Judgment:
R.K. Agrawal J.
1. In Wealth-tax Reference No. 237 of 1987 which relates to the assessment years 1970-71 and 1972-73 to 1974-75, the Income-tax Appellate Tribunal, New Delhi, has referred the following question of law under Section 27(1) of the Wealth-tax Act, 1957 (hereinafter referred to as 'the Act'), for the opinion to this court :
'Whether, on the facts and circumstances of the case, the Appellate Tribunal was correct in holding that interest under Section 34A(3A) of the Wealth-tax Act is allowable on refunds paid after March 31, 1975, where the payment made prior to March 31, 1975, under Section 15B of the Wealth-tax Act are adjusted against the wealth-tax demands on the completion of assessments ?'
2. Whereas in Wealth-tax Reference No. 124 of 1988 which relates to the assessment years 1971-72, 1975-76 to 1977-78, the Income-tax Appellate Tribunal, New Delhi, has referred the following questions of law under Section 27(1) of the Act for the opinion to this court :
'1. Whether the Tribunal was correct in holding that the payments made under Section 15B should be deemed to be payment in pursuance of the orders of assessments and will qualify for interest under Section 34A(3A) of the Wealth-tax Act in respect of the assessment years 1971-72, 1975-76 to 1977-78 ?
2. Whether, on the facts and circumstances of the case, the Tribunal was legally correct in holding that interest under Section 34A(3A) was allowable on the payment made prior to March 31, 1975, in respect of the assessment year 1971-72 ?'
3. Briefly stated the facts giving rise to the present references are as follows :
4. In respect of the assessment for the assessment years 1970-71 to 1974-75, the respondent assessee had made certain payments under Section 15B of the Act. These payments were made prior to March 31, 1975. The assessments for these four years were completed on March 20, 1979. Against the assessment orders the respondent had preferred appeals and as a result of the appellate orders certain refunds became due to the respondent which are as follows :
Assessment year Amount of refund due1970-71 7,3171972-73 35,5041973-74 43,7121974-75 53,120
5. The claim of the respondent for grant of interest on refund was considered under Section 34A(3A) of the Act. The Inspecting Assistant Commissioner, however, was of the view that interest under Section 34A(3A) was allowable only if the payments had been made after March 31, 1975. He found that after the assessment certain payments were made by the respondent as follows :
Assessment Year Amount paid Date1970-71 5,835 7-6-19791972-73 3,032 20-3-19791973-74 22,100 7-6-19791974-75 41,040 7-6-1979
6. He worked out the amount of refund for the different years as follows :
Assessment year Amount of refund1970-71 7,3171972-73 35,5041973-74 43,7121974-75 53,120
which was paid after March 31, 1975. In appeal the Commissioner of Wealth-tax (Appeals) relying upon a decision of the Delhi High Court in the case of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India : [1981]130ITR928(Delhi) had accepted the plea of the respondent that the payments made under Section 15B stood adjusted on the date of the assessment, thus all the payments should be deemed to have been made on the date when such adjustments took place. The Tribunal has upheld the order.
7. In respect of the assessment years 1971-72, 1975-76 to 1977-78, the respondent became entitled to the refund pursuant to the order passed under Section 23 of the Act as follows :
Assessment year Amount of refund Date of revision1971-72 17,315 21-1-19841975-76 45,879 -do-1976-77 41,037 13-8-19841977-78 31,015 27-1-1984
8. The respondent applied for payment of interest under Section 34A(3A) of the Act but was allowed interest only for the assessment year 1975-76 on the amount which was deposited in pursuance of the assessment order after March 31, 1975. For the remaining assessment years, the claim was declined on the ground that the payments had not been made in pursuance of the assessment orders but under Section 15B of the Act. The Commissioner of Wealth-tax (Appeals) had upheld the order passed by the Assessing Officer. This time he did not follow the decision of the Delhi High Court in the case of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India : [1981]130ITR928(Delhi) as he was of the view that the Bombay High Court in the case of CIT v. Carona Sahu Co. Ltd. : [1984]146ITR452(Bom) and the Gujarat High Court in the case of Bardolia Textile Mills v. ITO : [1985]151ITR389(Guj) had taken a different approach and he preferred to follow those decisions as the matter was from the State of U. P. and did not fall within the jurisdiction of the Delhi High Court. However, the Tribunal by following its earlier order dated November 7, 1986, in respect of the assessment years 1970-71 and 1972-73 to 1974-75 had upheld the claim of the respondent-assessee and had allowed interest on the amount of tax which had been deposited prior to March 31, 1975, as also prior to the assessment order as in its view under Section 15B of the Act the amount deposited by way of advance tax is to be treated as amount of tax deposited pursuant to the assessment order.
9. We have heard Sri Shambhoo Chopra, learned standing counsel for the Revenue, and Sri Rithik Upadhyaya, learned counsel appearing for the respondent-assessee.
10. As both the references relate to the same assessee and raise a common questions of law they are being decided by a common judgment and order.
11. Learned standing counsel for the Revenue submitted that interest under Section 34A(3A) of the Act is admissible only in respect of the amount which has been deposited after March 31, 1975, in pursuance of the assessment order and not on such amount which has been deposited suo motu as self-assessment tax before the assessment order has been passed. He submitted that the deeming clause under Section 15B of the Act would not be attracted for levy of interest. In support of his aforesaid plea he has relied upon the following decisions :
(1) National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India : [1981]130ITR928(Delhi) ;
(2) K. Govindan and Sons v. CIT [2001] 247 ITR 192 ; and
(3) Vikrant Tyres Ltd. v. First ITO : [2001]247ITR821(SC) .
12. Sri Rithik Upadhyaya, learned counsel for the respondent-assessee, submitted that in view of the deeming provision under Section 15B of the Act the amount of tax deposited prior to the assessment is to be treated for all purposes as tax deposited on the date when the adjustment of such tax has been made in the assessment order and, therefore, on the date of assessment order the amount of tax would be treated to have been paid and thus the interest under Section 34A(3A) of the Act is payable on such amount also. In support of his plea he has relied upon the decision of the apex court in the case of Modi Industries Ltd. v. CIT : [1995]216ITR759(SC) .
13. Having heard learned counsel for the parties we find that under Section 34A of the Act the provision has been made for granting of refund and interest. Sub-section (3A) of Section 34A of the Act provides for payment of interest on refunds which reads as follows :
'(3A) Where the whole or any part of the refund referred to in Sub-section (3) is due to the assessee as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in Sub-section (3) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted :
Provided that, were the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalment or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted :
Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding.
Provided also that, where any interest is payable to an assessee under this sub-section no interest under Sub-section (3) shall be payable to him in respect of the amount so found to be in excess.'
14. From a reading of the aforesaid provision, it is seen that simple interest at the rate specified in Sub-section (3) is to be paid by the Central Government from the date on which the refund was granted on the amount which has been paid by the assessee after March 31, 1975, in pursuance of any order of assessment or penalty found to be in excess.
15. Section 15B of the Act provides for deposit of tax and interest before the return has been filed. Sub-section (2) provides that any amount paid towards self-assessment shall be deemed to have been paid towards such regular assessment after the regular assessment under Section 16 has been made. Sub-section (2) of Section 15B of the Act reads as follows :
'(2) After the regular assessment under Section 16 has been made, any amount paid under Sub-section (1) shall be deemed to have been paid towards such regular assessment.'
16. From a reading of the aforesaid provision it is seen that any amount which has been deposited towards tax under self-assessment is to be deemed to have been paid towards regular assessment.
17. In the case of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India : [1981]130ITR928(Delhi) , the Delhi High Court has held that after introduction of Sub-section (2) in Section 214 of the Income-tax Act, 1961, whatever may have been the interpretation that might be placed on the expression 'regular assessment' contained in Section 214, there is no escape from the conclusion that the assessee is entitled to a refund along with interest up to the date of refund and the expression 'regular assessment' in Section 214 should be construed as referring only to the first or initial regular assessment and not to subsequent modifications thereof. The Delhi High Court has held that the payment of advance tax has material significance only till the initial regular assessment is made and thereafter it has no separate existence by itself but gets merged in the tax demand payable by the assessee. Therefore, even the payment of advance tax can be worked into the provisions under Section 244(1A). On the language of Section 219, the advance tax paid is treated as a payment of tax for the assessment year and is given credit for at the time of the regular assessment. This means that when the regular assessment is made in the first instance, the advance tax paid earlier is treated as having been paid in pursuance of the regular assessment and in satisfaction thereof. Thus, the advance tax paid earlier will get converted into a payment on the date of the initial assessment of the tax due for the assessment year. Carrying this fiction to its logical extent the Delhi High Court has held that the assessee must be held entitled to interest on the amount of advance tax also to the extent it is found refundable from the date of the excess payment right up to the date of the actual refund.
18. In the case of Carona Sahu Co. Ltd. : [1984]146ITR452(Bom) the Full Bench of the Bombay High Court has held that interest is compensatory in character but there is no right to receive interest other than by a right created by statute which depends upon the construction of the statute. It has further held that the regular assessment in Sub-sections (1) and (1A) of Section 214 of the Act must be read to mean the first order of regular assessment and not the last operative order of regular assessment. If the amount of advance tax paid by the assessee for an assessment year is equal to the tax assessed by the order of first regular assessment no interest is payable. However, if the amount of advance tax paid is greater than the tax assessed by the order of first regular assessment the Government pays, under Section 214, interest to the assessee on the excess amount up to the date of the first order of regular assessment. If the amount of advance tax paid is less than the tax assessed by the first order of regular assessment, the assessee pays, under Section 215, interest on the amount of the shortfall up to the date of the first order of regular assessment.
19. In the case of Bardolia Textile Mills v. ITO : [1985]151ITR389(Guj) the Full Bench of the Gujarat High Court has held that interest on the excess of advance tax refunded under Section 214(1) of the Act has to be paid up to the date of 'regular assessment'. When the first assessment of the Income-tax Officer is final, that is the 'regular assessment' for purposes of Section 214(1). Where the first assessment is set aside by the Appellate Assistant Commissioner on appeal and a fresh assessment is made, the excess will be determined with reference to such fresh assessment and interest has to be paid up to the date of such revised assessment. Even when on an appeal from the first assessment, the Appellate Assistant Commissioner does not set aside the assessment, but merely reduces the tax liability and, therefore only a revised assessment is made recomputing the income and the tax to give effect to the appellate decision, the position is the same and the excess of advance tax refundable will be determined with reference to the revised assessment and the interest is payable on such excess up to the date of such revised assessment.
20. In the case of Modi Industries Ltd. v. CIT : [1995]216ITR759(SC) the apex court has approved the view taken by the Delhi High Court in the case of National Agricultural Co-operative Marketing Federation of India Ltd. v. Union of India : [1981]130ITR928(Delhi) and the Bombay High Court in the case of Carona Sahu Co. Ltd. : [1984]146ITR452(Bom) and has impliedly disapproved the view taken by the Gujarat High Court in the case of Bardolia Textile Mills v. ITO : [1985]151ITR389(Guj) . It has held that the regular assessment means the first assessment made by the assessing authority and not the assessment passed pursuant to an order in appeal or revision. It has further held that the amount of advance tax and the amount of tax deducted at source must be treated as payment of tax pursuant to an order of assessment and will have to be similarly treated. The apex court has approved the view taken by the Punjab and Haryana High Court in the case of CIT v. Leader Engineering Works that the advance tax paid lost its identity when it was adjusted towards tax liability accrued under the regular assessment and takes the shape of payment of tax in pursuance of the order of assessment. While summing up the apex court at page 808 of the report has summed up as follows :
'If any tax is paid pursuant to an assessment order after March 31, 1975 (which will include tax deducted at source and advance tax to the extent the same has been retained and treated by the Income-tax Officer as payment of tax in discharge of the assessee's tax liability in the assessment order), becomes refundable wholly or in part as a result of any appellate or other order passed, the Central Government will have to pay the assessee interest on the refundable amount under Section 244(1A). For the purpose of this section, the amount of advance payment of tax and the amount of tax deducted at source must be treated as payment of income-tax pursuant to an order of assessment on and from the date when these amounts were set off against the tax demand raised in the assessment order, in other words, the date of the assessment order.'
21. In the case of K. Govindan and Sons v. CIT [2001] 247 ITR 192 the apex court has held that a first or initial assessment order under Section 147 of the Act is a 'regular assessment' within the meaning of Section 139(8) of the Act which has been the position of law even before the Explanation in Section 139(8) was added by amendment and it was only clarificatory in nature.
22. In the case of Vikrant Tyres Ltd. v. First ITO : [2001]247ITR821(SC) the apex court has held that it is a settled principle that while construing revenue Acts courts have to give a fair and reasonable construction to the language of the statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the statute clearly showing an intention to lay the burden on the subject. In this process courts must adhere to the words of the statute and the so-called equitable construction of those words of the statute is not permissible. The task of the court is to construe the provisions of taxing enactments according to the ordinary and natural meaning of the language used and then to apply that meaning to the facts of the case and in that process if the taxpayer is brought within the net he is caught, otherwise he has to go free.
23. In the present case, we are not concerned with the meaning of the words 'regular assessment'. Here the only question is as to whether any amount which has been paid by the respondent prior to the assessment order in respect of the assessment year 1974-75 prior to March 31, 1975, by way of self-assessment tax under Section 15B of the Act would be treated to have been paid in pursuance of the order of assessment which has been passed after March 31, 1975, or not. As held by the apex court in the case of Modi Industries Ltd. : [1995]216ITR759(SC) the amount of advance tax as also the tax deducted at source is to be treated as payment of tax pursuant to an order of assessment on and from the date when these amounts were set off against the tax demand raised in the assessment order, i.e., from the date of the assessment order, the self-assessment tax paid by the respondent either before March 31, 1975, or prior to the passing of assessment orders has to be treated as tax paid on the date of the relevant assessment orders which have been passed after March 31, 1975, in view of the express provision of Section 15B of the Act. In coming to the above conclusion we are not placing any equitable construction on the two provisions referred to above.
24. We further find that the Delhi High Court in the case of Director of Income-tax v. Escorts Employees Welfare Trust [2002] 124 Taxman 340, has upheld the view taken by the Tribunal wherein a direction was issued by the Assessing Officer to allow to the assessee interest under Section 34A(3A) of the Act by following the decision of the apex court in the case of Modi Industries Ltd. : [1995]216ITR759(SC) . We are in respectful agreement with the view taken by the Delhi High Court in the aforementioned case. The controversy have been set at rest by the apex court in the case of Modi Industries Ltd. : [1995]216ITR759(SC) and applying the principles laid down therein we are of the considered opinion that the deeming clause provided under Section 15B of the Act has to be given full effect and the amount of self-assessment tax paid under the aforesaid provision has to be treated as payment of tax pursuant to an order of assessment on and from the date when these amounts were set off against the tax demand raised in the assessment order, i.e., from the date of the assessment order and, therefore, the Tribunal has rightly allowed interest under Section 34A(3A) of the Act on the amount deposited prior to March 31, 1975, as also prior to the assessment order.
25. In view of the foregoing discussions, we answer the questions referred to us in the affirmative, i.e., in favour of the assessee, and against the Revenue. However, there shall be no order as to costs.