SETHURAMAN J. - This is a writ petition for the issue of a writ certioraris and to quash the order of the Commissioner of Income-tax dated July 15, 1976, under the following circumstances :
For the assessment year 1973-74, the assessment on the assessee on total income of Rs. 3,68,090 was made on January 31, 1975, resulting in the determination of a gross tax of Rs. 2,51,247. After adjustment of the tax deducted at source of Rs. 5,709 and the advance tax of Rs. 2,32,735 there was a demand of Rs. 12,803. The assessee filed an appeal before the AAC disputing the disallowance of, (a) the claim under s. 35B to Rs. 54,546; (b) gratuity of Rs. 71,720, and (c) the claim for deduction under s. 80G of Rs. 20,000. When the matter came to be heard by the AAC, the assessee restricted its claim as regards the disallowance under s. 35B Rs. 13,387 as against Rs. 54,546. The AAC allowed the three amounts as ultimately pressed before him. The result was that the ITO came to pass an order on January 21, 1976, resulting in a refund of Rs. 52,121. The assessee was not granted any amount as and by way of interest under s. 214 of the I.T. Act, 1961. The assessee filed a revision petition under s. 264 of the Act before the Commissioner claiming that it was entitled to interest under s. 214 of the Act on the sum of Rs. 52,121 which was refunded, on the ground that the order of the ITO giving effect to the appellate order was itself an order under s. 143 of the Act within the meaning of s. 2(40) of the Act. The Commissioner by his order dated July 15, 1976, held that the interest under s. 214 was payable to an assessee only up to the date of 'regular assessment'. He relied on the definition of 'regular assessment' in s. 2(40) of the Act as assessment made under s. 143 or s. 144 and also on the decision of the Allahabad High Court in the case of Sir Shadilal Sugar and General Mills Ltd. v. Union of India : 85ITR363(All) . As in the regular assessment, there was no refund, he rejected the claim for interest. The matter has thus been brought before this court under art. 226 of the Constitution of India.
The only question that arises for consideration is whether the assessee is eligible for any interest on the amount refunded by the order dated January 21, 1976.
There is no dispute about the fact that the assessee had paid a sum of Rs. 2,32,735 as advance tax, that the original assessment after adjusting the advance tax and also the tax deducted at source involved a demand of only Rs. 12,803 and that the assessee had paid this amount in due course. As a result of the AACs order, the assessee became entitled to the refund of Rs. 52,121 and the point for consideration is whether with reference to this amount, the assessee was entitled to interest under s. 214 of the Act.
Section 214 is one of the provisions occurring in Chap. VII of the Act dealing with 'Collection and recovery of tax'. It runs as follows :
'214. (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 to 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 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.'
The first part of s. 214 provides for the Central Govt. paying simple interest on the amount by which the total of the advance tax paid in any financial year exceeded the amount of the tax determined on regular assessment. The expression 'regular assessment' has been defined in s. 2 (4) as meaning 'the assessment made under section 143 or section 144'. The starting point of interest is the first day of April next following the financial year in which the advance tax was paid. The terminal is fixed as the date of the regular assessment.
Section 214 is the counterpart of s. 18A(5) of the Indian I.T. Act, 1922. The liability to pay tax arises ordinarily upon the making of an assessment order and the issue of a notice of demand as laid down by the Privy Council in Doorga Prosad v. Secretary of State  13 ITR 285. Section 18A was introduced with a view to collecting the amount of tax payables by the assessee in advance, that is, even before the assessment order was made and a demand was issued for the payment of tax. Section 18A(5), as enacted originally, obliged the Central Govt. to pay to an assessee interest on the amount of advance tax paid by him and this was in recognition of the fact that the assessee had been deprived of money belonging to him, which he was entitled to retain and utilise so long as an assessment order was not made and a demand for tax was not issued. Under s. 18A(5) the period of interest was to run from the first day of the assessment year following the financial year in which the advance tax was paid and ended with the 'date of the assessment made under s. 23', which was called 'regular assessment' in the provision itself. Thus, while s. 18A(5) of the 1922 Act itself contained the definition of the expression' regular-assessment', this definition has now been transposed into s. 2(40) of the Act of 1961. There is no other difference in the statutory provision.
The expression 'regular assessment' came up for interpretation by this court in Natarajan Chettiar v. ITO : 42ITR29(Mad) . In that case the assessee was assessed for the assessment years 1947-48 to 1952-53 under s. 23(3) of the Indian I.T. Act. Subsequently, the ITO reopened the assessment under s. 34 of that Act and recomputed the assessees total income for the different years at figures which were in excess of the original figures. Further tax demands as a result of the reassessments came to be made. The ITO included a certain sum as interest payable by the assessee under s. 18A(6) of the 1922 Act. The assessee took exception to this charge of interest and also applied to the IAC, Madurai Range, for reduction or waiver of the interest paid by the assessee. This application was rejected, and thereupon the matter was brought before this court under art. 226 of the Constitution of India. Panchapakesa Iyer J., who came to consider the matter in the first instance, observed that he failed to see how a 'assessment' would not be a 'regular assessment' and that 'surely, it was not an irregular assessment' and that, therefore, the assessee was obliged to pay interest right up to the date of the assessment made under s. 34. The assessee appealed and in the judgment of the Division Bench it was pointed out that the amount ascertained on the basis of the regular assessment under s. 23 as originally made brought about a finality, subject only to the provision contained in the second proviso to s. 18A(6) which related to the reduction of the amount on which interest was payable as a result of an appeal, revision or a reference. It was held that there was no provision to meet the contingency where the amount of tax payable by the assessee was increased by proceedings taken under s. 34 of the Act. The result was that the assessee was held as not being liable to pay any interest on the amount subsequently demanded under s. 34, even though the said amount was in excess of the advance tax paid by the assessee.
This decision is authority for the proposition that the expression 'regular assessment' means only the assessment made under s. 23(3) of the 1922 Act and not a reassessment. The same position will hold good even under the Act of 1961 as the definition in s. 2(40) is identical in text. We have in T.C. Nos. 530 to 532 of 1975, in the case of the Triplicane Urban Co-operative Society Ltd v. CIT in the judgment dated July 17, 1979, - see : 126ITR125(Mad) , held that an order passed in pursuance of the appellate order would itself be an order under s. 143 of the Act. However, the question as to whether it was a regular assessment falling under s. 214(1) and whether the assessee would be entitled to interest on the amount being refunded as a result of the appellate order did not come up for consideration in that case. It is clear from s. 214(1) that the assessee would be entitled to interest from the 1st day of April next following the financial year in which the advance tax was paid up to the date of the 'regular assessment'.
The problem that now arises for consideration in the present case is whether the assessee would be entitled to interest on the difference between the amount paid and the actual tax payable as a result of the order giving effect to the appellate order. In the light of the above decision of this court, the order passed in pursuance of the later order giving effect to the appellate order would be an order under s. 143. The result will be that there are two regular assessment orders, though the second order replaces the first. The source of the power to pass that order is s. 143. When the earlier order is only modified and not affected, that order would continue to be the regular assessment order. As pointed out by the Allahabad High Court in Sir Shadilal Sugar and General Mills Ltd. v. Union of India : 85ITR363(All) , the words 'regular assessment' have been used in contradistinction to provisional assessment and that order would furnish the terminal point for interest.
If sub-s. (1) of s. 214 alone were to be taken into account, it would not be necessary to discuss the matter further, as the assessee would be entitled to interest only up to the date of the regular assessment. So long as that assessment is not set aside on appeal or revision, that would be the regular assessment. Its modification in appeal would not destroy its existence. This is a case of only modification of the order. However, sub-s. (2) of s. 214 introduces a new aspect. Sub-section (2) was in the form of a proviso to s. 18A(5). Now, it has been enacted as a substantive provision affecting the entire chapter 'Collection and recovery of tax', as it states that on any portion of the amount refunded under this Chapter, i.e., Chap. XVII, interest shall be payable only up to the date on which the refund was made. It is difficult to find the significance of the expression 'only' occurring in this provision. It purports to import a limitation on paying interest only up to the date of refund. The implication is that if the word 'only' were not there, it would extend to a further period. When once the date of actual refund is fixed as the terminal, it is not clear to what other date the period would have extended if the word was not there. The section would make sense even if the word is not there and its addition, as seen above, does not improve matters. It has thus to be conclude that the word is only a surplus age and need not be given any special significance.
As the first part of s. 214 granted a right to interest to the assessee up to the date of the regular assessment, it may be asked as to why sub-s. (2) provided for payment of interest up to the date on which the refund was made. Sub-section (1) does not, however, provide for any refund to the assessee. It is only designed to grant a right to interest on the advance tax paid in excess. Section 219 provides for the adjustment of advance tax paid against the tax demand and the refund in consequence of the credit would follow. In other words, while sub-s. (1) gave a right to the assessee to the interest at a particular rate from the 1st day of April next following the financial year in which the advance tax was paid, it does not provide for any refund, as such. With reference to the amount that refunded under the Chapter, i.e., by virtues of the credit contemplated by s. 219, sub-s. (2) of s. 214 provides that interest has to be paid up to the date on which refund was made. This sub-section is virtually an appendage to s. 219, as it has no relevance to s. 214(1).
In the present case, the refund came to be made on January 21, 1976. It is on that date that the ITO gave effect to the AACs order. The assessee would be eligible for interest under sub.s. (2) to s. 214 up to the said date.
Learned counsel for the Commissioner relied on the decision of the Allahabad High Court in Sir Shadilal Sugar and General Mills Ltd. v. Union of India : 85ITR363(All) . In that case, the ITO completed the as assessment for the assessment year 1961-62, on March 30, 1966, and that assessment was modified by an order dated July 15, 1969, to give effect to the appellate order of the AAC. As a result of the modified order the assessee was entitled to a refund of Rs. 2,92,902 and the question was whether the assessee was eligible for interest up to that date. The Allahabad High Court considered that the term 'regular assessment' used in s. 18A(5) referred only to the assessment made under s. 23 and that in the said case the said regular assessment was only made on March 30, 1966, and not on July 15, 1969. In that case, no arguments appear to have been advanced on the basis of the proviso to s. 18A(5) and, therefore, the court had no occasion to consider the issue in the context of the said proviso. This decision has been followed by the same High Court in Lala Laxmipat Singhania v. CIT : 110ITR289(All) . It was pointed out in the latter decision that there was no difference between the provisions of the 1922 Act and the Act of 1961, in this connection. As the matter had not to be debated in the light of s. 214(2) this decision also cannot be of any assistance to the Commissioner in the present case
Learned counsel for the assessee drew our attention to the decision of the Calcutta High Court in Chloride India Ltd. v. CIT : 106ITR38(Cal) . In this case for the assessment year 1964-65, the ITO demanded tax from the assessee on the basis that the public were not substantially interested in it. On appeal, the AAC held that the assessee-company was one in which the public were substantially interested, with the result that the tax rate was lower and a certain amount became due to the assessee as refund on account of excess tax paid in advance. After giving deduction for the tax payable under the order of the ITO giving effect to the order of the AAC, there was a surplus to be refunded to the assessee and the question was whether the assessee was entitled to the interest on the said amount up to the date of the order giving effect to the order of the AAC. The learned single judge of the Calcutta High Court held that the assessee would be entitled to interest on the said amount. However, even in this case, no attention appears to have been paid to s. 214(2), and, therefore, the learned judge had not to pronounce on it.
Section 215(3) provides for the reduction of interest payable by an assessee consequent on the modification of assessment by rectification or by the appellate and other orders. The absence of a provision for payment of interest by the Government consequent on similar modification of assessment was emphasised as showing the legislative intent not to grant interest in such cases. We do not consider that this contention has any force in the context of our conclusion based on s. 219 read with s. 214(2).
The result is that the assessee would be entitled to interest under s. 214(2) up to the date on which the refund was made. Sub-section (1) of s. 214 provides for interest being paid from the 1st day of April next following the financial year in which the advance tax was paid up to the date of the regular assessment while sub-s. (2) provides for payment of interest on the amount refunded up to the date on which the refund was made. The two provisions will have to be read together. Section 214(1) would apply cases where the refund is simultaneous with the regular assessment. When the refund is delayed, the assessee would be entitled to interest up to the date of refund. If the contention for the revenue were to be accept s. 214(2) would have no utility. It would be reduced to a dead letter. Such a construction should be avoided. The construction placed by us avoids this result. Thus, whenever an assessee paid advance tax in excess of tax found to be due, he would be entitled to interest under s. 214(2) read with s. 219 up to the date of refund if the refund is made or has to made after the regular assessment.
Learned counsel for the Commissioner drew our attention to two other provisions which occur in Chap. XIX. Section 240 provides that where, as a result of any order passed in appeal or other proceedings under Act, refund of any amount becomes due to the assessee, the ITO should refund the amount to the assessee without the assessee having to make claim in that behalf. Section 244 provides that where a refund is due the assessee in pursuance of an order referred to in s. 240, and the ITO does not grant the refund within a period of three months from the end of the month in which such order was passed, the Central Govt. should simple interest to the assessee at 12% per annum on the amount of refund due from the date immediately following the expiry of the period of three months aforesaid to the date on which the refund was granted. These provisions do not deal with a situation where advance tax was paid in excess. They refer to cases where the assessee had paid the tax, as a result of the demand, and the appellate order resulted in a refund due to the assessee. These provisions are supplementary in nature and give the assessee further right to interest whenever there has been a delay on the part the ITO in giving the refund due to the assessee as a result of the order referred to in s. 240 were passed. These two provisions do not in any way cut down the scope of s. 214(2).
The result is that the assessee would be eligible for interest claimed to January 21, 1976, on the sum of Rs. 52,121 from the April 1, 1973. The writ petition is accordingly allowed and the assessee would entitled to its costs, Counsels fee Rs. 500.