Law:

Section:

Section 214 of the Income-tax Act, 1961 - Advance tax - Interest payable by Government - Assessment years 1964-65 to 1966-67 - Whether interest paid, under section 214(1A) is not remission in tax or refund of tax - Held, yes - Whether interest paid, under section 214 being statutory obligation with respect to amount found refundable, would be assessed as income from "other sources" - Held, yes FACTS As a result of excess advance tax paid in respect of the relevant assessment years, the assessee was allowed interest under section 214, and, this was assessed as income under the head "other sources". This was confirmed by the AAC and the Tribunal. On reference : HELD The liability to pay advance tax is with reference to the income chargeable to tax. Any amount paid in excess is, therefore, not paid for income chargeable to tax. The concept of remission or relief necessarily implies that there must have been a liability to tax. The excess amount found refundable on assessment, cannot be said to be paid as tax or collected as tax. It may be it was paid or collected by way of tax. It may also be not a voluntary payment and it is a forced payment by virtue of the provisions of the Act. But since in the assessment, it is found as not referable to any income chargeable to tax, it could not be treated either as tax paid or its refund or the interest paid on that amount as a remission or rebate in tax. Nor can one accept the argument that it becomes payable as a result of income-tax assessment. It became payable because the amount paid was found not referable to any income chargeable. While, the use of the word "interest" in section 214 is not decisive of the question, whether that amount is refund of tax or a remission in tax, the original character of the amount paid or the interest paid under section 214 could not be ignored. Once the payment originally was not referable to income chargeable, the liability to pay advance tax being only on income chargeable, it could not be treated as tax paid. There is no distinction between the interest paid under section 237, read with section 243, and, that paid under section 214 either, as both take note of the fact that certain…

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