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Addl. Commissioner of Income-tax Vs. Bareilly Corporation Bank Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 509 of 1974
Judge
Reported in[1988]115ITR449(All)
ActsIncome Tax Act, 1961 - Sections 198, 199 and 214
AppellantAddl. Commissioner of Income-tax
RespondentBareilly Corporation Bank Ltd.
Appellant AdvocateR.S. Dhawan, Adv.
Respondent AdvocateAshok Gupta, Adv.
Excerpt:
- - the provisions of the aforesaid section clearly apply to the facts of the present case. learned counsel for the assessee failed to point out any provision in the act under which the interest is payable on the amounts or moneys deducted at source in excess of the liability of tax found due. 11. in view of the divided success, we direct the parties to bear theirown costs......rs. 1,05,402. out of this amount, rs. 91,576 had been deducted at source, while the assessee had paid advance tax in the sum of rs. 58,882. the asesssment order in respect of the year 1970-71 was passed by the ito on 22nd february, 1971, determining the gross tax payable by the petitioner to be rs. 75,444. out of this amount, rs. 91,035 had been deducted at source and rs. 46,519 had been deposited by the assessee by way of advance tax. the ito did not grant any interest on the amounts which had been deposited by the assessee over and above the amounts found due from the assessee on the ground that the advance tax paid was less than the gross tax.3. aggrieved by the judgments and orders of the ito refusing to award interest, the assessee appealed to the aac of income-tax. he accepted.....
Judgment:

K.C. Agrawal, J.

1. The assessee is a limited company doing business in banking. The assessment years in question are 1969-70 and 1970-71 and the corresponding previous years are the years ending on 31st December, 1968, and 31st December, 1969.

2. It appears that by the assessment order passed on 28th December, 1970, in respect of the year 1969-70, the ITO found that the gross tax payable by the assessee was Rs. 1,05,402. Out of this amount, Rs. 91,576 had been deducted at source, while the assessee had paid advance tax in the sum of Rs. 58,882. The asesssment order in respect of the year 1970-71 was passed by the ITO on 22nd February, 1971, determining the gross tax payable by the petitioner to be Rs. 75,444. Out of this amount, Rs. 91,035 had been deducted at source and Rs. 46,519 had been deposited by the assessee by way of advance tax. The ITO did not grant any interest on the amounts which had been deposited by the assessee over and above the amounts found due from the assessee on the ground that the advance tax paid was less than the gross tax.

3. Aggrieved by the judgments and orders of the ITO refusing to award interest, the assessee appealed to the AAC of Income-tax. He accepted the appeals and directed that the assessee's claim should be allowed. The revenue, thereupon, filed appeals before the ITA Tribunal. It was contended on its behalf that the assessee was not entitled to interest. The Tribunal held that the assessee was entitled to interest on Rs. 37,056 for the first year and on Rs. 46,519 for the second year. It may be stated that these were the amounts which were deposited by the assessee by way of advance tax in the years 1969-70 and 1970-71, respectively. The Tribunal further found that the assessee was not entitled to any interest on the amount of tax deducted at source. Thereupon, the assessee filed two applications for the assessment years 1969-70 and 1970-71 under Sub-section (1) of Section 256 of the I.T. Act, for making a reference to this court. On beingsatisfied that the questions raised by the assessee were of law, the ITA Tribunal referred the following three questions to the High Court for its opinion :

'1. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the tax determined to be payable by the assessee would be tax payable by him after it is given credit for tax deducted at source ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the interest under Section 214 was payable on Rs. 37,056 for the assessment year 1969-70 and on Rs. 46,519 for the assessment year 1970-71 ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal was legally correct in holding that the assessee was not entitled to any further interest under Section 214 for the assessment year 1970-71 on excess tax deducted at source in addition to the interest payable on the advance tax of Rs. 46,500 ?'

4. It would be seen from the above that the first question that arises for our decision is whether the assessee was entitled to get interest on the amounts paid as advance tax. Learned counsel for the revenue urged that the interest under Section 214 would be payable only on the difference between the advance tax paid and the gross tax payable, and, therefore, if the advance tax paid is less than the gross tax payable, the assessee would not be entitled to get interest on the advance tax. In this connection, the learned counsel also urged that the amounts deducted at source under the provisions of the I.T. Act had to be ignored for the purposes of payment of interest under Section 214 of the Act.

5. Sub-section (2) of Section 207 of the I.T. Act defines 'advance tax'. Sections 208 to 213 further pr6vide for the cases in which the advance tax would be payable by an assessee. S. 214 of the Act lays down that the Central Government would be liable to pay simple interest at 12 per cent. per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under Sections 207 to 213 exceeds the amount of tax determined on regular assessment. Section 214 thus makes a provision for the payment of interest in cases of excess payment of advance tax by an assessee. The provisions of the aforesaid section clearly apply to the facts of the present case. Under this section an assessee would be entitled to interest on the difference between the tax paid in advance and the tax determined to be payable by the assessee. It is not open to construe this section as laying down that the tax deducted at source in respect of the income by way of dividend and interest on securities has not to be taken into account for the purposes of determining whether an assessee is entitled to get interest under thisprovision. The object of Section 214 appears to be to compensate an assessee for the overpayment which he has made by way of advance tax by giving him interest on the amount paid as advance tax. If the tax deducted at source meets the entire liability, of tax found payable by an assessee, such an assessee would be entitled to get interest on the entire amount of advance tax as the same would be refundable to him. It is not correct to argue that for the purposes of determining the liability of interest under this provision, the tax deducted at source has to be ignored and if the advance tax paid is found to be more than the gross liability determined, only then the interest would be payable under this section.

6. Under Section 199 of the Act, any deduction made in accordance with the provisions of Sections 192 to 194, Sections 194A, 194B, 194C, 194D and Section 195 is liable to be treated as payment of tax on behalf of the assessee from whose income the deduction was made. If the amount deducted at source is higher than the gross tax determined to be paid, there will be no net tax payable and the assessee will be entitled to interest on the whole of the advance tax paid. Similarly, an assessee would also be entitled to get interest on the excess amount refundable to him out of the advance tax deposited if his total liability is met from the tax deducted at source and form a part of the amount paid as advance tax.

7. We, consequently, hold that on the facts and in the circumstances of the present case the Tribunal was fully justified in holding that the interest under Section 214 of the I.T. Act was payable on Rs. 37,056 for the assessment year 1969-70 and on Rs. 46,519 for the assessment year 1970-71.

8. The next question that arises for determination is whether the assessee was also entitled to get interest under Section 214 for the assessment year 1970-71 on the excess tax deducted at source in addition to the interest payable on the advance tax of Rs. 46,500. We are unable to find any substance in the claim of the assessee made for interest for this amount. As already pointed out above, Sections 192 to 194, Sections 194A, 194B, 194C, 194D, and Section 195 make provision for deduction of tax at source in different contingencies provided therein. Under Section 198, all sums deducted under the aforesaid provisions are to be treated as income of the assessee for the purpose of computing his income. Under section 199 of the Act, credit is given to an assessee from whom the deduction has been made. Learned counsel for the assessee failed to point out any provision in the Act under which the interest is payable on the amounts or moneys deducted at source in excess of the liability of tax found due. Section 214 applies only to amounts deposited as advance tax. As already pointed out above, only the amounts deposited under Sections 208 to 213 can be classified as advance tax. The amounts deducted at source cannot be treated as advance tax. As there is no provision in the statute for the payment of interest on the amountsdeducted at source, it is not possible to accept the claim of the assessee for the refund of the amount deducted at source in excess of the liability of tax found due from him. When there is a specific provision in the Act dealing with the payment of interest in the cases mentioned in Section 214, it is not possible to award interest in cases other than those covered by it. Its terms cannot be enlarged by bringing within its ambit the cases not covered by it. It is true that interest is the compensation allowed by law but where, as here, the statute does not make any provision for the payment of any compensation in the case of amounts deducted at source in excess of the tax liability, it is not possible to award interest thereon.

9. Learned counsel for the assessee contended that even though there is no provision in the Act for the payment of interest on the amounts deducted at source over and above the tax found due from an assessee, but by applying the principles of equity such a direction should have been given by the I.T. authorities in the present case. A court created by a statute has only those powers which are given to it under it. It is not possible for such a court to employ the principles of equity to award interest in cases not covered by the provisions of the I.T. Act.

10. Consequently, we answer the question No. 1 in the affirmative, in favour of the assessee and against the department. The second question is also decided in the affirmative, in favour of the assessee and against the revenue. Question No. 3 is decided in the affirmative, in favour of the revenue and against the assessee.

11. In view of the divided success, we direct the parties to bear theirown costs.


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