C G KRISHNASWAMI NAIDU Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this writ petition, the petitioner seeks to have the order of the second respondent dated March 7, 1972, quashed. The circumstances under which the said order came to be passed can be noted before dealing with the petitioner's grounds of attack against the said order The petitioner was assessed to income-tax on March 28, 1951, for the assessment year 1946-47, the relevant year of account being the year ended January 31, 1946, on a total income of Rs. 1, 80, 042 and a demand of Rs. 1, 09, 133-7-0 was raised against him and coercive process was resorted to to collect the said amount from the petitioner's premises No. 151, Mount Road, Madras, owned by the petitioner and which was auctioned to realise the tax arrears. Against such assessment an appeal was taken contending that out of the total income of Rs. 1, 80, 042, a sum of Rs. 1, 24, 004 was earned in Mysore State and that it was not brought into British INdia and that, therefore, it cannot be included in the total income. The Appellate Assistant Commissioner allowed the petitioner's appeal on February 26, 1952.

(2.) THEREAFTER, the income-tax department went on appeal before the Appellate Tribunal and the Tribunal decided the issue against the assessee and in favour of the revenue on January 9, 1953. The petitioner took the matter on reference to this court and this court in R.C. No. 8 of 1954 reversed the finding of the Tribunal, on September 5, 1958, agreeing with the view of the Appellate Assistant Commissioner holding that the income which had accrued in Mysore cannot be brought to charge. The revenue pursued the matter further before the Supreme Court which reframed the question referred and directed this court on November 25, 1963 (Commissioner of Income-tax v. C. G. Krishnaswami Naidu), to decide the issue finally. This court finally decided in favour of the assessee setting at rest once for all the controversy as to the assessability of the income that accrued in Mysore State, on September 6, 1965. THEREAFTER, the Tribunal passed the consequential order under section 66(5) of the Indian Income-tax Act, 1922, hereinafter referred to as the old Act, on October 25, 1965, directing the refund of the excess tax collected and a sum of Rs. 68, 190.76, was actually refunded to the petitioner on February 25, 1966. On March 11, 1966, the petitioner submitted a petition to the Commissioner of Income-tax claiming interest on the sum refunded at 12 per cent. right from the date of collection to the date of refund.

(3.) THE interest paid in this case is four per cent. It has not been shown by the petitioners with reference to any specific material that the fixation of interest at 4 per cent. is not a proper discretion by the Commissioner. Thus, under section 66(7) and the proviso thereto, the petitioner may be entitled to interest from the date of the original order of the Tribunal, that is, from September 5, 1958, to February 25, 1966, the date of refund at the rate of 4%. This is on the basis that section 66(7) could be invoked by the petitioner in this case. However, as already stated, the assessee has based his claim for interest only under section 66(7) of the old Act, and the Commissioner also proceeded on that basis. But in answer to the rule nisi the revenue has filed a counter-affidavit asserting that in view of the transitory provisions contained in section 297(2)(i) of the Income-tax Act of 1961, hereinafter referred to as the "new Act", it is only the provisions of the new Act relating to the interest payable on refunds that have to be applied and not section 66(7) of the old Act.