Law:

Section:

Section 214 of the Income-tax Act, 1961 – Advance tax – Interest payable by Government – Assessment year 1967-68 – Whether liability to pay interest on part of Government and correspondingly right of assessee to receive interest arises only on completion of assessment – Held, yes – Whether once liability to pay interest under section 214 arises on or after 1-10-1967 i.e. date with effect from which section 214 was amended, interest will have to be calculated at amended rate of 9 per cent and not at 6 per cent even for period anterior to 1-10-1967 – Held, yes FACTS The assessment for the assessment year 1967-68 was completed on 30-11-1968. The assessee had paid advance tax in excess of the tax ultimately assessed. Consequently, the assessee became entitled to interest on the said excess amount under section 214. The ITO calculated the interest at 6 per cent per annum for the period from 1-4-1967 to 30-9-1967, and at 9 per cent thereafter as per the amendment made by the Taxation Laws (Amendment) Act, 1967 with effect from 1-10-1967. The assessee filed an application under section 154 requesting ITO to rectify his order by calculating interest at 9 per cent for the entire period. The ITO declined to make any rectification. The AAC allowed the claim of the assessee which was confirmed by the Tribunal. On reference : HELD The liability to pay interest on the part of the Government and correspondingly the right of the assessee to receive interest arises only when the assessment is completed. So long as the assessment has not been completed, it will not be possible to find out whether the advance tax paid by the assessee is in excess of the ultimate tax payable by him or falls short of that tax. Consequently, the provisions of section 214 as in force on the date when the assessment is completed will be the only provision that will be applicable with regard to payment of interest on the said excess amount. In the instant case, the assessment was completed on 30-11-1968, that is to say, after the amendment of section 214 with effect from 1-10-1967. Thus, after 1-10-1967, the only statutory provision in force with reference to payment of interest is section 214 and that…

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