R.C.MANKAD, J. -
(1.) THE question which arises for our consideration in this petition filed under art. 226 of the Constitution of India is, whether the petitioner is entitled to claim interest u/s. 214 of the IT Act, 1961 (hereinafter referred to as "the Act"), on the excess amount paid during the relevant financial year on the dates subsequent to the date u/s. 211 of the Act for payment of instalments of advance tax.
(2.) PETITIONER, a limited company registered under the Companies Act, was served with a notice under s. 212(3) of the Act and was required to pay advance tax in three equal instalments for the asst. yr. 1975-76. PETITIONER's year of account was calendar year 1974 and, therefore, it was required to pay advance tax in three equal instalments on the following dates under s. 211 of the Act, namely, 15th June, 1974, 15th September, 1974, and 15th December, 1974. There is no dispute as regards the payment of the first two instalments which were paid on the due dates. The third and the last instalment of Rs. 1,88,103 was payable on 15th December, 1974. Before this last instalment became due, petitioner's income-tax assessment for the asst. yr. 1973-74 was completed and as a result of this assessment, the petitioner became entitled to a refund of Rs. 2,20,000. PETITIONER, therefore, addressed a letter dated December 12, 1974, to the ITO, Companies Circle-II, Ahmedabad, who had jurisdiction to assess the petitioner to income-tax and who is respondent herein, requesting him to adjust the refund of Rs. 2,20,000 due to it as stated above against the last and third instalment of Rs. 1,88,103 payable for the asst. yr. 1975-76. On December 21, 1974, the respondent wrote a letter to the petitioner rejecting its request for adjustment of the refund of Rs. 2,20,000 as stated above, and calling upon it to pay up the last instalment within three days from the receipt of the letter. It was stated in the letter that if the instalment was paid within three days from the receipt of the letter, the petitioner would not be considered in default. PETITIONER received this letter on December 24, 1974, and paid the last and third instalment of Rs. 1,88,103 on December 25, 1974. PETITIONER's assessment to income-tax for the asst. yr. 1975-76 was completed on September 13, 1976. As a result of the assessment order passed on September 13, 1976, the petitioner was entitled to refund of excess tax paid by it. The respondent, however, did not award any interest on the amount refundable under s. 214 of the Act on the ground that the last instalment which was not paid on the due date, namely, December 15, 1974, could not be treated as advance tax. PETITIONER thereafter addressed a letter dated October 20, 1976, to the respondent demanding interest on the refund of Rs. 1,20,507 u/s. 214 of the Act. The respondent, however, by his letter dated November 11, 1976, rejected the petitioner's demand. PETITIONER thereafter approached the CBDT claiming interest on the amount refunded, but it appears that the CBDT also rejected the petitioner's demand. The decision of the Board was communicated by the CIT, Gujarat-I, vide his letter dated October 10, 1978. PETITIONER has, therefore, approached this Court praying for a writ of certiorari or a writ in the nature of certiorari, or any other appropriate writ, direction and/or order under art. 226 of the Constitution of India, quashing and/or setting aside the decision of the ITO, refusing to pay interest u/s. 214 of the Act as stated above and directing the respondent to pay Rs. 20,485 by way of interest at the rate of 12 percent. per annum from April 1, 1975, till September 13, 1976, the date of regular assessment. The petition is resisted by the respondent contending that since the last instalment of Rs. 1,88,103, which was more than the amount ordered to be refunded, was not paid on the due date, that is, December 15, 1974, such payment could not be treated as payment of advance tax and consequently no interest on the amount refused was awarded u/s. 214 of the Act.
The controversy in this petition is directly covered by a decision of the Division Bench of this Court in Chandrakant Damodardas vs. ITO (1980) 16 CTR (Guj) 1 : (1980) 123 ITR 748, wherein it was held by this Court that there is no indication in s. 214 that the dates of instalments are strictly to be adhered to and, if they are not adhered to, interest will not be payable. It was observed that in view of the language used in s. 214 particularly with reference to the 1st day of April and not with reference to the dates on which the instalments are actually paid by the assessee, it is clear that the Legislature intended to provide that irrespective of the dates on which the instalments of advance tax are paid, interest will be payable on the excess tax if two conditions are satisfied: (i) the entire amount of advance tax is paid up, and (ii) it is paid up before the end of the financial year. There is no further condition that the instalments of advance tax must have been paid on or before the due dates mentioned in s. 211. Failure to pay the instalments on the due dates might involve an assessee in payment of penalty if the other conditions regarding penalty are satisfied, but the concept u/s. 214 being totally unconnected with deprivation of interest where penalty is incurred, the interest on excess advance tax must be paid if the two conditions are satisfied. We are in respectful agreement with the view taken by the Division Bench. In the present case, the two conditions referred to above are satisfied and, therefore, the petitioner is entitled to claim interest on the amount refunded to him u/s. 214 of the Act.
Mr. S. N. Shelat, learned counsel for the respondent, however, strongly relied upon the decision of the Andhra Pradesh High Court in Kangundi Industrial Works (P.) Ltd. vs. ITO (1980) 14 CTR (AP) 328 : (1980) 121 ITR 339, and the decision of the Kerala High Court in A. Sethumadhavan vs. CIT (1980) 16 CTR (Ker) 376 : (1980) 122 ITR 587, wherein a contrary view has been taken. We do not consider it necessary to refer to these two decisions in detail, as in our view, we are bound by the aforesaid decision of the Division Bench of this Court in the case of Chandrakant Damodardas (supra), which, in our opinion, lays down the correct law. With respect, we do not agree with the view taken by the Andhra Pradesh and Kerala High Courts in the aforesaid decisions. In the view which we are taking, the decision of the ITO and the CBDT not to allow interest to the petitioner on the excess amount ordered to be refunded to it for the asst. yr. 1975- 76 must be held to be erroneous and contrary to law. We, therefore, allow this petition and quash and set aside the order, annex. H, dated November II, 1976, passed by the respondent and the order of the CBDT contained in letter, annex. I, dated October 10, 1978, of the CIT, Gujarat-I, by which the petitioner's request for awarding interest u/s. 214 of the Act was rejected. We direct the respondent to pay interest at the rate of 12 per cent. per annum on the excess amount referred to in s. 214 from 1st April, 1975, till the date of regular assessment. Respondent will pay costs of this special civil application to the petitioner. Rule made absolute accordingly.;