Law: Income Tax Act, 1922

Section: 18A(1)

JUDGMENT Chainani, CJ.-This is an appeal by the Income-tax Officer, Companies Circle I(1), Bombay, and the Union of India, against the order passed by Mr. Justice K.T. Desai, by which he set aside the assessment order dated 30th July, 1957, passed by the first appellant and the notice of demand issued by him on 3rd August, 1957, upon the respondents, and prohibited the appellants from taking any steps or proceedings in enforcement of the said assessment order or the said notice of demand. The respondents are a limited company registered under the Indian Companies Act, 1913. For the assessment year 1952-53, the respondents made an advance payment of tax amounting to Rs. 10,75,017-9-0 under section 18A(1) of the Indian Income-tax Act. On 30th August, 1952, the respondents were regularly assessed under sub-section (3) of section 23 of the Act, for the same assessment year. The total amount of tax assessed was Rs. 6,46,329-9-0. Under section 18A(5) of the Act, as it then stood, the respondents were entitled to interest at 2 per cent. on the amount deposited by them on account of advance payment of tax. Under this provision, Rs. 14,720-14-0 were due to the petitioners on account of interest. This amount, together with the refund of tax due to the respondents was paid back to the respondents in September, 1952. On 24th May, 1953, the Income-tax Act was amended and a further proviso was added to section 18A(5) of the Act. Under section 18A(5) of the Act, as it originally stood. Government was liable to pay interest on the entire amount paid as advance payment of tax. Under the subsection as amended, interest is payable on the amount by which the amount paid on account of advance payment of tax exceeds the sum payable on account of tax determined on regular assessment. This amendment was given retrospective effect and was made effective as from 1st April, 1952. As a result of this amendment, the respondents were entitled to receive, on account of interest, only Rs. 9,404-5-0. They had, in fact, received Rs. 14,720-14-0. Under the provision, as amended, an excess payment of Rs. 5,316-9-0 had, therefore, been made to them. On 18th March, 1957, the respondents were served…

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