- This is a reference by the Income-tax Appellate Tribunal, Delhi Bench, under section 66(1) of the Indian Income-tax Act, 1922, of these two questions to this court :
(1) Whether on the facts and in the circumstances of this case an appeal against the order of the Excess Profits Tax Officer rejecting the assessees claim for interest under
section 14A(7) of the Excess Profits Tax Act lay to the Appellate Assistant Commissioner ? and (2) Whether on the facts and in the circumstances of this case the expression regular assessment for purposes of computing the claim of interest under section 14A(7) is the original assessment - made by the Excess Profits Tax Officer as a result of direction made by the Income-tax Appellate Tribunal - under section 19(2) of the Excess Profits Tax Act ?
The assessee was first assessed by way of provisional assessment under section 14A of the Excess Profits Tax, 1940 (XV of 1940), for five chargeable accounting years ending between March 31, 1942, and March 31, 1946. In the case of each chargeable accounting year specified amount was arrived at in the provisional assessment and the payment was accordingly made by the assessee. On regular assessment having been made under section 14 of the Act by the Excess Profits Tax Officer, the amount assessed of the profits tax for each year was found to be more than the amount assessed under the provisional assessment. On appeal to the Income-tax Appellate Tribunal, however, the orders of the Excess Profits Tax Officer were set aside under section 19 of the Act with a direction to the Excess profits Tax Officer to make a fresh assessment according to law as from the return stage in regard to each year concerned.
The Excess Profits Tax Officer, thereafter, made a regular assessment under section 14 of the Act Pursuant to the orders of the Income-tax Appellate Tribunal and then the amount of excess profits tax assessed in regard to each year fell short of the amount paid by the assessee pursuant to provisional assessment under section 14A. The Excess Profits Tax Officer under sub-section (7) of section 14a allowed refund of excess amount paid but refused to all interest on the excess amount at the rate of 5 per cent. per annum under sub-section (7) of section 14a on the grounds that the interest payable under section 14A(7) is similar to interest payable under section 18A of the Indian Income-tax Act, 1922, which is allowed to the regular settlement, but if the regular settlement is set aside to be made de novo, no further interest is allowable and that the assessees claim was not covered by section 14A(7) because the assessment made by him was not a regular assessment contemplated under section 14, but an assessment made under the directions of the Income-tax Appellate Tribunal under section 19(2). The Excess Profits Tax Officer made separate orders in regard to each chargeable accounting year.
In appeal the Appellate Assistant Commissioner overruled the objection of the Commissioner of the Income-tax that no appeal against the orders of the Excess Profits Tax Officer was competent to him under section 17(1) of the Act and reversing the order of the Excess Profits Tax Officer found that statutory interest under sub-section (7) of section 14a as claimed by the assessee was admissible to him. On the question of the competence of the appeal before him, the Appellate Assistant Commissioner was of the opinion that the word "relief" in sub-section (1) if section 17 of the Act must have its full meaning or removal or mitigation of an evil or release from it, and that once refund of excess amount was allowed under sub-section (7) of section 14a, interest upon such excess amount could not possibly be denied on any consideration, and such denial gave a right of appeal to the assessee. On the merits he pointed out that to assessment can be made under section 19(2) of the Act, which only deals with the powers of the Income-tax Appellate Tribunal, and that the Excess Profits Tax Officer, even when he was making assessments in consequence of the directions of the Income-tax Appellate Tribunal on the quashing of his previous orders, was making the assessments under section 14 of the Act and under no other section. So relief under sub-section (7) of section 14a was to be for the period between the date of the provisional assessment and the date of the refund allowed under the assessment actually made under section 14. He repelled the argument with reference to section 18A(5) of the Income-tax Act, 1922, on the ground that that provision is not worded in the same way as the provision of section 14A(7) of the Act. On appeal by the Commissioner of Income-tax, the Income-tax Appellate Tribunal on May 1, 1975, agreed with the Appellate Assistant Commissioner on both the question pointing out that decision in Sarangpur Cotton Manufacturing Co. Ltd. v. Commissioner of Income-tax is distinguishable from the present case because that was a decision concerning section 18A of the Indian Income-tax Act, 1922, and the scheme of the Act, so far as it concerns provisional assessment, is basically different from the scheme of the Excess Profits Tax Act, 1940. On an application by the Commissioner of Income-tax, the Income-tax Appellate Tribunal has made a reference of the two question, already reproduced, to this court under section 66(1) of the Indian Income-tax Act, 1922.
In so far as the first question is concerned, this part of sub-section (1) of section 17 of the Act is material :
"17. (1) Any person aggrieved... objecting... to the amount allowed by the Excess Profits Tax Officer by way of relief under any provision of this Act or to any refusal by the Excess Profits Tax Officer to grant relief may appeal to the Appellate Assistant Commissioner..."
The rest of the provisions in the section are not relevant. sub-section (7) of section 14a reads :
14A. (7) If, when a regular assessment is made in due course under section 14, the amount of excess profits tax payable thereunder is found to be less than that determined as payable by the provisional assessment, any excess of tax paid as a result of the provisional assessment shall be refunded to the assessee together with interest at 5 per cent. per annum calculated from the date of payment of such excess tax to the date of the order of refund, both days inclusive."
It is evident that in the case of excess payment of profits tax under the provisional assessment as against the regular assessment when refund of the excess is made to the assessee, the assessee has a statutory right to interest upon such amount at the rate given in the sub-section. The question then is whether claim under such right to statutory interest under sub-section (7) of section 14a is claim to relief within the scope of the words - "to any refusal by the Excess Profits Tax Officer to grant relief" - and it is the answer to this question which goes to decide whether an appeal in the present case lay or not to the Appellate Assistant Commissioner. The argument of the learned counsel for the Commissioner of Income-tax is that section 7 of the Act deals with "relief on occurrence of deficiency of points" and section 11 with "relief in respect of double excess profits taxation", and that the word "relief" as used in sub-section (1) of section 17 of the Act has reference only to such special reliefs as are particularly mentioned in the provisions of the Act and not to a general claim like a claim for interest in sub-section (7) of section 14a of the Act. In support of this argument the learned counsel makes reference to Simplex Mills Ltd. v. P. S. Subramanyam, Income-tax Officer, Commissioner of Income Tax v. Saraswati Sugar Syndicate and two cases of the Kerala High Court reported as Commissioner of Income-tax v. Nonshi Devshi Kattawala (Private) Ltd. and Commissioner of Income-tax v. Forbes Ewart and Figgis (Private) Ltd., respectively, in which last mentioned two cases are learned judges have relied upon the case of Simplex Mills Ltd. These cases do not relate to the provisions of Act XV of 1940, but to the provisions of the Indian Income-tax Act, 1922. What has been held in these cases is that the expression "relief under the Act" in section 34 of the Indian Income-tax Act, 1922, refers to the various kinds of reliefs to the assessee in respect of his income profits or gains, under section 15b, 15c, 49a, 49b, 49c, 49d and 60, and to the reliefs specified in part II of the Form of Assessment prescribed under Income-tax Rules, and that the payment of interest on tax paid in advance is not an integral part of the whole process of assessment and where any excess amount of interest is allowed it cannot be equated with the payment of less amount by way of tax. These were cases in which more than due amount of interest had been paid to the assessee under section 18A(5) of the Indian Income-tax Act, 1922, and what was attempted by the Income-tax Officer under section 34(1) of that Act was to demand back the excess interest paid on the ground that the income of the assessee had been made the subject of excessive relief under the provisions of that Act. The learned counsel for the Commissioner of Income-tax refers to those cases to urge that as refund of the excess amount of interest paid to the assessee under section 18(5) of the Indian Income-tax Act, 1922, has not been taken to be "excessive relief" under the provision of that act and the expression "relief under the Act" has been confined to specific sections of that Act, so in the present case also the word "relief" as used in section 17(1) of Act XV of 1940 should be confined to relief as referred to in section of this act such as section 7 or 11. The learned judges in these cases are only interpreting the expression "subject of excessive relief under the Act" as used in sub-section (1) of section 34 of the Indian Income-tax Act, 1922, and they point out that this expression as used in this provision is in respect of income, profits or gains and is only referable to various kinds or reliefs afforded to an assessee on that amount, that is to say in respect of his income, profits or gains. The enumeration of section is given, e.g., 15B, 15C, 49A, 49B, 49C, 49D and 60, under which sections relief may be available to an assessee in respect of his income, profits or gains. In the terms of sub-section (1) of section 34 the meaning of the expression "excessive relief under this Act" is limited to relief in respect of assessees income, profits or gains. So that the learned judges are interpreting this specific provision in this particular Act and expression used in the particular context, which has not bearing on any provision of Act 15 of 1940, and particularly no bearing on the provisions of section 17(1) of that Act relating to appeals. Among other matters that are subject or right of appeal under section 17(1) of the last mentioned Act there are two, that is to say, any person aggrieved objecting (i) to the amount allowed by the Excess Profits Tax Officer by way of relief under any provision of this Act, or (ii) to any refusal by the Excess Profits Tax Officer to grant relief may appeal to the appellate Assistant Commissioner. Now, the approach of the learned counsel for the Commissioner of Income-tax, with reference to section 7 and 11 of the Act, may well have meaning in regard to the matter of appeal in the first of the two matters stated above, that is to say when the appeal is in regard to the amount allowed by the Excess Profits Tax Officer by way of relief under any provisions of the Act, which tends to mean that if there is any grievance in regard to relief allowed under section 7 or 11 the aggrieved party may appeal in this respect having regard to the words in section 17(1) - "objecting to the amount allowed by the Excess Profits Tax officer by way of relief under the provisions of this Act" but this will not come under these these words in the sub-section -"objecting... to any refusal by the Excess Profits Tax Officer to grant relief", for the simple reason that if what the learned counsel for the Commissioner of Income-tax says was correct reading of the sub-section one of these rights of appeal would be superfluous and redundant. Any appeal in regard to "relief" under the provisions of Act 15 of 1940 would either be covered by the words "to the amount allowed by the Excess Profits Tax Officer by way of relief under the Provisions of this Act" alone or by the words - "to any refusal by the Excess profits Tax Officer to grant relief." The expression of both these rights of appeal was therefore not necessary. However, there is not force in the contention of the learned counsel and while his argument may, as stated, apply to the words - "to the amount allowed by the Excess Profits Tax Officer by way of relief under any provision of this Act", it has not reference to the right of appeal given by these words - "to any refusal by the Excess profits Tax Officer to grant relief". In the last reproduced expression giving right of appeal to an aggrieved person the word "relief" is apparently used in its ordinary and full meaning. The word "relief" means the remedy a court may afford in regard to something which a party may claim as of right and which, in any case, the court has no discretion to refuse. It is in this wider and full meaning of this word that it has been used in words -"to any refusal by the Excess Profits Tax Officer to grant relief" in sub-section (1) of section 17. There is on justification whatsoever that the meaning of the word "relief" in this context be limited to its technical sense of relief claimed under section 7 or 11 of the Act as contended by the learned counsel. This is particularly so as relief under such sections can be the subject-matter of appeal under the words - "to the amount allowed by the Excess Profits Tax Officer by way of relief under any provision of this Act". The word "relief" in sub-section (1) of section 17 of Act 15 of 1940 in the last sentence as reproduced above has cull and ordinary meaning that are given to this word and it, therefore, has in its scope what an assessee may claim as of right. An assessee on a refund being available under sub-section (7) of section 14a has a statutory right to interest on the refund amount at the rate of 5 per cent. per annum. Refusal to allow interest on such refund amount is refusal by the Excess Profits Tax Officer to graft relief to the assessee to which he has a statutory tight and hence against such refusal an appeal under sub-section (1) of section 17 is competent to the Appellate Assistant Commissioner. The answer to the first question is that in this case the assessees appeal claiming interest under section 14A(7) was competent to the Appellate Assistant commissioner.
On the second question what is contended by the learned counsel for the Commissioner of Income-tax is that the expression "regular assessment" in sub-section (7) of section 14a means factually the first regular assessment made by the Excess Profits Tax Officer under section 14 and not any subsequent assessment made by him on the first regular assessment having been quashed on appeal. To support this the learned counsel relies upon Sarangpur Cotton Manufacturing Co. Ltd. v. Commissioner of Income-tax, which was a case concerning sub-section (5) of section 18A of the Indian Income-tax Act, 1922, and Natarajan Chettiar v. Income-tax Officer, III Additional Circle, Karaikudi, which was a case involving interpretation of sub-section (6) of section 18a of the same act and in which the learned judges followed the first mentioned of these two cases in giving meaning to the expression "regular assessment", which expression appears in both sub-sections (5) and (6) of section 18A of the said Act. Now, under sub-section (5) of section 18A of that Act (Indian Income-tax Act, 1922) interest is payable to the assessee from the date of payment to the provisional assessment under section 23B, or if on such assessment has been made, to the date of the assessment (called the "regular assessment") made under section 23 of that act. The learner judges were considering the of the assessee to claim interest having regard to those two dates. They obviously found on difficulty with regard to the first date which is definitely fixed by the statute as the date of payment of the advance tax by the assessee. In regard to the second date it is to be the date of the regular assessment and this the learned judges have interpreted to mean the regular assessment factually made for the first time and not any subsequent assessment by the order of a superior authority. The main reason given by the learned judges it that under sub-section (5) of section 18a of that act as soon as regular assessment is made interest ceases to run and it cannot possibly be revived when the order of assessment is set aside and a fresh assessment takes place. These cases, therefore, interpret particular provisions of the provisions of sub-section (7) of section 14a of the Act (15 of 1140), are not pari materia with the provisions of sub-section (5) of section 18A of the Indian Income-tax Act, 1922. Sub-section (7) of section 14A of the first mentioned Act provides for refund of tax paid under the provisional assessment which is found to be in excess of the tax assessed in the regular assessment, with interest at the rare of 5 per cent. per annum. If the matter stood there there might have been drawn some analogy between claim for refund and interest under this provision from claim for refund and interest under sub-section (7) of section 14A of Act 15 of 1940 provides that the calculation of the rate of interest is to be "from the date of payment of such excess tax to the date of the order of refund, both days inclusive." So that in this case both dates are clearly set out in the statute and there is no room for doubt inviting any interpretation in this respect. The first date is the date of payment of the tax and the second date is the date of the order of refund. Now, it is obvious that in a case like the present the order of refund comes to be made only when assessment under section 14 is made in pursuance of the appellate directions of the Income-tax Appellate Tribunal. As soon as the order of refund is made, as has been done in these cases, the second date for calculation of interest comes to fixed without any possible argument about it. Consequently, in sub-section 14a of act 15 of 1940, the material matter for the purposes of allowance of interest are the date of payment of the excess tax and the date on which the excess tax is ordered to be refunded and from this it follows that the expression "regular assessment" in this sub-section can only mean the last assessment made by the Excess Profits tax Officer under section 14 of the Act for then only refund order can be made in favour of an assessee and the second point of time for calculation of interest comes to be fixed. In this view the answer to the second question is that the expression "regular assessment" for the purpose of computing the claim of interest under section 14A(7) of Act 15 of 1940 is the date of the last assessment made by the Excess Profits Tax Officer under section 14 of that act.
The answers to the questions are in conformity with the view taken by the Income-tax Appellate Tribunal. In this case the petitioner will bear the costs of the reference, the counsels fee Rs. 100.
I. D. DUA J. - I agree.
Questions answered accordingly.