Excess profits tax refund interest runs from provisional assessment payment, and refund must be adjusted against the assessed firm.

Interest on excess profits tax refunds under section 14A(7) runs only from payment made pursuant to the provisional assessment, not from an earlier payment under a superseded regular assessment, so the claim for an earlier commencement date was rejected. Refund of excess profits tax and the related interest had to be referable to the assessed firm as the taxable entity, and could not validly be adjusted against the separate tax liabilities of individual partners. The partner-wise adjustments were therefore held improper to that extent, and relief was confined to the amounts wrongly adjusted against the identified partners.

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Issues: (i) Whether interest on excess profits tax refund under section 14A(7) of the Excess Profits Tax Act, 1940, was payable from a date earlier than the provisional assessment. (ii) Whether the refund of excess profits tax, and the interest thereon, could be adjusted against the separate tax liabilities of individual partners instead of against the assessed firm.

Issue (i): Whether interest on excess profits tax refund under section 14A(7) of the Excess Profits Tax Act, 1940, was payable from a date earlier than the provisional assessment.

Analysis: Section 14A(7) makes interest payable on excess tax refunded when the regular assessment is lower than the provisional assessment, and the subsection read as a whole links the commencement of interest to payment made pursuant to the provisional assessment. The payment made before the provisional assessment was not payment under that assessment but under an earlier regular assessment later set aside. The statutory liability to pay interest therefore arose only from the date of payment under the provisional assessment.

Conclusion: The claim for interest from any date earlier than 9 June 1960 was rejected and the interest was confined to the date of the provisional assessment.

Issue (ii): Whether the refund of excess profits tax, and the interest thereon, could be adjusted against the separate tax liabilities of individual partners instead of against the assessed firm.

Analysis: Under section 21 of the Excess Profits Tax Act, 1940, section 49E of the Indian Income-tax Act, 1922 applied, but the refund had to be treated as due to the same assessable entity that had been assessed to excess profits tax. The firm, and not the individual partners, was the assessee for the relevant periods. Adjustment of the refund against the separate liabilities of partners was therefore not permissible in law, although the relief was restricted to the amounts improperly adjusted in respect of the identified partners because the remaining adjustments had already operated in favour of the other partners.

Conclusion: The adjustment against the individual liabilities of the specified partners was held invalid and the refund was directed to be made to the firm to the extent of those improper adjustments.

Final Conclusion: The petition succeeded only in part: the assessee-firm obtained relief against improper partner-wise adjustment of refund, but failed on the claim for interest for any period prior to the provisional assessment date.

Ratio Decidendi: Under the Excess Profits Tax Act, refund and interest are referable to the assessed firm as the taxable entity, and interest on excess tax refunded under section 14A(7) runs only from payment made under the provisional assessment, not from any earlier payment under a superseded regular assessment.

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