Subramonian Poti, Actg. C.J.
1. These cases were heard together since common questions arise in all these cases. The facts of W. A. No. 81 of 1980 are a little different from the facts in the other cases. The facts in all other cases are similar. Therefore, we will refer to the facts in W.A. No. 81 of 1980 and also the facts in W. A. No. 30 of 1980, the latter being representative of the other cases also.
2. The petitioner in O.P. No. 3799 of 1977 [A. Sethumadhavan v. CIT : 122ITR587(Ker) ], the judgment in which is under appeal in W.A. No, 81 of 1980, is an assessee under the I.T. Act, 1961. The order, Ex. P-4 dated August 5, 1977, passed by the Commissioner of Income-tax under Section 264 of the I.T. Act, 1961, is impugned by the petitioner in that petition. By the said order the Commissioner rejected the petitioner's claim for interest under Section 214 of the Act on the ground that the instalment of advance tax payable by the petitioner on or before 15th March of the relevant financial year was paid only subsequently though during the course of the same financial year, that is, before the 1st of April of the next financial year.
3. The assessment year, which is the subject-matter, is 1976-77. The petitioner was required to pay advance tax in terms of Section 210 of the I.T. Act in three equal instalments at the rate of Rs. 6,600 on the due dates, namely, 15th September, 15th December and 15th March. Admittedly, the first two instalments were paid on due dates. On March 13, 1976, the petitioner forwarded an estimate of his income together with a demand draft for Rs. 55,760, being the balance advance tax payable by him on the basis of such estimate. Evidently this was because, according to the assessee, the income estimated for the assessment year 1976-77 was much in excess of that corresponding to the tax demanded by the notice under Section 210 and, therefore, he was making an estimate of such higher income voluntarily and paying advance tax in accordance with such estimate. That had to be made before the 15th March, 1976. Actually he had sent the estimate two days earlier on March 13, 1976. But that was by post. That was accompanied by a demand draft for Rs. 55,760 in full payment of the amount of advance tax as estimated. This was so sent from Shoranur to Palghat, the seat of the ITO's office. Though the estimate and draft should have reached by the 15th, they seem to have reached the hands of the ITO only on the 16th. Therefore, it has been taken by the department that with regard to the 3rd instalment the petitioner is in default. Consequently, though advance tax was paid during the financial year, the petitioner was treated as a person who was not entitled to the benefit under Section 214 of the Act. This benefit arises for consideration because by the final assessment it was found that the petitioner had paid as advance tax, inclusive of Rs. 55,760, an amount which was in excess of that due on final assessment. If there was such excess, in terms of Section 214 of the Act, the assessee was entitled to be paid such excess together with interest thereon from 1st of April next succeeding. That meant that from April 1, 1976, interest on the excess would be due, provided Section 214 of the Act applied. The Commissioner in Ex. P-4 is seen to have taken the stand that such interest would not be due in this case because the amount of Rs. 55,760 was paid as advance tax in accordance with the estimate filed by the paosty only on March 16, 1976, which is a belated payment, and if it was a belated payment though made in the financial year, the assessee is not entitled to claim interest under Section 214 of the Act. This was challenged before the learned single judge who took the view that the liability of the Central Govt. to pay interest under Section 214 arises only when the advance tax itself was paid as required by the Act, that is to say, paid on the date on which it was payable under Section 211 of the Act. Since the learned judge found that this was not the case here, he declined to interfere with Ex, P-4 order.
4. In W. A. No. 30 of 1980, the appellant is the assessee who paid the 3rd instalment of advance tax payable on December 15, 1973 (which in the case of that assessee was the date on which the last of the 3 instalments was payable) by cheque, which was encashed within the accounting year but was not cashed on the 15th itself though the cheque was handed over to the ITO in time on the 15th. Therefore, the assessee was treated as not having paid the advance tax on the due date. As in the other case to which we have adverted, in this case also the assessee was treated as in default and the benefit under Section 214 was denied to him. The assessee challenged the order before the learned single judge as in the other case.
5. To understand the scope of the controversy in these cases it may be necessary to advert to some of the provisions of the I.T. Act in brief. Section 207 of the Act provides for the liability for payment of advance tax. Advance tax has to be paid in accordance with Sections 208 - 219 on income which is subject to advance tax. Section 210, as it stood during the concerned year, which alone is relevant for our purpose, contemplates an order by the ITO in the case of an assessee who has been previously assessed under the Act. By that order he requires the assessee to pay to the credit of the Central Govt. advance tax determined in accordance with the provisions of Sections 207, 208 and 209. Such advance tax is payable under Section 211 in three equal instalments, the dates of payment of which are 15th June, 15th September and 15th December and in the case of those falling under Section 211(1)(i) are 15th September, 15th December and 15th March. W.A. No. 81 of 1980 falls under the latter category while the other cases fall under the former category. Section 212(2) provides that the assessee may send a revised estimate of the advance tax payable by him and that has to be on or before any of the dates specified in Section 211 and any excess or deficiency in respect of any instalment already paid in a subsequent instalment or in subsequent instalments could be adjusted. Section 212(3A) casts an obligation to file such revised estimate and pay the advance tax in accordance with such revised estimate in the case of persons whose current income is likely to be greater than the income on which the advance tax payable by him under Section 210 has been computed. Section 214 which is the provision which arises for construction here reads as follows:
'214. Interest payable by Government.--(1) The Central Government shall pay simple interest at twelve 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 - 213 exceeds the amount of the tax determined on regular assessment, from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year during which it is payable by reason of the provisions of Section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of the regular assessment:
Provided that in respect of any amount refunded on a provisional assessment under Section 141A, no interest shall be paid for any period after the date of such provisional assessment.
(1A) Where on completion of the regular assessment the amount on which the interest was paid under Sub-section (1) has been reduced, the interest shall be reduced accordingly and the excess, if any, paid shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.
(2) On any portion of such amount which is refunded under this Chapter, interest shall be payable only up to the date on which the refund was made.'
6. Section 217 also may be referred to in this context. That provision enables the ITO to charge simple interest at 12% on an assessee if on making the regular assessment the assessing authority finds that the assessee has failed to make an estimate revising his income, as he ought to, for the purpose of payment of advance tax. Section 219 may also be adverted to. That provides that any sum, other than a penalty or interest, paid by or recovered from an assessee as advance tax in pursuance of the chapter shall be treated as a payment of tax in respect of the income of the period which would be the previous year for an assessment for the assessment year next following the financial year in which it was payable, and credit therefor shall be given to the assessee in the regular assessment. Whatever is paid as advance tax is entitled to credit at the time of regular assessment by reason of Section 219 of the Act.
7. Now, we will revert back to Section 214 of the Act. In simple terms, that obliges the Central Govt. to pay simple interest at 12% on a specified sum in case the amount of advance tax paid exceeds the amount of tax determined on regular assessment. Such interest has to be paid on the first day of April next following the said financial year and is for the period up to the date of the regular assessment. Evidently that means that if tax is paid during the financial year 1975-76 as advance tax and such tax so paid is found to be in excess of the tax due when regular assessment is made such excess paid will be paid back with interest from April 1, 1976. That interest will be at 12% per annum. The simple question is : 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 is paid within the 31st March during that financial year? If the answer is that it could be paid at any time during the financial year then the matter of delay in the payment of advance tax, which advance tax was admittedly paid during the financial year would not be material at all and we need not go into any other question. If, on the other hand, despite the fact that the estimated advance tax had been paid fully before the end of 31st March but there is some delay in the payment of one or more of the instalments and the assessee is found not entitled to the benefit of Section 214, then some further questions will arise for consideration in these cases. According to counsel for the department the date would not be 31st March in the case of those persons who fall under Section 211(1) but it would be 31st December. That will not make any difference in the disposal of these cases and, therefore, we need not go into that aspect in these cases. The further question in all these cases would be : When exactly were the payments made? If money is sent by post, will that constitute payment on the day the money is so sent If money is sent by demand draft, will it not be as good as cash payment? If money is sent either by cheque or demand draft, under what circumstance will it amount to payment--when the cheque itself is accepted by the ITO, later presented to the bank and cash realised In case we accept the contention of the department, that irrespective of the payment within the year concerned, if there is even the slightest delay in the date of payment of advance tax, the benefit of Section 214 will not be available, we will have to go into all these questions. Naturally we will deal with the main question first.
8. '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 - 313' is the term which calls for contraction in this case. It is only when that aggregate sum exceeds the amount of tax determined on regular assessment that the question of payment of interest on the difference arises. Should the advance tax paid, say, on the 16th of March but payable on 15th March, be taken into account in determining the aggregate sum of instalments of advance tax paid Does it cease to be an instalment of advance tax, when it is paid not on 15th March but on 16th March Is the qualification of the term 'advance tax paid 'by the words 'during any financial year' of any significance The words 'in which they are payable' under Section 207 - 213 evidently qualify the term 'financial year'. That also indicates that the liability to pay advance tax under Sections 207 - 213 is in relation to a financial year, though no doubt the dates are specified. Apart from the reference to financial year, the fact that interest commences to run not from the dates of payment but from the first of April of the next year would show that advance tax paid in excess during a year begins to earn interest for the assessee from the I.T. Dept. only from 1st of April next year. The payment need not, it appears on a reading of the section, be in terms of the notice under Section 210 read with Section 211. The section does not use the words 'instalments of advance tax paid in accordance with Sections 207 - 213'. Even payments made pursuant to notices on dates other than last dates specified would be advance tax payable under the Act and if they are paid during the financial year concerned, it will be given credit to under Section 219. It is not the case of the department that if advance tax payable on the 15th is paid on the 16th, it will not be given credit to at the time of regular assessments of tax, Necessarily that will be given credit to. That is because of Section 219 of the Act which provides for treating advance tax paid as payment of tax in respect of income of the period for which the assessment is later made. We are indicating here that advance tax paid during the year concerned but not on specified dates does not cease to have the character of advance tax. That continues to be advance tax and is to be credited as advance tax paid against tax payable at the time of regular assessment in accordance with Section 219.
9. Even under Section 211 the obligation to pay advance tax is during the financial year. That section reads :
'211. Instalments of advance tax.--(1) Subject to the provisions of this section and of Sections 209A and 212, advance tax shall be payable in three equal instalments on the following dates during the financial year, namely :--
(i) the 15th day of Juno, the 15th day of September and the 15th of day December, in the case of an assessee whose total income to the extent of 75 per cent. thereof or more is derived from a source or sources for which the previous year (relevant to the assessment year next following the financial year aforesaid) ends on or before the 31st day of December;
(ii) the 15th day of September, the 15th day of December and the 15th day of March, in any other case :
Provided that in respect of any class of assessees referred to in Clause (i), the Board may, having regard to the nature of dealings in the business carried on by such assessees, the method of accounting followed by them and other relevant factors, authorise, by notification in the Official Gazette and subject to such conditions as may be specified therein, the payment of the last instalment of the advance tax on the 15th day of March during the financial year, instead of on the 15th day of December. Explanation,--In this Sub-section, 'total income' means,--
(a) in a case where the advance tax is paid by the assessee in accordance with the statement sent by him under Sub-section (1) of Section 209A or in accordance within order of the Income-tax Officer under Section 210, the total income with reference to which the advance tax payable has been calculated in such statement or order ;
(b) in a case where the advance tax is paid in accordance with an estimate (including a revised estimate) made by the assessee under Section 209A or Section 212, the total income with reference to which the advance tax is so estimated ;
as reduced, in either case, by the amount of capital gain and income referred to in Sub-clause (ix) of Clause (24) of Section 2, if any, included therein.
(2) If the notice of demand issued under Section 156 in pursuance of the order under Section 210 is served after any of the dates on which the instalments specified therein are payable, the advance tax shall be payable in equal instalments on each of such of those dates as fall after the date of the service of the notice of demand, or in one sum on the 15th day of March, if the notice is served after the 15th day of December.'
10. The dates fall within the financial year. No doubt the obligation is to pay on these dates but the advance tax is to be paid during the financial year. Though it is paid the next day or later but in the financial year, it does not cease to be advance tax.
11. Apart from the language of Section 214 which, to us, is quite clear, the very purpose and object of that provision will not be promoted by taking a very narrow and restricted view about the scope of Section 214. The very scheme of the I.T. Act shows that the obligation of the assessee is to pay tax in advance during the previous year and if he fails to make an estimate in accordance with his income he invites the liability to pay interest under Section 217. Similarly, if he pays more, he has necessarily the right to get interest on the excess amount paid and that interest is payable from the 1st of April next succeeding. Naturally so, because payment has to be made during the previous financial year. There is no rhyme or reason in limiting the payment of interest to excess paid before specified dates and not in the financial year. Of course if the plain language of the section compels us to read it in a different way despite any rule of reasonableness or logic, we may have to read the section in such plain sense. But we see no reason to read the section in the manner learned counsel, Sri. P.K.R. Menon) attempts to persuade us to read. According to counsel that section would apply only in respect of the aggregate sum of any instalment of advance tax paid if such payment has been made in accordance with Sections 207 - 213 which again means that they have been made on the dates specified in the notice issued to the assessee. This would be to ignore the significance of the words 'advance tax paid during any financial year'. Further, we have to notice that while the interest is earned on advance tax paid in excess, such excess is what is paid in 'any financial year' in which they are payable under Sections 207 - 213.
12. We notice that the High Court of Gujarat has taken a view consistent with what we have said here while the High Court of Andhra Pradesh has taken a contrary view. Though this question was posed as a general question in the decision in Addl. CIT v. Chitra Sagar : 121ITR699(Mad) , in the facts of that case the question was left open. We may notice the argument advanced in the Andhra Pradesh case, an argument which was attempted here also. It was urged that non-payment of advance tax on the respective due dates may invite an imposition of penalty and, therefore, there is no question of interest being paid on such belated payments. As rightly pointed out by Chief Justice Divan in Chandrakant Damodardas v. ITO : 123ITR748(Guj) , speaking for the Bench, the liability for penalty under some provision of the Act has no relevance at all in considering the right to interest under Section 214. The assumption to the contrary made by the Andhra Pradesh High Court in Kangundi Industrial Works (P.) Ltd. v. ITO : 121ITR339(AP) is not warranted by the terms of the Act. The Act imposes penal consequences in respect of certain Acts. Independently it provides for the rights of parties such as for interest on excess payments. The fact that penal consequences may follow a failure to pay on the dates specified need not affect the right to interest envisaged under other provisions. In other words, if by reason of an excess payment during a financial year an assessee is entitled to claim interest on the amount of excess so paid that need not be denied to him merely because, for some other reasons, namely, non-payment on due date he is amenable to be dealt with under the penal provisions of the Act. Otherwise, by the same logic no refund should be given to him at all. If he could get the excess paid by him despite the failure to pay the amounts in time there is no logic in saying that he can get principal but not interest. In other words, the return of excess paid has no nexus with the incurring of any liability by way of penalty for non-compliance with the obligation to pay on specified dates. We, therefore, hold that in these cases where payments have been made of the advance tax within the financial year there is no question of denial of the right under Section 214 of the Act.
13. In this view, we are not going into the further question as to whether payment by demand draft would be sufficient as payment in cash. Of course, so far as this court is concerned, there is a pronouncement in Varghese v. Annamma ILR  Ker 494, which holds that payment by demand draft would be equivalent to a payment in cash. Again the question whether payment by cheque when the cheque is accepted and is encashed will relate back to the date when the cheque is received is a question considered by the Punjab & Haryana High Court in Oswal Woollen Mills Ltd. v. CIT . We are not going further into that question because it may not be necessary for the purpose of these cases in view of the decision on the main question.
14. In this view, we allow these appeals in reversal of the judgment of the learned single judge. We quash the orders of the ITO declining to pay interest and direct that such interest be paid on the excess. This shall be done expeditiously. Parties are directed to suffer costs.
15. Learned counsel for the revenue made an oral application under Article 134A of the Constitution for a certificate for leave to appeal to the Supreme Court. We see no substantial question of law of general importance which needs to be decided by the Supreme Court arising in these cases. Leave declined.