K. C. Agarwal, J. - At the instance of the Commissioner of Income-tax, the Income-tax Appellate Tribunal has referred the following questions of law under S. 256(1) of the Income-tax Act for the opinion of this Court :-
1. Whether on the facts and in the circumstances of the case, interest under S. 214 was payable to the assessee on the entire amount of advance tax paid viz. Rs. 38,162/- ?
2. 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 u/s. 214 on excess tax deducted at source in addition to the interest payable on the advance tax of Rs. 38,162/- ?
2. The assessee filed a return showing a gross income. On the amount of the gross income the tax determined was at Rs. 49,075/-. It, however, appears that Rs. 92,929/- had been deducted towards the tax at source. Over and above this amount of Rs. 92,929/- the assessee paid Rs. 38,162/-by way of advance tax. After the determination of the total liability of tax of Rs. 49,075/- the assessee filed an application for the refund of the amount due to him along with the interest payable thereon. The Income-tax Officer held that the assessee was not entitled to claim interest on the amount refundable to him. The order passed by the Income-tax Officer was reversed in appeal filed by the assessee before the Appellate Assistant Commissioner of Income-tax. In the opinion of the Appellate Assistant Commissioner the entire amount of tax payable by the assessee having already been adjusted from the amount deducted at source, the assessee was entitled to get interest on the amount of Rs. 38,162/-. Aggrieved by the judgment and order of the Appellate Assistant Commissioner and the Income-tax Officer the assessee preferred an appeal before the Income-tax Appellate Tribunal. The appeal was dismissed. But since the Tribunal on reference by the Department was satisfied that the aforesaid questions of law was involved, it referred the same to the High Court for its opinion.
3. After hearing counsel for the parties, we are satisfied that the judgment of the Appellate Tribunal is legally sound and correct. Under S. 214 of the Income-tax Act an assessee is entitled to get interest on the advance tax paid during any financial year which exceeds the amount of the tax determined on regular assessment. In the instant case, it would be seen from the facts mentioned above that the total liability of tax found recoverable from the assessee was Rs. 49,675/- where as a sum of Rs. 92,929/-had been deducted at source from the amount payable to the assessee. Consequently, the entire liability of the tax of the assessee had been satisfied as a result of the deductions made at source. The deposit of the entire amount of Rs. 38,162/- by the assessee by way of advance tax was refundable along with interest under S. 214 of the Income-tax Act inasmuch as the said amount exceeded the amount of the tax determined on regular assessment. In our opinion, the Tribunal rightly found that the assessee was entitled to the payment of interest on the said amount.
4. So far as the amount deducted at source in addition to Rs. 38,162/- is concerned, it may suffice to mention that this was admittedly not advance tax. Under S. 214 of the Income-tax Act interest at the rate of 9 per cent per annum is payable on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year exceeds the amount of tax determined in regular assessment. The expression 'advance tax' has been defined in S. 207(2) of the Income-tax Act. This definition does not take within its ambit the amount deducted at source. Under S. 214 of the Income-tax Act, interest is not payable on excess tax deducted at source. It only prescribes for payment of interest on tax paid in advance under S. 207 to 213. The fact that under S. 190 tax deducted at source is treated as tax paid on behalf of the assessee would not convert it into advance tax within the meaning of S. 207(2) of the Act. Consequently, in our opinion the Tribunal was justified in holding that no interest was payable on the amount deducted at source.
5. In the result, we answer question No. 1 in the affirmative in favour of the assessee and against the Department whereas the question No. 2 is answered in the affirmative in favour of the Department and against the assessee.
6. The assessee will be entitled to costs which we assess at Rs. 200/-.