Relief of income under tax law: interest under s.18A(5) is not relief, reassessment to recover it invalid.

The article examines whether interest paid under section 18A(5) constitutes a "relief" of income, profits or gains for the purpose of section 34(1)(b). It reasons that interest under 18A(5) is payable on advance tax deposits and is distinct from tax liability determined by assessment; statutory forms and framework treat interest separately as an adjustment after tax is fixed. Consequently such interest does not operate as a remission or reduction of tax chargeable and cannot be treated as a relief permitting reassessment or demand under section 34(1)(b).

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Issues: Whether payment of interest under section 18A(5) of the Income-tax Act constitutes "relief" of income, profits or gains within the meaning of section 34(1)(b) of the Income-tax Act, thereby permitting reassessment to recover excess interest paid.

Analysis: Section 18A(5) provided for simple interest payable by Government on amounts deposited as advance tax; that interest is payable on the amount deposited and is not related to the amount of tax found due on assessment. The assessment process determines the taxable income and reliefs expressly refer to reductions of tax liability attributable to income, profits or gains (for example reliefs of the kinds listed in sections 15A, 15C, 49A, 49B, 49C, 49D and 60). The statutory assessment form and the statutory framework treat tax, penalty and interest as distinct items and show interest as an adjustment after the tax liability is determined. Therefore, payment of interest under section 18A(5) does not operate as remission or reduction of the tax chargeable on income, profits or gains and does not fall within the concept of "relief" for the purposes of section 34(1)(b).

Conclusion: Payment of interest under section 18A(5) is not "relief" of income, profits or gains within section 34(1)(b); action under section 34(1)(b) to recover excess interest is not competent. The appeal is dismissed and the reassessment and demand based on section 34(1)(b) are invalid.

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