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Commissioner of Income-tax, Karnataka-ii Vs. T. Gopal Bhandary - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberIncome-tax Referred Case No. 110 of 1984
Judge
Reported in(1985)49CTR(Kar)155; ILR1985KAR1687; [1986]159ITR828(KAR); [1986]159ITR828(Karn)
ActsIncome Tax Act, 1961 - Sections 140A, 208, 209, 209A, 210, 212(3A), 215(2) and 217(1A)
AppellantCommissioner of Income-tax, Karnataka-ii
RespondentT. Gopal Bhandary
Appellant AdvocateK. Srinivasan and ;H. Raghavendra Rao, Advs.
Respondent AdvocateS.P. Bhat, Adv.
Excerpt:
- [s. abdul nazeer, j.] code of civil procedure, 1908 — order 23 rule 3-b -representative suit — compromise of — leave of the court - the suit in question is a representative suit which comes within the explanation(d) of order 23 rule 3-b of c.p.c. — the explanation to order 23 rule 3-b of cpc explains the meaning of the words ‘representative suit’ employed in sub-rule (1) of order 23 rule 3-b of cpc. explanation (d) of order 23 rule 3-b of cpc states that a representative suit means, any other suit in law in which the decree passed may, by virtue of the provisions of cpc or of any other law for the time being in force, bind any person who is not named as party to the suit. bombay public trust act comes within the expression ‘any other law for..........while calculating interest under section 217(1a), it is tax paid which matters and not advance tax paid. advance tax undoubtedly means advance tax payable in advance in accordance with the provisions of sections 208 to 219. mr. g. n. desai, appearing for the revenue, is right when he contends that tax which is not paid in accordance with the provisions of section 212(3a) is not advance tax for the purposes of any of the provisions of sections 208 to 219 and, therefore, for the purposes of section 217(1a). however, by virtue of the language of section 215(2), which has got to be given effect to while calculating interest under section 217(1a), interest has to be calculated keeping in mind the date on which tax is paid before the date of completion of the regular assessment and if that.....
Judgment:

K. Jagannatha Shetty, J.

1. Under section 256(1) of the Income-tax Act, 1961 (the 'Act'), the Tribunal has referred the following two questions :

'(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the appeal is maintainable in respect of levy of interest under section 217(1A) (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that no interest under section 217(IA) is leviable even though the filing of estimate as specified under section 212(3A) and the payment of last instalment of advance tax was beyond the time specified under the Act ?'

2. The reference arises out of an order of assessment made on the assessee for the assessment year 1975-76. In demanding the tax, the Income-tax Officer also demanded interest under section 217(1A) of the Act to the extent of Rs. 25,740. The assessee appealed to the Appellate Assistant Commissioner against the levy of interest under section 217(1A) of the Act. The Appellate Assistant Commissioner found that the appeal was not maintainable. He, however, considered the matter on merits and dismissed the appeal.

3. The assessee appealed to the Tribunal. The Tribunal was of the opinion that the appeal was maintainable in view of the decision of this court in National Products v. CIT : [1977]108ITR935(KAR) . On merits, the Tribunal held that there would be no liability to pay interest under section 217(1A) of the Act since the tax was paid within the financial year. In support of this conclusion, the Tribunal relied upon the decision of the High Court of Gujarat in Bharat Textile Works v. ITO : [1978]114ITR28(Guj) .

4. It is now necessary to refer to the facts found by the Tribunal. The Income-tax Officer demanded tax of Rs. 3,263 under section 210 of the Act and the assessee paid the first two instalments. For the third instalment, the assessee sent an estimate under section 212(3A) of the Act on December 16, 1974, and paid the tax of Rs. 34,228. That was paid on January 22, 1975. The Income-tax Officer held that the estimate was belated and he levied the interest in question. The Tribunal observed that though the estimate filed by the assessee was beyond time, for purposes of levying interest under section 217(1A) of the Act, the tax paid by the assessee ought to be taken into consideration. With that, the Tribunal held that the advance tax paid under section 212(3A) of the Act, though belated, should be taken note of and, if that is so, there would be no liability to pay interest under section 217(1A) of the Act. So stating, the Tribunal allowed the appeal.

5. It seems to us that the Tribunal was justified in taking that view. Sub-sections (IA) and (2) of section 217 of the Act which were introduced by the Finance Act, 1969, with effect from April 1, 1970, read :

Section 217 :

'(1A) Where, on making the regular assessment, the Income-tax Officer finds that any person who is required to send an estimate under sub-section (4) of section 209A or any such person as is referred to in sub-section (3A) of section 212 has not sent the estimate referred to therein, simple interest at the rate of twelve per cent. per annum from the 1st day of April next following the financial year in which the advance tax was payable in accordance with the said sub-section (4) or, as the case may be, sub-section (3A) up to the date of the regular assessment shall be payable by the assessee upon the amount by which the advance tax paid by him falls short of the assessed tax as defined in sub-section (5) of section 215.'

(2) The provisions of sub-sections (2), (3) and (4) of section 215 shall apply to interest payable under this section as they apply to interest payable under that section.'

6. Sub-section (2) of section 215 of the Act which has been made applicable to the levy of interest under section 217(1A) provides :

Section 215(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.'

7. A combined reading of these provisions indicates that on making a regular assessment, if the Income-tax Officer finds that any person referred to in section 217(1A) or any such person as is referred to in sub-section (3A) of section 212 of the Act has not sent the estimate referred to therein, simple interest at the rate of twelve per cent. per annum from the 1st day of April next following the financial year in which the advance tax was payable, up to the date of the regular assessment, shall be levied on the assessee upon the amount by which the advance tax paid by him falls short of the assessed tax.

8. The previous year in the case of the assessee ended on June 30, 1974. The last instalment was due on December 15, 1974. The assessee filed the estimate under section 212(3A) of the Act on December 16, 1974. He paid the entire tax upon that estimate on January 22, 1975, i.e., before the 1st day of April next following the financial year in which the advance tax was payable.

9. The question is whether the tax so paid by the assessee could be taken into consideration for the purpose of levying interest under section 217(1A) of the Act. Reading the provisions of section 217(1A) along with the provisions of s. 215(2) of the Act, it is apparent that the interest payable for late filing of the estimate is upon the amount by which advance tax paid by the assessee falls short of the assessed tax. Since section 217(1A) also refers to the date from which the interest has to be calculated, it goes without saying that if any tax or advance tax is paid before the said date, that tax must be given credit to in calculating the amount of interest. It would be illogical and illegal to exclude the tax paid before the said date. Our view finds support from the decision of the High Court of Gujarat in Bharat Textile Works v. ITO : [1978]114ITR28(Guj) , wherein it was observed at page 35 :

'It must be emphasised that for the purposes of section 215(2) which has to be given effect to while calculating interest under section 217(1A), it is tax paid which matters and not advance tax paid. Advance tax undoubtedly means advance tax payable in advance in accordance with the provisions of sections 208 to 219. Mr. G. N. Desai, appearing for the Revenue, is right when he contends that tax which is not paid in accordance with the provisions of section 212(3A) is not advance tax for the purposes of any of the provisions of sections 208 to 219 and, therefore, for the purposes of section 217(1A). However, by virtue of the language of section 215(2), which has got to be given effect to while calculating interest under section 217(1A), interest has to be calculated keeping in mind the date on which tax is paid before the date of completion of the regular assessment and if that tax, that is, tax chargeable under the provisions of the Income-tax Act, 1961, is paid before the 1st day of April next following the financial year in which the advance tax was payable under section 212(3A), then full effect to that payment must be made in computing the interest under section 217(1A).'

10. This disposes of the second question.

11. So far as the first question is concerned, it is admitted that the question with regard to the maintainability of the appeal has been concluded by the decision of this court in National Products v. CIT : [1977]108ITR935(KAR) .

12. In the result, we answer both the questions in the affirmative and against the Revenue.

13. In the circumstances of the we make no order as to costs.


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