Bakelite Hylam Ltd. Vs. Commissioner of Income-tax - Court Judgment

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(i) direct taxation - maintainability of appeal - sections 139 and 143 of income tax act, 1961 - modification order passed by income tax officer(ito) granting refund giving effect to order of tribunal - assessee filed appeal stating that ito omitted to grant interest thereon - revenue contended that assessee cannot appeal against order of ito giving effect to order of appellate tribunal - impugned order was as much an assessment under section 143 - held, appellate authority bound to entertain appeal. (ii) interest on belated refund - sections 244 and 246 of income tax act, 1961 - whether omission to grant interest under section 244 on belated refund could be subject matter of appeal - there was total denial of liability by revenue - held, appeal lies against total denial. head note: income tax appeal--maintainability under s. 246(1)(c)--against denial of interest under s. 244 held: where there is total denial of the liability to pay interest, the order is liable to be challenged in an appeal although there can be no appeal if the dispute is only regarding the quantum of interest payable. -kooka sidhwa & co. v. cit (1964) 54 itr 54 (cal) followed. income tax act 1961 s.246 appeal (aac)--maintainability--against modification order passed by ito giving effect to appellate order held: the order passed by the ito giving effect to the decision of the appellate authority is as much an assessment order as the one passed by him by way of regular assessment under s. 143. an assessee has, therefore, a right to appeal against a modification order as if it were an assessment order itself. it is true that s. 246 does not specifically refer to the provision of an appeal against an order under s. 244. -central provinces managanese ore co. ltd. v. cit (1986) 160 itr 961 (sc) followed. income tax act 1961 s.246 - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers entitlement to defend the action joint appeal by insured and insurer - held, the language employed in enacting sub-section (2) of section 149 appears to be plain and simple and there is no ambiguity in it. it shows that when an insurer is impleaded and has been given notice of the case, it is entitled to defend the action only on grounds enumerated in sub-section (2) of section 149 of the act, and no other grounds are available to it. the insurer is not allowed to contest the claim of the injured or heirs of the deceased on other grounds, which are available to the insured. if insurer is permitted to contest the claim on other grounds it would mean adding more grounds of contest to the insurer and will be negation of the intention of the legislature and annihilate mandate of the provisions of sections 170 and 149 of the act. the insured can pursue appeal only after giving up the insurer as the appellant and not otherwise. in the instant case, the insurer has not withdrawn from party array but has remained prosecuting the appeal with the insured on the grounds which are available only to the insured. therefore, the joint appeal as filed by the insured and the insurer is not maintainable. section 166: [v. gopala gowda & jawad rahim, jj] claim for compensation accident due to mechanical defect in the vehicle held, it is not in dispute that the claimant suffered injuries in an accident, which occurred during the course of his employment, albeit due to his negligence but law does not render him remediless. statutory right is conferred on him, accruing by virtue of his employment under insured to claim compensation under workmens compensation act. the insurer is statutorily duty bound to discharge the liability of the owner of the vehicle, to pay such compensation to the employee, as mandated under the provisions of section 149 of the act. the right of an injured employee or his dependents as the case may be to be compensated, when injury is suffered or death occurs during his employment, is recognised not only under workmens compensation act, but also under benevolent provisions under section 166 and 167 of the m.v. act. the right of driver to seek compensation is not restricted only to the workmens compensation act, it has been enlarged to enable such person to seek just compensation (sections 166 and 168), conferring upon him the right of election engrafted under section 167 of the act to choose either of the two forum. the only defence which the insurer could take is limit of its liability as enumerated under section 147 of the act, leading to contest, inter alia, only between insured and insurer and does not impact claimants right to recover the compensation determined by the tribunal which crystallizes into enforceable right against both. in the instant case, the claimant/driver has exercised right of election under section 167 of the act to seek compensation under section 166 of the act resulting in award passed by the tribunal. therefore, the insured and the insurer have no escape but to discharge the said award as directed. undisputedly, in this case as deduced for proved facts, the vehicle in question was not properly maintained by the owner and despite faulty brake system, the claimant had undertaken the hazardous journey to his peril at the behest of and at the instruction of the owner. the owner is therefore, tortfeasor. section 168: [v. gopala gowda & jawad rahim, jj] insurers limit of liability - held, it is well settled that the liability of the insurance company for payment of compensation can be statutory or contractual. is for the insurance company to show that the insurance policy was a statutory policy and not a contractual policy to restrict its liability. that issue was neither raised before the tribunal nor is raised in this appeal requiring decision. thus, if at all the insurer has any valid ground to restrict its liability, it can proceed against the insured but firstly it has to discharge the award as required under section 149 (1) of the act. where the owner/insured has failed to maintain the vehicle as per prescribed safety standards and has caused the claimant to drive the vehicle with mechanical defects, the owner would be the tortfeasor and the claimant can maintain a petition seeking compensation under the provisions of the act, instead of seeking compensation under the workmens compensation act. on facts, held, the material evidence on record, particularly, with regard to the income of the claimant, his age, medical evidence and the evidence relating to pecuniary loss has not been considered by the tribunal in the correct perspective, which has resulted in passing of the impugned award, disproportionate to the pecuniary loss and the loss of future income of the victim. the settled principles governing determination of compensation has been given a go-bye. compensation of rs.4,15,150/- awarded by the tribunal was enhanced to rs.8,20,000/-. - a distinction lay in the fact that, where, on the principal of law, there is total denial of the assessee's claim, it is open to him to show that the claim for interest is well-founded.y.v. anjaneyulu, j.1. this is a reference made by the income-tax appellate tribunal under section 256(1) of the income-tax act, for the assessment year 1971-72, at the instance of the assessee. the question referred is : 'whether, on the facts and in the circumstances of the case, the tribunal erred in law in holding that an appeal did not lie to the commissioner (appeals) against an order of the income-tax officer passed to give effect to an appellate order made by the appellate assistant commissioner in the quantum appeal, on the issue of non-allowance of interest under action 244 on the refund arising to the assessee as a result of the appellate assistant commissioner's order in quantum appeal ?' 2. for the income-tax assessment year 1971-72, assessment was initially made and the matter went up to the tribunal. the tribunal passed an order granting certain reliefs to the assessee and in giving effect to the tribunal's order, the income-tax officer passed what he described as a modification order dated september 19/22, 1978. the income-tax officer granted a refund of rs. 4,037. the assessee referred an appeal against the so-called modification order. in the appeal filed, the assessee claimed that the income-tax officer was in error in omitting to grant interest under section 244 of the act. it may be pointed out that whatever refund is due and is not granted within the time allowed, the assessee can claim payament of intrest on the amount of refund. the commissioner (appeals) declined to admit the assessee's appeal on the ground that no appeal lies against an order giving n effect to the appellate order of the tribunal. in any event, no right of appeal is provided against the income-tax officer's omission to grant refund under section 244 of the act. 3. the assessee filed an appeal before the tribunal questioning the correctness of the view taken by the commissioner (appeals). the tribunal upheld the commissioner's view and dismissed the appeal. the present reference is the outcome of the tribunal's order rejecting the assessee's contention. 4. two issues arise for consideration as indicated by the question referred to this court. the first question is, whether the assessee can appeal against a modification order passed by the income-tax officer giving effect to the order of the appellate authority in other words, could it be said that the modification order partakes of the nature of an order under section 143 of the act so as to subject itself to an appeal under section 246 of the act. now, the revenue's contention is that the order/orders passed by the income-tax officer giving effect to the appellate decisions cannot be described as assessment orders in the sense they are understood under section 143 of the act. it is, therefore, submitted that no appeal lies. we are afraid, the contention urged by the revenue is not tenable. an order of assessment is one in which there is computation of income or computation of tax or both. that computation of income and tax can be made by the income-tax officer not only in regular assessment made under section 143 of the act but also in orders passed from time to time giving effect to the decision of the appellate authority is as much an assessment order as the one passed by him by way of regular assessment under section 143 of the act but also in order passed from time to time giving effect to the decisions of the appellate authirities. the order passed by the income-tax officer giving effect to the decision of the appellate authority is as much an assessment under section 143 of the act. we are fortified in this view by the decision of the calcutta high court in kooka sidhwa and co. v. cit : [1964]54itr54(cal) and the decision of the punjab high court in gopi lal v. cit . we, therefore, hold that an assessee has a right of appeal against a modification order as if it were an assessment order itself and the appellate authority is bound to entertain an appeal and decide it on merits. 5. the second question involved is whether the omission to grant interest under section 244 of the act on the belated refund could be the subject-matter of an appeal 6. it is true the section 246 of the act does not specifically refer to the provision of an appeal against an order under the section 244 of the act. learned counsel for the assessee, however, invited our attention to the decision of the supreme court in central provinces manganese ore co. ltd. v. cit : [1986]160itr961(sc) . the question considered by the supreme court in this case is, whether the assessee is entitled to file an appeal against the levy of interest under section 215 and 139 of the act. section 246 of the act did not, in terms, refer to these two items and provide a right of appeal. the view taken, therefore, was that in the absence of a specific right of appeal conferred by section 246, no appeal lies to the appellate authority against refusal to grant interest. the supreme court held that where there is total denial of the liability to pay interest, the order is liable to be challenged in an appeal although there can be no appeal if the dispute is only regarding the quantum of interest payable. a distinction lay in the fact that, where, on the principal of law, there is total denial of the assessee's claim, it is open to him to show that the claim for interest is well-founded. if, however on principle, there was no objection to the grant of interest but the dispute related only to the quantum, then the assessee has no right of appeal against the order on the ground that interest was inadequately granted in our opinion, this analogy holds good in the present case also. this is not a case where the assessment is in issue on the quantum of interest payable on belated refund under section 244. there is total omission on the part of the income-tax officer to grant interest on refund. the income-tax officer insisted that, in terms of section 244 of the act, the assessee is not entitled to interest. there is thus total denial of the liability by the revenue to pay interest on the belated refund to the assessee under section 244 of the act. an appeal, therefore lies against such total denial to the next appellate authority. if, however, the dispute is merely regarding the quantum of interest payable on the belated refund, no appeal would be maintainable. as we find in the present case that there is total denial without granting any interest whatsoever under section 244, an appeal lies. we accordingly answer 7. we accordingly answer the question in favour of the the assessee and against the revenue. 8. no costs.