Case Note & Summary
The petitioner, M/s. Godrej & Boyce Mfg. Co. Ltd., filed a writ petition challenging the order dated 14.6.1988 passed by the Commissioner of Income Tax, Bombay City II, regarding the assessment years 1982-1983 and 1983-1984. The petitioner had filed a return of income for A.Y. 1982-1983 declaring a loss of Rs.23,82,75,310/-, having already paid advance tax of Rs.6,30,00,000/- and tax deducted at source of Rs.8,44,150/-. On 5.6.1984, the Inspecting Assistant Commissioner computed the total income at Rs.7,93,48,600/- and determined a refund of Rs.1,19,78,111/- with interest of Rs.31,14,306/- under Section 214 and charged interest of Rs.4,80,000/- under Section 216. The total refund was Rs.1,46,12,470/-, part of which was adjusted against pending tax demands. On 2.7.1985, a rectification order under Section 154 was passed, granting further refund. The Commissioner later passed an order denying interest under Section 214 on the refund, which the petitioner challenged. The court held that interest under Section 214 is mandatory and must be paid on the entire refund amount from the date of payment of advance tax. The Commissioner's order was set aside, and the respondents were directed to pay interest as per law.
Headnote
A) Income Tax - Interest on Refund - Section 214 of Income Tax Act, 1961 - Mandatory Nature - The court held that interest under Section 214 is mandatory and must be paid on the entire refund amount from the date of payment of advance tax. The Commissioner's order denying interest was set aside. (Paras 1-10) B) Income Tax - Rectification of Mistake - Section 154 of Income Tax Act, 1961 - Scope - The court held that a mistake in computation of interest under Section 214 can be rectified under Section 154, and the Commissioner's refusal to do so was erroneous. (Paras 5-8) C) Income Tax - Advance Tax - Refund - Sections 214, 237 of Income Tax Act, 1961 - The court held that the provisions of Section 237 regarding refunds do not override the mandatory interest under Section 214. The petitioner was entitled to interest on the refund of advance tax. (Paras 6-9)
Issue of Consideration
Whether the petitioner is entitled to interest under Section 214 of the Income Tax Act, 1961 on the refund of advance tax for the assessment years 1982-1983 and 1983-1984, and whether the Commissioner's order denying such interest is valid.
Final Decision
The court allowed the writ petition, set aside the Commissioner's order dated 14.6.1988, and directed the respondents to pay interest under Section 214 of the Income Tax Act, 1961 on the refund amount as per law.
Law Points
- Interest under Section 214 of Income Tax Act
- 1961 is mandatory
- not discretionary
- interest on refund must be computed from the date of payment of advance tax
- rectification under Section 154 can be used to correct errors in computation of interest
- Commissioner cannot deny interest by invoking Section 237 or other provisions.
