Law: Income Tax Act, 1961

Section: 219,244(1A)

Income-tax---Interest---Interest on refund in consequence of Appellate order---Advance tax adjusted towards tax liability under regular assessment takes the place of payment of tax---Assessment for assessment year 1973-74 completed on 27-1-1977--¬Advance tax paid before 31-3-1975---Same adjusted towards tax liability after 31-3-1975---Assessee becoming entitled to refund of tax on account of appellate order is entitled to interest on such refund---Indian Income-tax Act, 1961, Ss. 219 & 244(1-A). For the assessment year 1973-74, the Income-tax Officer completed the assessment of the assessee on January 27, 1977. The assessee had paid advance tax before March 31, 1975, and the advance tax was adjusted against the liability created by the aforesaid assessment order. On appeal to the Appellate Assistant Commissioner, the tax liability of the assessee was reduced and the excess amount was refunded. The assessee claimed interest on the amount refunded under section 244(1-A) of the Indian Income-tax Act, 1961, from the date the advance tax was adjusted pursuant to the assessment order till the date of refund. The Income-tax Officer disallowed the claim of the assessee. The Commissioner (Appeals) allowed the claim of the assessee. The Tribunal affirmed the order of the Commissioner (Appeals). On a reference: Held, that the advance tax paid lost its identity the moment it was adjusted towards the tax liability created under the regular assessment and took the shape of payment of tax in pursuance of the order of assessment. In the instant case, the assessment order was passed on January 27, 1977, i.e., after March 31, 1975, and, therefore, section 244(1-A) of the Act clearly applied to the case of the assessee. Section 214 provides for payment of interest to an assessee on the excess amount of advance tax paid. After adjustment of advance tax at the time of regular assessment, if some balance remained to the credit of the assessee, that balance is treated as advance tax and the amount adjusted therefrom is treated as payment of tax. The assessee was entitled to interest under section 244(1-A) on the amount adjusted towards tax, if found refundable in pursuance of the…

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