Court rules Hindu undivided family not entitled to interest on excess advance tax post-appeal

Lala Laxmipat Singhania Versus Commissioner Of Income-Tax And Others

Lala Laxmipat Singhania Versus Commissioner Of Income-Tax And Others - [1977] 110 ITR 289, 1977 CTR 160 Issues Involved:
1. Entitlement to interest u/s 214 on excess advance tax paid.
2. Interpretation of 'regular assessment' in the context of interest on excess advance tax.

Summary:

1. Entitlement to Interest u/s 214 on Excess Advance Tax Paid:
The petitioner, a Hindu undivided family, was assessed to income-tax and deposited Rs. 73,398 as advance tax for the assessment year 1970-71. The Income-tax Officer's assessment resulted in an additional demand of Rs. 65,940. Upon appeal, the Appellate Assistant Commissioner partially allowed the appeal, leading to a recomputation by the Income-tax Officer, who found Rs. 36,058 refundable. The petitioner's application u/s 154 for interest on the excess advance tax was dismissed by the Income-tax Officer, and subsequent appeals to the Appellate Assistant Commissioner and the Commissioner were also dismissed. The Commissioner held that interest u/s 214 was only payable if the original assessment determined a tax amount less than the advance tax paid, not when the final tax amount was determined post-appeal.

2. Interpretation of 'Regular Assessment':
The court examined the relevant provisions of the Income-tax Act, 1961, and the Indian Income-tax Act, 1922. It referred to the definition of 'regular assessment' in section 2(40) of the Act and compared it with section 18A of the old Act. The court cited the Bombay High Court's decision in Sarangpur Cotton Manufacturing Co. Ltd. v. Commissioner of Income-tax [1957] 31 ITR 698 (Bom) and the Allahabad High Court's decision in Sir Shadilal Sugar and General Mills Ltd. v. Union of India [1972] 85 ITR 363 (All), which held that interest on excess advance tax is payable only up to the date of the first or original assessment, not up to the date of any subsequent reassessment or modification following an appeal.

The court rejected the Calcutta High Court's ruling in Chloride India Ltd. v. Commissioner of Income-tax [1977] 106 ITR 38 (Cal), which suggested that 'regular assessment' should include assessments made pursuant to appellate orders. The court emphasized that the context of section 214 did not require a departure from the definition of 'regular assessment' as the first or original assessment.

Conclusion:
The court dismissed the petition, holding that the petitioner was not entitled to interest on the excess advance tax beyond the date of the original assessment. The parties were directed to bear their own costs.