1981 (3) TMI 71 - HC - Income Tax

Court rules excess tax paid under Section 172(4) not eligible for interest under Section 214

The court ruled against the assessees, stating that the excess tax paid under Section 172(4) does not qualify for interest under Section 214 as it is not ... Non-resident, Shipping Business Issues Involved:1. Entitlement to interest under Section 214 of the Income-tax Act on excess tax paid under Section 172(4).2. Interpretation of Section 172(7) in relation to advance tax provisions.Detailed Analysis:Issue 1: Entitlement to Interest under Section 214 on Excess Tax Paid under Section 172(4)The assessees, shipping companies from Norway, paid tax on freight earnings under Section 172(4) of the Income-tax Act, which allows for summary assessment of tramp ships. Upon filing returns for regular assessment under Section 172(7), it was found that the tax paid on summary assessment exceeded the tax due on regular assessment, entitling the assessees to a refund of the excess amount. However, the Income-tax Officer (ITO) did not order payment of interest on the excess amount refunded. The assessees' appeal to the Appellate Assistant Commissioner (AAC) for interest under Section 214 was rejected, but the Income-tax Appellate Tribunal (ITAT) directed payment of interest under Section 214. The Tribunal referred the question to the High Court regarding whether the excess amount should carry interest as advance tax under Section 214.Issue 2: Interpretation of Section 172(7) in Relation to Advance Tax ProvisionsSection 172 deals with the levy and recovery of tax for non-resident ships carrying goods from Indian ports. Sub-section (7) allows the owner or charterer to claim regular assessment, treating any payment made under Section 172 as a payment in advance of the tax leviable for the assessment year. The question was whether such payments could be treated as advance tax under Section 214, which provides for interest on advance tax paid in excess.The court examined Section 214, which mandates interest on advance tax paid under Sections 207 to 213 if it exceeds the tax determined on regular assessment. Section 207 specifies that advance tax is payable in accordance with Sections 208 to 219. The court noted that advance tax under these sections is distinct from 'payment in advance of the tax' under Section 172(7).The court referred to the legislative history, noting that Section 44C of the Indian Income-tax Act, 1922, which corresponds to Section 172(7), did not provide for interest on excess payments. The concept of advance tax was introduced in 1944, and Section 18A (now Section 214) provided for interest on advance tax. The court concluded that Section 172(7) permits only an adjustment of tax paid under summary assessment towards the tax due on regular assessment, not treating it as advance tax.The court cited the Gujarat High Court decision in Bharat Textile Works v. ITO, which distinguished between advance tax under Sections 208 to 219 and other tax payments. The court emphasized that payments under Section 172 are on actual assessment, not advance tax, and hence do not attract interest under Section 214.ConclusionThe court answered the referred question in the negative, ruling in favor of the revenue and against the assessees. The excess tax paid under Section 172(4) does not qualify for interest under Section 214, as it is not considered advance tax within the meaning of the Act.