Statutory interest on excess tax retained after assessment was upheld for the assessee.

Interest was held payable on excess tax retained after regular assessment where the amount remained to the assessee's credit and became refundable under the governing interest provision. Applying the principle recognised in Modi Industries Ltd. v. CIT, the Court treated excess advance tax or self-assessment tax as carrying statutory interest when the Revenue continued to hold the refundable balance. On that basis, the assessee's claim for interest on the refunded amount was sustained and the Revenue's objection failed.

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Issues: Whether interest was payable on the overpaid self-assessment tax under section 18 of the Surtax Act read with section 244(1A) of the Income-tax Act, 1961.

Analysis: The question turned on the principle that where advance tax paid by an assessee exceeds the tax ultimately assessed, the excess amount retained by the Revenue is to be treated as refundable along with statutory interest. The Court applied the rule recognised in Modi Industries Ltd. v. CIT that section 214 provides for interest on excess advance tax, and that the balance remaining to the assessee's credit after regular assessment must be refunded with interest. On that basis, the assessee's claim for interest on the refunded amount was sustainable.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Where tax paid in excess remains to the credit of the assessee after regular assessment, the refundable balance carries statutory interest in accordance with the governing interest provision.

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