1. The assessee is a private limited company. For the assessment While completing the assessment, the ITO allowed interest on the excess advance tax paid over and above the amount which the assessee had to pay as tax as per the assessment. Subsequently, the said assessment was revised by the ITO invoking his jurisdiction under s. 154 of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), on the ground that the interest already granted to the assessee under s. 214 of the Act should be withdrawn.
2. The withdrawal of the interest allowed earlier to the assessee by the revocation order passed under s. 154 was as follows : The total amount of income-tax payable by the assessee was determined in the original assessment dated June 28, 1976, at Rs. 80,176. The tax deducted at source amounted to Rs. 62,501. Apart from the tax deducted at source, the assessee had also paid a total sum of Rs. 1,85,200 by way of cheques as advance tax, and the details of the payments are set out below :
------------------------------------------------------------------------Cheques date Date of realization Amount------------------------------------------------------------------------15-6-1971 25-6-1971 2,76715-9-1971 14-10-1971 2,76722-12-1971 29-12-1971 1,74,46629-2-1972 6-3-1972 5,200------------1,85,200-------------
3. At the stage of the rectification proceedings under s. 154, the assessee claimed that the payments made on December 22, 1971, and February 29, 1972, should be treated as advance tax payments and the interest under s. 214 of the Act should be granted on the net amount of the refund due to it, i.e., Rs. 1,67,525. The ITO, however, did not treat the payments on December 22, 1971, and February 29, 1972, as advance tax payments as they had been made beyond the due dates mentioned in s. 208 of the Act. Accordingly, he did not allow interest under s. 214 of the Act on revisional assessment proceedings though he had allowed such interest in the original assessment. On appeal by the assessee before the AAC, it contended that all the payments should be treated as made towards advance tax payable, by it, and, therefore, the following the decision of the Gujarat High Court in CIT v. Sharma Construction Co. : 100ITR603(Guj) , accepted the assessee's contention and held that the payments made on December 22, 1971, and February 29, 1972, should be deemed to be payment of advance tax, and, therefore, the assessee is entitled to interest under s. 214 of the Act. The Revenue took the matter in appeal to the Tribunal. Before the Tribunal, the assessee gave up its claim for interest on the sum of Rs. 5,200 paid by it on February 29, 1972. Regarding the balance sum of Rs. 1,80,000 paid on different dates, the Appellate Tribunal agreed with the AAC and held that the assessee was entitled to interest on the refund due and dismissed the Departmental appeal. Aggrieved with the view taken by the Tribunal, the Revenue has sought and obtained a reference on the following two questions :
'(1) Whether, on the facts and in the circumstances of the case, the assessee is entitled to interest under section 214 of the Income-tax Act, 1961, on the net refund amount of Rs. 1,62,325
(2) Whether, on the facts and in the circumstances of the case, and having regard to the provisions of section 208 to 219 of the Income-tax Act, 1961, the payment of Rs. 1,74,466 made on December 22, 1971, should be treated as advance payment of tax
Before us, the learned counsel appearing for the Revenue contends that any payments made beyond the time-limit prescribed under s. 211 cannot be treated as and towards advance tax and that the interest under s. 214 can only be in relation to the advance tax paid on due dates. In support of the said contention, strong reliance is placed on the decision of the Andhra Pradesh High Court in Kangundi Industrial Works (p.) Ltd., v. ITO : 121ITR339(AP) . No doubt, that decision squarely applies to the contention of the Revenue. In the case, the assessee had paid the first instalment of advance tax in respect of the financial year 1974-75, but did not pay the second and third instalments on or before the respective due dates. The income-tax payable was finally determined and refund of excess payment was made to the assessee. The assessee claimed interest under s. 214 of the Act on the excess amount refunded. But that was rejected by the ITO. Aggrieved by the said rejection, the assessee filed a writ petition before the court. While dismissing the said writ petition, the Andhra Pradesh High Court held that as the assessee had committed default in making payment of advance tax of second and third instalments, it is not entitled to interest under s. 214 of the Act and that interest payable on the excess amount under s. 214 does not amount to refund of any amount paid as tax, and hence the claim of the assessee cannot be entertained even under s. 243 of the Act. The reasoning of the court for rejecting the claim of the assessee for interest under s. 214 of the Act was as follows (p. 341) : 'A careful reading of s. 214 of the Act will indicate that the street is not on the question whether all the instalments of advance tax were paid during the financial year, but the street is that the instalments must have been paid before the due dates fixed for payment if the assessee was to be given the right to claim interest under s. 214 of the I.T. Act. Section 214 of the I.T. Act has to be read along with s. 218 of the Act. Under s. 218 of the I.T. Act, if the instalment of advance tax was not paid by the specified date, the assessee shall be deemed to be an assessee in default in respect of such instalment and the Revenue is given the right to impose penalty on such assessee for not paying the instalment before the due date. It is not disputed that the Department could have proceeded against the petitioner and levied penalty for the delay. But Sri. Y. V. Anjaneyulu, the learned counsel for the petitioner, contends that the right of the Revenue to impose penalty for the delay has nothing to do with the right of the assessee to claim interest on the excess payments made by him as advance tax and that even if the Revenue had such a right, the petitioner is entitled to interest from April 1, 1975, as, before any penalty proceedings were taken against him, the company has deposited the entire advance tax as per its estimated. We do not feel persuaded to accept this contention.' However, on a due consideration of the matter, we find it is not possibl for us to accept to the view taken in that case. It is no doubt true that the payment made by cheques on December 22, 1971, was belated by seven days, the due date being December 15, 1971. But, so long as the Revenue has accepted the payment, though made belatedly, the character of the amount received by the Revenue can only be advance tax and not an ad hoc payment as has been held by the ITO. The fact remains that the assessee is liable to be proceeded against for non-payment of the tax in time. However, if the payment has been accepted, it can only be deemed to be a payment towards advance tax. It is no doubt open to the Revenue to refuse the tax on the ground that it was not paid on the due date. When once the payment of tax paid as advance tax is accepted, the payment cannot be said to be not towards advance tax. Any payment made before the end of the accounting year for which the assessment has been made should be taken to be an advance tax. We are not inclined to agree with the view taken by the Andhra Pradesh High Court in the above decision that an assessee becomes an assessee in default if the advance tax has not been paid on the due date, and the amount paid belatedly and accepted by the Revenue ceases to be an advance tax. As a matter of fact, the decision of the Andhra Pradesh High Court has not found favour with any of the other High Courts. In Addl. CIT v. Chitra Sagar : 121ITR699(Mad) , this court has specifically held that so long as the amount of advance tax is paid, though belatedly, but within the end of the accounting year, it will have to be taken as advance tax for the purpose of s. 214 of the Act as, otherwise, credit cannot be given to that sum at the stage of the assessment under s. 214.
4. The court also has pointed out that the subject-matter of the mandatory provisions of ss. 214 and 217 is the same except for the difference that s. 214 contemplates the Government paying interest on the amount of advance tax which is in excess of the tax payable under the regular assessment while s. 217 enables the Government to recover interest from an assessee who had not paid advance tax which is in excess of the tax pay-able under the regular assessment while s. 217 enables the Government to recover interest from an assessee who had not paid advance tax in accordance with the relevant statutory provisions and that if an amount paid after the due date is not to be treated as advance tax for the purpose of s. 214. it cannot also be treated as advance tax for the purpose of s. 217. Thus, notwithstanding the delay in the payment of advance tax, the amount paid has been treated only as advance tax. In Chandrakant Damodardas v. ITO : 123ITR748(Guj) , the Gujarat High Court has taken the view the that the substance of the requirement in s. 211 is that before the end of the financial year, advance tax should be paid and the absence of the words 'paid in accordance with ss. 207 to 213' in s. 214 indicates that the dates of instalments are not to be strictly adhered to and that if they are not adhered to, interest will be payable. The learned judges took the view that in view of the language used in s. 214 particularly with reference to the 1st day of April, and not with reference to the dates on which the instalments are actually paid by the assessee, it is clear that the legislature intended to provide that irrespective of the dates on which the instalments of advance tax are paid, interest will be payable on the excess advance tax if two conditions are satisfied : (i) the entire amount of advance tax is paid up, and (ii) it is paid up before the end of the financial year. There is no further condition that the instalments of advance tax must have been paid on or before the due dates mentioned in s. 211. The learned judges have also held that though the failure to pay the instalments on the due dates might involve an assessee in payment of penalty if the other conditions for the levy of penalty are satisfied, that will not take away the right of the assessee to claim interest on the amount of advance tax paid, for, the concept under s. 214 is totally different and unconnected with the deprivation of interest on excess advance tax. The same view has also been taken by the Kerala High Court in Santha S. Shenoy v. Union of India : 135ITR39(Ker) and the Bombay High Court in CIT v. Traub (India) P. Ltd., : 118ITR525(Bom) . The Madhya Pradesh High Court in CIT v. Jagannath Narayan Kutumbik Trust : 144ITR526(MP) , has also taken the same view. As a matter of fact, the decision of the Andhra Pradesh High Court in Kangundi Industrial Works (P.) Ltd., v. ITO : 121ITR339(AP) , had been dissented from in some of the above decisions. Thus, as a result of the above discussion, we have to hold that the assessee is entitled to claim interest under s. 214 notwithstanding the fact that one of the instalments of advance tax has been paid beyond the due date so long as that amount has been accepted by the Department and the Revenue had the benefit of the said payment. In this view of the matter, we have to answer both the questions in the affirmative and against the Revenue. The Revenue will pay the costs to the assessee. Counsel's fee Rs. 500.