1984 (10) TMI 241 - HC - Income Tax

Interpretation of 'regular assessment' under Excess Profits Tax Act 1940

S.A. KADRE, EXCESS PROFITS TAX OFFICER AND OTHERS Versus BINOD MILLS COMPANY LTD.

The court held that the term 'regular assessment' in section 14A(7) of the Excess Profits Tax Act, 1940 includes any assessment made under section 14, ... - Issues Involved:1. Meaning of 'regular assessment' under section 14A(7) of the Excess Profits Tax Act, 1940.2. Entitlement to interest on the refund amount under section 14A(7) of the Excess Profits Tax Act, 1940.Detailed Analysis:1. Meaning of 'Regular Assessment' under Section 14A(7) of the Excess Profits Tax Act, 1940:The primary issue in this appeal is the interpretation of the term 'regular assessment' as used in section 14A(7) of the Excess Profits Tax Act, 1940 (the said Act). The respondent, a public limited company, was assessed under the said Act for the chargeable accounting period ending December 31, 1942. Initially, a provisional assessment under section 14A was made, demanding Rs. 2,20,000, which the respondent paid under protest. Later, an assessment under section 14 determined the excess profits and tax, leading to a refund of Rs. 1,11,421. Following an appeal, the Appellate Assistant Commissioner directed a reassessment, resulting in a further refund of Rs. 1,08,579.The appellant argued that 'regular assessment' refers only to the first assessment order under section 14 and not to any subsequent orders following appellate directions. The respondent contended that the reassessment order should also be considered a 'regular assessment' for the purpose of section 14A(7).The court held that the term 'regular assessment' in section 14A(7) includes any assessment made under section 14, including those made pursuant to appellate directions. The court reasoned that the scheme of the said Act, which provides for provisional assessments and subsequent regular assessments, supports this interpretation. The intention of the Act is to ensure that any excess amount collected through provisional assessment is refunded with interest, irrespective of whether the refund arises from the initial assessment or a subsequent reassessment following appellate directions.2. Entitlement to Interest on the Refund Amount under Section 14A(7) of the Excess Profits Tax Act, 1940:The second issue concerns whether the respondent is entitled to interest on the refund amount of Rs. 1,08,579 under section 14A(7). The appellant contended that interest is payable only on the amount refunded under the initial assessment order and not on amounts refunded following appellate directions.The court examined the language of section 14A(7), which provides for interest on any excess tax paid as a result of provisional assessment, from the date of payment to the date of the refund order. The court found that the provision aims to compensate the assessee for the excess amount collected, regardless of whether the refund arises from the initial assessment or a reassessment following appellate directions.Supporting this view, the court cited the decision of the Punjab High Court in CIT v. R. B. Jodhamal Kuthiala [1963] 49 ITR 383, which held that the term 'regular assessment' in section 14A(7) includes the last assessment made under section 14, as it is only then that an order for refund can be made. The court also distinguished this case from the decision of the Full Bench of the Bombay High Court in CIT v. Carona Sahu Co. Ltd. [1984] 146 ITR 452, which interpreted 'regular assessment' under section 214 of the Income-tax Act, 1961, as the first assessment order. The court noted that the scheme of the Income-tax Act, 1961, is different from that of the Excess Profits Tax Act, 1940, and the provision for interest under section 14A(7) is intended to cover all refunds arising from both initial and subsequent assessments.In conclusion, the court affirmed the respondent's entitlement to interest on the refund amount of Rs. 1,08,579 from the date of payment to the date of the refund order, as provided under section 14A(7) of the said Act. The appeal was dismissed with costs.