ORDER
A. Kalyanasundharam, Accountant Member
1 In this appeal by the assessee, the only issue involved is regarding the claim of interest under Section 244(1A) in respect of self-assessment tax paid which was refunded. According to the assessee, it is not disputed by the department that the payment was made after 1-4-1975 but what is being disputed is that self-assessment tax is not an amount paid as a consequence of assessment order and, therefore, interest is not allowable. Reference was made to the provisions contained in Section 140A(2) where it has been mentioned that after a regular assessment has been made the amount that is paid as self-assessment tax shall be deemed to have been paid towards such regular assessment. Therefore, though the amount was paid prior to the assessment, in view of this provision, the claim of the assessee is fully justified that it should be treated as payment made as a consequence of the regular assessment. Reliance was also placed in Delhi High Court decision in National Agricultural. Co-operative Marketing Federation of India Ltd. v. Union of India [1981] 130 ITR 928. The department relied on the orders of the authorities below.
2.After carefully considering the submissions, we are of the view that the claim of the assessee is reasonable and should be allowed. The provisions of Section 140A(2) clearly provides that after a regular assessment under Section 143 or 144 has been made, any amount paid under Sub-Section (1) shall be deemed to have been paid towards such regular assessment. Section 244(1A) talks of interest payable as a consequence of refund that has been granted to the assessee in pursuance of an order of assessment. Therefore, reading of the provisions of the above Sections, the claim of the assessee has only to be allowed. The Delhi High Court in the case of National Agricultural Co-operative Marketing Federation of India Ltd. (supra) have made categorical observation that since as a consequence of an assessment made, the tax that are paid as advance tax has to be treated as amounts paid as a consequence of an assessment. Therefore, we allow this appeal of the assessee.
S.S. Mehra, Judicial Member
1. I have the benefit of perusing the order framed by the learned Accountant Member, Shri A.Kalyanasundharam. It is,, however, regretted that I could not agree with the conclusion arrived at in his order. The facts by and large are not in dispute and have in fa.ct been detailed by my learned brother. The issue pertains to allowance of interest under Section 244(1A) of the Income-tax Act, 1961. Such interest was claimed by the asses-see with respect to the refund, which became due out of the self-assessment tax paid.
2. Section 244(1A) deals with the interest on refund consequent upon the order passed in appeal or other proceedings. In fact this special Section deals with a situation arising out of Section 240 of the Act. We are in the present case concerned with a situation covered under Section 244(1A) of the Act. The Sub-section contemplates that interest at the rates specified in Sub-section (1) of Section 244 will be allowable to the assessee where refund was due to the assessee as a result of any amount having been paid after 31st day of March, 1975 in pursuance of any order of assessment or penalty. In the case before us the payment was made under Section 140A and 244(1A) makes it abundantly clear that the facts of the assessee’s case do not warrant the allowance of any interest as the refund was not due on account of the amount having been paid in pursuance of any order of assessment or penalty. The assessee’s refund was out of the self-assessment tax.
3. Section 140A(2) deals with a situation where the tax once paid becomes payment towards a regular assessment only after the assessment is framed. Same is the ratio in the case of National Agricultural Co-operative Marketing Federation of India Ltd. (supra), relied upon by the learned brother with this proposition of law there cannot be any dispute. But before the self-assessment tax becomes a tax paid towards such regular assessment, it has got a different character, i.e., it was self-assessment, tax. On account of this factual position the refund out of the self-assessment tax does not fit in the frame of language of Section 244(1A). Thus in my view the disallowance of interest was rightly made by the learned ITO and such action of the learned. ITO was correctly confirmed by the learned CIT(A) Keeping in view the undisputed factual position and the law on the point the learned CIT(A)’s finding does not warrant any interference and the same is confirmed.
4. In the result the appeal is dismissed.
ORDER UNDER Section 255(4) OF THE INCOME-TAX ACT
Consequent upon the difference of opinion the matter is being placed before the Hon’ble President for proceeding in the matter in the light of the above Section. The difference of opinion is as under :
Whether on the facts and in the circumstances of the case the assessee was entitled to interest under Section 244(1 A) of the Act on the refund due out of the self-assessment tax paid ?
THIRD MEMBER ORDER
S. Narayanan, Vice President (WZ)
1. A difference of opinion having arisen between the Members, who originally heard this appeal, the matter has come to be referred to me by the President under Section 255(4). The point of difference is as under :
Whether, on the facts and in the circumstances of the case, the assessee was entitled to interest under Section 244(1 A) of the Act on the refund due out of self-assessment tax paid ?
2. The assessee is a Pvt. Ltd. Company. The assessment for this year was completed on 18-9-1978 on a total income of Rs. 3,20,630. The assessee had made the following payments as self-assessment tax (under Section 140A) :
Date Amount paid
Rs.
29-12-1975 53,107
19-7-1977 75,000
After the assessment was finalised on 18-9-1978, the assessee paid various amounts, amounting in all to Rs. 27,000 in the period 25-3-1980 to 15-3-1982.
3. By an application under Section 154 dated 28-3-1982, the assessee requested that interest under Section 244(1A) on the refund arising out of the tax paid in excess be granted to it. The ITO, however, rejected this prayer on the ground that, no such interest was allowable as regards the payments made under Section 140, i.e., such payments could not be deemed to be payments made “in pursuance of the assessment”. The assessee appealed.
4. The Commissioner (A), first of all, recorded the following additional facts :
(a) The assessee was allowed a refund of Rs. 66,800 on 26-3-1983 in pursuance of an order of rectification dated 21-10-1982. It was further allowed a refund of Rs. 22,000 on 4-2-1983.
(b) The assessee was asked to pay Rs. 27,000 by instalments after the completion of the assessment on 18-9-1978. This payment was made on different dates between March 1980 and March 1982.
(c) The assessee, by application under Section 154 dated 28-7-1983 requested for interest on the refund of Rs. 66,800 and Rs. 27,000 noted above, i.e., at Rs. 93,800 on the ground that the said payments were made after 1-4-1975 and interest at the rate of 12 per cent per annum was payable by the Govt. under Section 244(1A).
(d) The ITO rejected the request. Though he did not mention it in his order he did consider the point that interest could not be allowed under Section 244(1A) where refund was granted as a result of rectification under Section 154, as such an order was not covered by the expression “other proceeding’s” used in Section 240.
5.The Commissioner (A) then noted that Section 244 had two subSections, both of which were relevant for allowing interest to an assessee on refunds. He extracted, therefore, the relevant provi sions as under :
244. Interest on refund where no claim is needed.-(1)…. (carries a, reference to refunds issued under orders mentioned in Section 240).
(1A) Where the whole or any part of the refund referred to in Sub-section (1) 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 the 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 Govt. shall pay to such assessee simple interest at the rate specified in Sub-section (1) 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.
The further points made by the Commissioner (A) were as follows :
(i) The term “other proceeding” found in Section 240 was comprehensive enough to cover the proceedings under Section 154 also (Section 240 provides that “where as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the ITO shall, except as otherwise provided in the Act, refund the amount to the assessee without his having to make any claim in that behalf).
(ii) The contention that interest on refund cannot be allowed because payments were made under Section 140A and not in pursuance of a regular assessment, cannot be accepted fully. Out of the refund of Rs. 66,800 issued on 26-3-1983, Rs. 5,000 was in respect of a payment made in March 1980. That was in pursuance of an order of regular assessment. Hence interest on Rs. 5,000 had to be allowed from the date of payment to the date of refund, i.e., 26-3-1983. The balance of Rs. 61,800 was the refund of self-assess ment tax and that was not covered under Section 244(1A). However, interest on this refund has to be allowed under Section 244(1) as the refund arose from a rectification order dated 21-10-1982 even though the refund was issued on 26-3-1983. Interest was payable at the rate of 12 per cent after the expiry of three months from the end of the month in which the order under Section 154 was passed. Section 244(1)/Rule 119A of the Income-tax Rules, 1962 entitled the assessee to interest at the rate of 12 per cent for one complete month, i.e., for the month of Feb. 1983. Hence the ITO had to allow interest at the rate of 12 per cent per annum on Rs. 61,800 for one month.
(iii) As regards the interest on refund of Rs. 22,000 granted on 4-10-1983. there could be no doubt that the payment of tax of Rs. 22,000 was made in pursuance of the order of regular assess-ment by instalments on different dates. Interest at the rate of 12 per cent per annum was clearly payable from the dates of payment of each of the instalments to the date of refund, i.e., 4-10-1983 after excluding in each case one month as required under the second proviso to Section 244(1A). The major dispute between the ITO and the assessee regarding dates of payment appear to be on account of the tact that payments in most of the cases were made by cheques, which were cleared by the banks on different dates later than the dates on which they were tendered. Under the Treasury Rules, where a payment is made by cheque ; the date of tendering the cheque at the bank had to be taken as the date of payment of Govt. dues, subject to the cheque being honoured. The ITO should, therefore, ascertain the dates of payment in accordance with the above position and compute the interest payable to the assessee on that basis.
The Department accepted the above order, but the assessee came up in appeal raising the following contentions :
1. On the facts and circumstances of the case, the CIT(A) erred in holding that refund of Rs. 6.1,800 paid on self-assessment under Section 140-A was not eligible for interest under Section 244(1 A).
2 The learned CIT(A) erred in law in holding that self-assessment tax paid under Section 140-A is not a payment in pursuance of an order of assessment.
6.The learned Accountant Member, who wrote the leading order, held as under :
(a) The payment of Rs. 61,800 was made after 1-4-1975. It was self-assessment tax. In the light of Section 140-A(2) it had to be taken as a payment made in pursuance of a regular assess-ment. See. 140-A(2) provides that after a regular assessment under Section 143 or Section 144 has been made any amount paid under Section 140-A(1) (self-a.ssessment tax) shall be deemed to have been paid towards such regular assessment.
(b)Section 244(1A) read with Section 140-A(2) authorised payment of interest on the self-assessment tax paid by the assessee.
(c) The above position was in line with the decision in National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra). The assessee’s appeal would, therefore, succeed.
7.The learned Judicial Member, however, disagreed. According to him, the Commissioner (A) was correct in denying interest on the self-assessment tax paid. He made the following points in his order :
(a) Section 244(1A) is a special Section dealing with a situation arising out of Section 240 of the Act. Refund arose here on account of payment of self-assessment tax. There was no dispute on this. The refund was not out of any amount paid by the assessee in pursuance of an order of assessment or penalty. With such kind of refunds, Section 244(1 A) was not concerned.
(b) Section 140-A(2) deals with a situation where the tax once paid, becomes a payment towards a regular assessment only after the assessment is framed. This was the ratio of the National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra). There could not be any dispute on this proposition. But before the self-assessment tax becomes a tax paid towards such regular assessment, it carries a different charac-ter, i.e., it was self-assessment tax. Hence it is not covered by the language of Section 244(1A). The Commissioner (A) was therefore, correct in his order.
It is because of the above position, that the question referred to in paragraph 1 supra, was referred to the Third Member by the President.
8. Shri K.N. Butani, learned counsel for the assessee referred to the facts of the case. In particular, he pointed out that the assessee objected to the finding that interest was not payable on the refund amounting to Us. 61,800 as noted by the Commissioner (A) also. The amount of Rs. 61,800 indisputably relates wholly to the self-assessment tax paid by the assessee. Shri Butani drew attention to the following passage from the judgment in National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra) :
The second alternative is to read this Section harmoniously with the provisions contained in Chapter XVII-C and in particular s. 219. Acting on the logic, we have followed in our earlier dis-cussion that the payment of advance-tax has material significance only till the initial regular assessment is made arid that there-after it has no separate existence by itself but gets merged in the tax demand payable by the assessee, it would be seen that even the payment of advance-tax can be worked into the provisions of s. 244(1A). On the language of s. 219 the advance-tax is treated as a payment of tax for the assessment year and is given credit for a.t 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.
9. Shri Butani referred to Section 219 in this regard. That provides that any sum (other than penalty or interest) paid or recovered from an assessee as advance-tax in pursuance of Chapter XVII shall be treated as a payment of tax in respect of the previous year relevant for the assessment year concerned and credit therefor shall be given to the assessee in the regular assessment. The point stressed by Shri Butani in this regard is that when one compares the language of Section 2.19 with that of Section 140-A(2), it would be seen that the position stated by Section 140-A(2) is even clearer and expressed in “stronger language. In other words, applying the ratio of the National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra), the assessee’s claim here should succeed without doubt. No doubt, as the learned Judicial Member has stated in his order it bears the character of the self-assessment tax up to the completion of the assessment, but only up to that stage. Thereafter, it loses that identity a,nd in terms of Section 140-A(2) it cannot but he looked upon as tax paid “towards such regular assessment”. Interest under Section 244(1A) was, therefore, rightly allowable on Rs. 61,800 also.
10. Shri B.K. Haldar, Departmental Representative, placed strong reliance on the orders of the learned Judicial Member as well as the Commissioner (Appeals). He also referred to the decision in Bardolia Textile Mills v. ITO [1985] 151 ITR, 389 (Guj.) (FB). In that case, it was pointed out that Section 244(1A) does not apply to the amounts paid as advance-tax, that advance-tax paid was not an amount paid in pursuance of any order of assessment or penalty that Sections 214(1) and 244 operate in different fields ; and that Section 244 was not determinative of the construction to be placed on Section 214(1).
11. With regard to the National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra), the Departmental Representative placed a copy of the order of the Supreme Court in Civil Misc. Petition No. 26717 of 1983 dated 26-11-1984. The Supreme Court ordered as under in that matter on the application of the CIT, Delhi-II, New Delhi, the respondent being the National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra):
The application for stay above-mentioned being called on for hearing before this court on the 26th day of November, 1984, upon hearing counsel for the parties herein, this Court both order that pending the hearing and final disposal by this court of the appeal above-mentioned, there shall be interim stay of the judgment and order dated the 17th Sep. 1980 of the Delhi High Court at New Delhi in writ Petition No. 878 of 1978 directing the payment of interest under Sections 214 and 244(1A) of the IT Act.
Shri Haldar submits that, as a result of the above interim stay order, the decision of the Delhi High Court in National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra) is no longer operative and hence the Tribunal should follow the decision in Bardolia Textile Mills’ case (supra). The contention for the department, therefore, is that there was no merit in the assessee’s claim for interest on self-assessment tax refund also.
12. I have considered the position. I may first refer to the Bardolia Textile Mills’ case (supra). In that case, the question raised before the court (by way of a writ petition under Article 226 of the Constitution) was, whether the ITO should be directed to pay interest under Section 214(1) of the Act, on the advance tax paid in excess of the amount of tax determined on regular assessment. The controversy before the court concerned the meaning of the expression “Regular Assessment” used in Section 214(1). The interpretation of Section 244(1A) was not directly in controversy in that matter. The observations of the Gujarat High Court in Bardolia. Textile Mills’ case (supra) could hence be looked upon as as obiter dicta and to that extent they do have a persuasive effect.
13. According to the departmental representative, National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra) is no longer operative in rem, so to speak, because of the interim stay order of the Supreme Court. I am unable to accept this position as correct. The Stay Order affects only the parties to the dispute before the Supreme Court. The ratio of the judgment in National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra) being that of the jurisdictional High Court would still bind the subordinate Tribunals functioning in the Union territory of Delhi. There is no getting away from this. Applying the ratio of the National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra), there can be no room for holding that self-assessment tax is not covered by Section 244(1A). When that Section is read math Section 140-A(2) it has to be held in the light of the National Agricultural Co-operative Marketing Federation of India Ltd.’s case (supra) that the payment of Rs. 61,800 was an amount paid in pursuance of an order of assessment. I would, therefore, agree with the view expressed by the learned Accountant Member and hold that interest on the refund of Rs. 61,800 is due to the assessee in terms of Section 244(1A).
14. The matter will now go back to the Bench which originally heard the appeal for disposal in accordance with law.