this court, in CIT v. Carona Sahu Co. Ltd. : 146ITR452(Bom) to be the counterpart of section 215, was the concept of the aggregate amount of the installmentsof advance tax paid during the particular financial year. There was no indication in section 214 that the dates of the installmentswere strictly to be adhered to and, if they were not adhered to, interest would not be payable. It would be doing violence to the language used in section 214 if the requirement were to be read into it that, for the purpose of earning interest from 1st April following the end of the financial year in question, the assessee must have paid all the installmentsof advance tax on the dates referred to in section 211.
12. In Santha S. Shenoy v. Union of India : 135ITR39(Ker) , the Kerala High Court took much the same view. Posing the question : should the advance tax have been paid on the due dates on which they were payable or would it be sufficient if the advance tax was paid within the 31st March of that financial year The court considered the provision of section 214. It posed the further question : should the advance tax paid, say, on 16th March but payable on 15th March, be taken into account in determining the aggregate sum of installmentsof advance tax paid and does it cease to be an instalment of advance tax when it is paid not on 15th March but on 16th March. It noted that the words used in the section were not 'installmentsof advance tax paid in accordance with sections 207 to 213'. Even payments made pursuant to notices on dates other than the last dates specified would be of advance tax payable under the Act and if paid during the financial year concerned, would be given credit to under section 219. The scheme of the Act showed that the obligation of the assessee was to pay tax in advance during the financial year and if he failed to make an estimate in accordance with his income, he invited the liability to pay interest under section 217. Similarly, if he paid more, he had necessarily the right to get interest on the excess amount paid and that interest was payable from the 1st of April next succeeding. This was naturally so because the payment had to be made during the previous financial year. There was no rhyme or reason in limiting the payment of interest to excess advance tax paid before the specified dates and not within the financial year. The court approved the judgment of the Gujarat High Court to which I have just referred and declined to follow the judgment of the Andhra Pradesh High Court in Kangundi Industrial Works (P) Ltd. v. ITO : 121ITR339(AP) to which I shall advert.
13. The Madhya Pradesh and Madras High Courts have in CIT v. Jagannath Narayan Kutumbik Trust : 144ITR526(MP) and CIT v. T. T. Investments & Trades Pvt. Ltd. : 148ITR347(Mad) taken the view favoured by the Gujarat and Kerala High Courts.
14. The Andhra Pradesh High Court in the case of Kangundi Industrial Works held that when an assessee committed default by making a belated payment of advance tax, he exposed himself to penalty proceedings and, consequently, forfeited his right to claim interest under section 214 of the Act.
15. Section 215, sub-sections (1) and (2) read thus :
'215. (1) Where, in any financial year, an assessee had paid advance tax under section 209A or section 212 on the basis of his own estimate including revised estimate and the advance tax so paid is less than seventy-five per cent. of the assessed tax, simple interest at the rate of fifteen per cent. per annum from the 1st day of April next following the said financial year up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax so paid falls short of the assessed tax :
Provided that in the case of an assessee, being a company, the provisions of this sub section shall have effect as if for the words 'seventy-five per cent.', the words 'eighty-three and one-third per cent.' had been substituted.
(2) Where before the date of completion of a regular assessment, tax is paid by the assessee under section 140A or otherwise, -
(i) interest shall be calculated in accordance with the foregoing provision up to the date on which the tax is so paid; and
(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax as so paid (in so far as it relates to income subject to advance tax) falls short of the assessed tax.'
16. An analysis of the provisions of section 215, sub-sections (1) and (2) is called for. Interest under section 215 is payable by an assessee where, in any financial year, he has paid advance tax (i.e., tax payable in advance) and it is less than 75 per cent. of the assessed tax. The interest is payable on the amount of the shortfall. It is simple interest at the rate prescribed. It is payable from 1st April next following the financial year up to the date of the regular assessment. Where tax is paid by the assessee before the date of the regular assessment, the interest is required to be calculated only up to the date upon which it is paid, thereafter interest is calculated on what, if anything, remains of the shortfall.
17. If there is a shortfall of 25 per cent. or more of the assessed tax and it is paid on, say, 7th April next following the financial year, interest is chargeable only between 1st and 7th April. Interest is payable commencing from 1st April and for the period the shortfall amount remains unpaid by the assessee. It must follow that where the shortfall amount is paid before 1st April next following the financial year, no interest is payable.
18. It is not possible to endorse the argument of Mr. Deodhar, learned counsel for the Revenue, that though, while computing the total amount of tax payable, the amount paid by an assessee during a financial year has to be taken into consideration and credit for it given, the assessee is liable to pay interest up to the date of the regular assessment upon the amount of the delayed payment. Interest cannot, and under section 215 is not, payable on an amount after that amount has been paid over. There is no merit in Mr. Deodhar's submission that sub-section (2) of section 215 does not apply here but applies, because of the phrase 'under section 140A or otherwise', only to cases of self-assessment. The words 'or otherwise' are of the widest amplitude and cover all payments of tax before the date of completion of the regular assessment.
19. I respectfully agree with the observations of the Gujarat and Kerala High Courts. There is nothing in section 215 which requires the payments of installments of advance tax to be made on or before the due dates thereof before the provisions of that section can apply. I cannot, with great respect, agree with the reasoning of the Andhra Pradesh High Court that, because the assessee has rendered himself liable to penalty for late payment of an instalment of advance tax, he becomes disentitled to the recovery of interest under section 214 if the amount paid by him as advance tax is in excess of the amount assessed to be due. I see no reason to link the provisions of the Act in regard to the payment of interest and the provisions which impose a penalty for late payment of installmentsof advance tax. The payment of interest is to recompense the party who has unlawfully been deprived of moneys due to it. Interest does not in any way partake of the nature of a penalty. To make an assessee pay interest on an amount he has already paid to the Revenue would be to impose upon him a penalty which is not the purpose of section 215. A penalty for late payment of an instalment of advance tax is provided for elsewhere in the Act.
20. In the instant case, the payment of Rs. 88,13,148 made on December 22, 1971, was a payment of advance tax and had to be taken into account in computing, under section 215, whether the total amount of advance tax paid by the petitioner was less than 75 per cent. of the assessed tax. Taking that payment of Rs. 88,13,148 into account, there was no shortfall and the provisions of section 215 did not apply.
21. In the result, the orders dated January 20, 1979, and March 30, 1981, are quashed and set aside. No order as to costs.