Kania, Actg. C.J. :
This is an appeal by the CIT, Bombay City-VI and others against a judgment and order of a ld. Single Judge dated 6-7-1979 making the aforesaid Miscellaneous Petition absolute and directing the Income-tax Department to pay interest to the respondent-company from 17-11-1962 till the date of actual refund, namely, 26-2-1971 at the rate of 6% per annum.
2. For the sake of convenience, we propose to refer hereafter to the parties by their original description in the petition. The petitioner, who is the respondent before us, sold 43,860 tons of teak logs in the periods relevant to the asst. yrs. 1950-51, 1951-52 and 1953-54. The petitioner claimed that the sale proceeds of these logs were capital receipts and not liable to the levy of income-tax. This contention was not accepted by the ITO and the petitioner was required to deposit the amount of tax payable on the footing that the sale proceeds of the said logs were revenue receipts. The appeals preferred by the petitioner before the AAC as well as the second appeals preferred to the Income-tax Appellate Tribunal were dismissed. The appeals in respect of the asst. yrs. 1950-51 and 1951-52 were dismissed by the Tribunal on 17-11-1962 and the appeal in respect of the asst. yr. 1953-54 was dismissed by the Tribunal on 19-11-1962. Pursuant to application for reference made by the petitioner, certain questions of law were referred by the Tribunal to this Court by its order dated 2-8-1963. These questions of law were answered by this Court (In Income-tax Ref. No. 111 of 1963) in April 1970 in favour of the petitioner. It was held by this Court that on the facts and circumstances of the case the receipts in question were of capital nature and not chargeable to income-tax. The cases were referred back to the Tribunal to pass orders in accordance with the decision of the High Court. On 15-12-1970, the Tribunal passed orders under s. 66(5) of the Indian IT Act, 1922 giving effect to the decision of the High Court and directed the ITO concerned to pass consequential orders. Pursuant to these orders of the Tribunal, on 26-2-1971 the ITO concerned passed orders directing an aggregate refund of Rs. 29,74,541 to the petitioner. The ITO, however, did not give to the petitioner any interest on the amount of tax which had been overpaid by the petitioner. On 24-10-1973, the petitioner applied to respondent No. 1 (appellant No. 1 herein) for the payment of interest as mandatorily required by law. Pursuant to a direction of respondent No. 1, the petitioner contacted respondent No. 2, being the ITO concerned in this regard, by a letter dated 15-11-1973 and claimed interest at 12% per annum from the respective dates of payment of tax up to the date on which the refund was actually paid to the petitioner. After considering the matter, respondent No. 1 directed the ITO (respondent No. 2 in the petition) to allow to the petitioner interest on the sum refunded to the petitioner for the asst. yrs. 1950-51, 1951-52 and 1953-54 respectively from the date on which the Tribunal passed its consequential order under s. 66(5), namely, 15-12-1970, upto the date on which the refunds were actually paid. The petitioner was aggrieved by these orders as, according to the petitioner, interest should have been paid to the petitioner as aforesaid right from 17-11-1962 in respect of the refund payable for the asst. yrs. 1950-51 and 1951-52 and from 19-11-1962 in respect of the refund payable for the asst. yr. 1953-54. The petitioner filed the aforesaid writ petition to enforce this claim. The claim is admittedly based on the provisions of s. 66(7) of the Indian IT Act, 1922.
3. The ld. Trial Judge by his judgment, delivered on 6-7-1979, upheld the claim of the petitioner. He proceeded on the footing that the provisions of s. 66(7) of the Indian IT Act, 1922 were applicable to the facts of the case and came to the conclusion that under sub-s. (7) of s. 66, no discretion was left with the CIT in respect of the period for which interest was to be paid, but the discretion only lay with the Commissioner in respect of the interest which was payable. In arriving at this conclusion, the ld. Trial Judge relied upon the decision of the Madras High Court in Ajax Products Ltd. v. CIT : 91ITR327(Mad) , with which the ld. Judge expressed his full agreement. Following the said decision the ld. Judge took the view that the petitioner was entitled to interest from the respective dates of the orders of the Tribunal in respect of the appeals relating to the said assessment years namely, 17-11-1962 and 19-11-1962 respectively at the rate of 6% per annum till the date of payment. It is the correctness of this judgment which is sought to be assailed by the Department in this appeal.
4. The submission of Mr. Jetly, ld. counsel for the respondents to the petition (appellants herein) is that, as far as the question of interest on the amount refunded is concerned, that question has to be decided in accordance with the provisions of the IT Act, 1961 which came into force on 1-4-1962. It is pointed out by him that the relevant provision in this connection is s. 243 of the IT Act, 1961 (referred to hereinafter as 'the Act of 1961'). The relevant portion of s. 243 of the Act of 1961, as it stood at the relevant time, ran as follows :
'243 (1) If the Income-tax Officer does not grant the refund, -
(a) xx xx xx
(b) in any other case, within three months from the end of the month in which the claim for refund is made under this Chapter, the Central Government shall pay the assessee simple interest at twelve per cent per annum on the amount directed to be refunded from the date immediately following the expiry of the period of three months aforesaid to the date of the order granting the refund.'
There is an Explanation to sub-s. (1) and there is also sub-s. (2) of s. 243. We are, however, not concerned with those provisions. It is common ground that if the provisions of s. 243 are applied, the respondents would not be entitled to any interest at all.
5. Mr. Jetly further referred to the provisions of s. 297 of the Act of 1961. Sub-s. (1) of s. 297 states that the Indian IT Act, 1922 is repealed. Sub-s. (2) of s. 297 contains the saving provisions. Clause (i) of sub-s. (2) of s. 297 reads as follows :
'297(2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (11 of 1922) hereinafter referred to as the repealed Act -
(i) where in respect of any assessment completed before the commencement of this Act, a refund falls due after such commencement or default is made after such commencement in the payment of any sum due under such completed assessment, the provisions of this Act relating to interest payable by the Central Government on refunds and interest payable by the assessee for default shall apply;'
It was submitted by Mr. Jetly that the question raised before us is concluded by a decision of the Supreme Court in O. RM. M. SP. S. V. P. Panchanatham Chettiar v. CIT, Madras : 99ITR579(SC) . In that case it was held that where in relation to an assessment under the 1922 Act, refund of tax became due consequent upon the decision of the Supreme Court rendered after the IT Act, 1961, came into force, the question of interest was governed by s. 297(2) (i) of the 1961 Act. That decision of the Supreme Court was rendered by Hegde, J. and is brief. Hegde J. has pointed out that the only question that arose for decision in the appeal before the Supreme Court was whether the assessee was entitled to claim interest on the refund which became due to him on the strength of the decision of the Supreme Court. The Supreme Court then observed as follows :
'........ The assessment in this case was completed long before the IT Act 1961 came into force. Under these circumstances, this case clearly comes within the scope of s. 297(2) (i) of the IT Act, 1961, and not under s. 66(7) of the Indian IT Act, 1922. Under the new Act, there is no provision for payment of interest unless the same comes within the scope of s. 243 of that Act. It is not the case of assessee that the facts of this case come within the scope of s. 243.'
The facts of that case were that the assessee claimed relief under s. 25(3) of the Indian IT Act, 1922 (referred to hereinafter as 'the Act of 1922'). That claim was rejected by the ITO and the AAC. The Appellate Tribunal granted relief in respect of business income, but not with respect to rental income from the house properties abroad. On cross-references filed by the parties, the Madras High Court answered the reference in favour of the Department. On appeal, the Supreme Court, by its judgment dated October, 1966 reversed the decision of the Madras High Court holding that the assessee-firm was entitled to relief under s. 25(3) as regard both business income and rental income. Consequent upon this decision of the Supreme Court, the department refunded the tax collected; but when the appellant, on behalf of the assessee-firm, claimed payment of interest on the amount of tax refunded, the Commissioner rejected that claim. The appellant filed a writ petition before the Madras High Court to quash the order of the Commissioner which was based on the footing that the provisions of s. 66(7) of the Act of 1922 were not applicable to the case. The Madras High Court upheld the view of the Commissioner and rejected the writ petition. The Supreme Court, on the basis of the conclusion set out earlier, dismissed the appeal preferred by the assessee. In our view, there is considerable force in the submission of Mr. Jetly, and the decision of the Supreme Court in the aforesaid case practically concludes the matter against the petitioner.
6. The submission of Mr. Ganesh, ld. Counsel for the assessee, is that the case is governed not by the provisions of the s. 297(2) (i), but by the provisions of s. 297(2) (c). Clause (c) of sub-s. (2) of s. 297 of the Act of 1961 runs as follows :
'any proceeding pending on the commencement of this Act before any income-tax authority, the Appellate Tribunal or any court, by way of appeal, reference or revision, shall be continued and disposed of as if the Act had not been passed;'
It was submitted by him that in view of this provision, the right of the petitioner assessee to interest on refund was governed by sub-s. (7) of s. 66 of the Act of 1922 and that under the provisions of the said sub-section, the Commissioner had discretion only with respect to the percentage of interest which was to be paid, but not with regard to the period for which interest was to be paid as laid down in the aforesaid decision of the Madras High Court in the case of Ajax Products Ltd. v. CIT : 91ITR327(Mad) . It was urged by him that the petitioner was entitled to interest right from the time when the Tribunal passed its consequential orders till the time when the refund was actually paid. In our view, this submission cannot be sustained. Sub-s. (c) of s. 297 deals with a case where any proceeding is pending on the commencement of the Act of 1961, namely, on 1-4-1962 before any Income-tax Authority, the Appellate Tribunal or any Court by way of appeal, reference or revision. It is quite clear that the claim for interest made by the petitioner could not be said to be a proceeding by way of appeal, reference or revision nor was any such claim pending on 1-4-1962 and hence we fail to see how the provisions of cl. (c) of sub-s. (2) of s. 297 can apply at all. Mr. Ganesh cited before us the decision of the Supreme Court in the case of CWT, Gujarat v. Smt. Vimalaben Vadilal Mehta : 145ITR11(SC) , where it has been held that it is well settled that when an appeal is filed against an assessment order before the AAC, the assessment is thrown open and appellate Proceeding constitutes a continuation of the assessment proceeding. We fail to see relevance this decision has to the question before us. Even assuming that the assessment was only concluded when the appeals of the petitioners were dismissed by the Tribunal on 17-11-1962 and 19-11-1962 respectively or even when the questions raised were answered by this Court on 2-8-1962, we still fail to see how that brings into play the provisions of cl. (c) of sub-s. (2) of s. 297 regarding the question of payment of interest on the amount refundable. The same can be said regarding the decision in the case of Premji Haridas & Co. v. CIT, Bombay City-II rendered by a Division Bench of this High Court and reported in : 110ITR315(Bom) . Apart from this, it must be observed that the said decision turned on its own facts as, in that case, the Tribunal, by its order dated 2-3-1966, had set aside the entire assessment order and remanded the matter for fresh assessment.
7. It was next contended by Mr. Ganesh that in the present case, the provisions of s. 297(2) (i) had no application, because, according to him, the process of assessment continued and was completed only with the decision of the Tribunal which was given in November, 1962 or when the questions raised in the said reference were answered by this Court, in August, 1963 both of which events occurred after 1-4-1962. In the first place, this argument cannot be sustained in view of the decision of the Supreme Court in the case of O. RM. M. SP. S. V. P. Panchanatham Chettiar (supra). Moreover, even assuming that the assessment was completed after 1-4-1962 and the provisions of s. 297(2) (i) are not applicable, this does not help the assessee in this case. It is quite clear that if one regards the assessment as continuing and having been concluded after the Act of 1961 came into force, then clearly the question regarding interest on the refund payable must be determined according to the provisions of the Act of 1961. We fail to see anything which could lead us to the somewhat illogical conclusion that although where an assessment is completed before 1-4-1962, that is, before the commencement of the Act of 1961 but refund falls due after such commencement, the question of payment of interest is governed by the Act of 1961 but where the assessment is completed after the commencement of the Act of 1961, the question of refund would be governed by the provisions of the Act of 1922. Such a conclusion would be prima facie against common sense and logic and no provision of law has been pointed out to us which would compel us to come to such a conclusion.
8. We may also mention that before delivering this judgment, we heard Mr. Dwarkadas who is appearing for an assessee in a similar appeal which is on board, although in the case the assessee represented by Mr. Dwarkadas is the appellant and not the respondent as herein. Mr. Dwarkadas drew our attention to the provisions of the Income-tax (Removal of Difficulties) Order, 1962. Clause 4 of this Order, very briefly stated, provides that a proceedings by way of appeal, reference or revision in respect of any order made under the Act of 1922, shall be instituted and disposed of as if the repealing Act namely, the Act of 1961 had not been passed. We fail to see how the provisions of this clause make any difference to the conclusion to which we have arrived.
9. In the result, we are of the view that the ld. trial Judge was in error in coming to the conclusion that the question of interest was governed by the provisions of s. 66(7) of the Act of 1922. He was probably led to this error by reason of the fact that the decision of the Supreme Court in the case of O. RM. M. SP. SV. P. Panchanatham Chettair (supra), was not pointed out to him at all.
10. In the result, the appeal is allowed. The Writ Petition filed by the petitioner (respondent herein) is dismissed and rule discharged with no order as to costs throughout.