Advance surtax paid within the financial year must be credited before computing compensatory interest under the surtax law.

Advance surtax paid belatedly but within the financial year was treated as advance surtax for computing interest under section 7C(2) of the Companies (Profits) Surtax Act, 1964. The Kerala HC held that section 7C is compensatory and targets default during the financial year, so interest cannot be levied on amounts already paid within that year. The definition of "assessed surtax" in section 7C(7) could not be read to require interest on the full assessed surtax without credit for such payment. Accordingly, the belated in-year payment had to be deducted in computing interest, and the Revenue's request for reference failed.

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Issues: Whether advance surtax paid belatedly but within the financial year could be treated as advance tax for the purpose of computing interest under section 7C(2) of the Companies (Profits) Surtax Act, 1964, and whether interest was leviable on the entire assessed surtax without deducting such advance payment.

Analysis: Section 7C provides for levy of interest in cases of default in payment of advance surtax. The definition of "assessed surtax" in section 7C(7) could not be read to require interest on the full assessed amount without giving credit for advance surtax actually paid during the financial year. A payment made within the financial year, though delayed, partook of the nature of advance tax and had to be deducted while computing the amount on which interest was payable. The provision was compensatory and was intended to offset loss caused by non-payment during the financial year, not to impose interest on amounts already paid within that year.

Conclusion: The belated payment made within the financial year was to be treated as advance surtax, and interest under section 7C(2) was not leviable on that amount. The Revenue's request for reference failed.

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