1980 (1) TMI 84 - HC - Income Tax

Court upholds denial of interest claim for late tax payment under Income Tax Act.

The court upheld the Commissioner of Income-tax's decision to reject the petitioner's claim for interest under section 214 of the Income Tax Act due to ... Liability of the Central Government to pay interest under section 214 - requirement to pay advance tax on dates specified in section 211 - effect of sending estimate under section 212(3A) - assessee deemed to be in default under section 218(2)Liability of the Central Government to pay interest under section 214 - requirement to pay advance tax on dates specified in section 211 - effect of sending estimate under section 212(3A) - assessee deemed to be in default under section 218(2) - Whether interest under section 214 is payable where the assessee sent an estimate before the due date under section 212(3A) but the advance-tax payment was received by the department after the due date under section 211. - HELD THAT: - The Court held that section 212(3A) required the assessee to send the estimate before the date on which the last instalment was due, and that requirement was satisfied. However, the same sub-section also required payment of advance tax on the dates applicable under section 211. Since the demand draft was received by the department after the due date, the payment was not made as required by section 211. Section 218(2) therefore deemed the assessee to be a defaulter for failing to pay the instalment on the specified date. Section 214 conditions the Central Government's liability to pay interest on the advance tax paid only where the advance tax was paid as required by the Act (i.e., on the dates specified under section 211). Because the advance payment was not made on the due date, the liability to pay interest under section 214 did not arise. The Court agreed with the view in Kangundi Industrial Works (P.) Ltd. v. ITO and found the decision in Traub (India) P. Ltd. inapplicable on its facts.Interest under section 214 is not payable where the advance tax was paid after the due date under section 211 despite the estimate having been sent before that date; the assessee is deemed a defaulter under section 218(2).Final Conclusion: The petition challenging the order rejecting interest under section 214 is dismissed; the advance-tax payment made after the due date did not give rise to a claim for interest from the Government. Issues involved: Impugned order rejecting interest claim u/s 214 of the Income Tax Act for late payment of advance tax installment.Summary:The petitioner challenged an order passed by the Commissioner of Income-tax rejecting the claim for interest u/s 214 of the Income Tax Act in relation to the third installment of advance tax paid late. The petitioner paid the first two installments on time but paid the third installment after the due date. The petitioner's contention was that interest should be paid by the Government for the excess amount paid as advance tax, even if paid after the due dates specified under the Act.The petitioner's counsel argued that as per section 212(3A), the liability of the assessee is fulfilled by sending the estimate before the due date, regardless of when the payment is received by the department. However, the court noted that while the estimate was sent before the due date, the actual payment was received after the due date, making the petitioner a defaulter as per section 218(2).The court referred to section 214 which mandates the Central Government to pay interest on advance tax paid in excess of the tax determined on regular assessment, but only if the advance tax was paid on the due dates specified in section 211. Since the payment in this case was not made on time, the court held that the Government was not liable to pay interest.The court cited a similar decision by the Andhra Pradesh High Court and disagreed with a decision of the Bombay High Court, ultimately dismissing the challenge against the impugned order.