AS. GLITTRE D/5 I/S GARONNE AND ORS. vs. COMMISSIONER OF INCOME TAX, KERALA-II

CIVIL APPEAL No. 8/1984Supreme Court[1997] 3 S.C.R. 55603 April 1997Bench: 2 JudgesAuthor: K.S. PARIPOORNAN, S.P. KURDUKAR AS. GLITTRE9 pages
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What were the facts?

The appellants, non-resident shippers, were assessed for tax under Section 172(4) of the Income Tax Act, 1961, for Assessment Years 1967-68 and 1969-70, and paid the assessed tax. Subsequently, they exercised their right under Section 172(7) to claim a regular assessment. The regular assessment revealed that the assessees had made excess payments. These excess amounts were refunded. The assessees claimed interest on these excess payments, which was rejected by the Income Tax Officer and the Appellate Assistant Commissioner. The Income Tax Appellate Tribunal allowed the claim for interest, holding that the payments made under Section 172(4) were to be treated as advance tax by legal fiction under Section 172(7). The High Court, however, reversed this decision, holding that the payment under Section 172(4) was an assessment payment, not advance tax, and Section 172(7) only permitted an adjustment.

What did the Supreme Court hold?

The Supreme Court held that Section 172(7) of the Income Tax Act, 1961, creates a legal fiction by which payments made under Section 172(4) are treated as advance tax. This legal fiction is intended to bring such payments on par with advance tax payments, attracting all consequential provisions of the Act. The Court found no basis for the High Court's distinction between 'advance tax' and 'payment in advance of the tax'. It reasoned that when a regular assessment is made under Section 172(7), the ad hoc assessment under Section 172(4) is superseded, and all provisions of the Act for determining tax liability, including ancillary matters, are attracted. Consequently, if there is an excess payment, the assessee is entitled to the refund of that excess amount along with interest under Section 214 of the Act. The High Court's reliance on the heading of the predecessor Act's provision was deemed misplaced as Section 172 of the 1961 Act does not have such a heading. The Tribunal's decision was upheld.

What were the issues?

1. Whether the amount directed under Section 172(7) of the Income Tax Act, 1961, to be treated as a payment in advance of the tax leviable for the assessment year, would carry interest as the amount of advance tax would under Section 214 of the Act, considering it is payable under Sections 207 to 213 of the Act? (Mixed question of law and fact, concerning Section 172(7) and Section 214 of the Income Tax Act, 1961). Assessee's contentions: The assessees argued that Section 172(7) creates a legal fiction treating the payment under Section 172(4) as advance tax. Therefore, all provisions relating to advance tax, including the entitlement to interest on excess payments under Section 214, should apply. They relied on the Income Tax Appellate Tribunal's reasoning. Revenue's contentions: The revenue, as upheld by the High Court, contended that the payment under Section 172(4) was a payment on assessment, not advance tax. They argued that Section 172(7) only permitted an adjustment of this payment as a payment in advance, and not as a payment of advance tax within the meaning of the Act. The High Court distinguished between 'advance tax' and 'payment in advance of the tax'.

Which sections of the Income-tax Act were involved?

Section 172(4),Section 172(7),Section 214,Section 207,Section 208,Section 209,Section 210,Section 211,Section 212,Section 213

AI-generated summary — verify with the full judgment below

A AS. GLITTRE D/5 I/S GARONNE AND ORS. v. COMMISSIONER OF INCOME TAX, KERALA-II APRIL 3, 1997 B [K.S. PARIPOORNAN AND S.P. KURDUKAR, .JJ.j Income Tax Act, 1961: Sections 172(4) & (7) and 214. Advance Ta.:c-lnterest 01r--E11titlement to--AYs. 1967-68 and 1969- C 7{}--Assessee non-resident shipper paid tax assessed under S.172(4)--0n regular assessme/lf under S.172(7) assessee was found to have made excess payment-Held : Such excess payme11t was liable to be refu11ded to the assessee together with interest as the payment already made by the assessee under S.172(4) had to be treated as advance tax by legal fiction under D S.172(7~Hence, such payment would attract all the provisions relating to advance tax-Corresponding provision in the predecessor Act not identical to S.172(7; of the 1961 Act--lncome Tax Act, 1922, S.44-C.

Words and Phrases : E ''Advance Tax''-Meaning of-In the context of S.2 of the Income Tax F Act, 1961. The appellant-assessees were non-resident shippers who tram- ships called at the port during the AYs. 1967-68 and 69-70. The assessee paid tax assessed under Section 172(4) of the Income Tax Act, 1961. Thereafter, the assessees exercised thei

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