COMMISSIONER OF INCOME-TAX vs. CHITTOR ELECTRIC SUPPLY CORPORATION AND ANR.

CIVIL APPEAL No. 1413/1977Supreme Court[1995] 1 S.C.R. 23113 January 1995Bench: 3 JudgesAuthor: B.P. JEEVAN REDDY, N.P. SINGH, S.C. SEN9 pages
AI SummaryAllowed

What were the facts?

The assessee, Chittor Electric Supply Corporation, had its assessment completed on January 31, 1966. The Appellate Assistant Commissioner (AAC) set aside this assessment on March 6, 1969, directing a fresh assessment under Section 12-B of the Income Tax Act, 1922, instead of Section 10(2)(vii). The assessee's appeal against the AAC's order was dismissed by the Tribunal on September 20, 1971. A fresh assessment was completed on August 14, 1973, resulting in a refund of Rs. 84,562, which was made in August 1973. The assessee claimed interest under Section 244(1) of the Income Tax Act, 1961, from the date of the AAC's order (March 6, 1969) to the date of refund (August 1973). This claim was rejected by the Income Tax Officer and the Commissioner. The assessee filed a writ petition, which was allowed by the High Court, directing the revenue to pay interest. The revenue appealed this decision.

What did the Supreme Court hold?

The Supreme Court allowed the appeal, setting aside the High Court's judgment. The Court held that Section 244(1) applies where a refund is due pursuant to an order referred to in Section 240. According to Section 237, a refund becomes due when the amount paid is in excess of what is properly chargeable. In this case, the AAC's order did not determine the tax payable or the refundable amount; it merely directed a fresh assessment. The amount due or refundable was ascertained only upon the making of the fresh assessment in August 1973. The AAC's order revived pending assessment proceedings, and no refund could be considered due while assessment proceedings were still pending. The Court found that Clause (a) of the proviso to Section 240, added with effect from April 1, 1989, stating that where an assessment is set aside and a fresh assessment is directed, the refund becomes due only upon the fresh assessment, is merely clarificatory. The Court overruled the Allahabad High Court's decision in Purshottam Dayal Varshney and the Kerala High Court's Division Bench decision in New Woodlands Hotel, while affirming the Kerala High Court's single judge decision in New Woodlands v. Commissioner of Income-Tax. The Court clarified that its decision was confined to cases where an assessment is set aside and a fresh assessment is directed.

What were the issues?

1. Whether any amount became due to the assessee as a result of the Appellate Assistant Commissioner's order, for the purpose of claiming interest under Section 244(1) of the Income Tax Act, 1961? (Question of law) Assessee's contention: The assessee argued that the AAC's order on March 6, 1969, determined that an excess amount was paid, and therefore, interest was due from that date until the refund was made. They relied on the High Court's decision which allowed the writ petition. Revenue's contention: The revenue argued that no refund became due until the fresh assessment was completed in August 1973. They contended that the AAC's order merely directed a fresh assessment and did not determine the tax payable or any refundable amount. The revenue submitted that the proviso to Section 240, added with effect from April 1, 1989, was clarificatory of the pre-existing position, supporting their view. They relied on the Gujarat High Court's decision in Saurashtra Cement and Chemical Industries Ltd. v. Income-Tax Officer and disputed the Allahabad High Court's view in Purshottam Dayal Varshney and Anr. v. Commissioner of Income-Tax, U.P.

Which sections of the Income-tax Act were involved?

Section 244(1),Section 240,Section 237,Section 12-B,Section 10(2)(vii),Section 264

AI-generated summary — verify with the full judgment below

' } j - COMMISSIONER OF INCOME-TAX A v. CHITTOR ELECTRIC SUPPLY CORPORATION AND ANR. JANUARY 13, 1995 [B.P. JEEVAN REDDY, N.P. SINGH AND SUHAS C. SEN, JJ.) B Income Tax Act, 1961-Section 244(1)-lnterest on refund-Where a refund is due to assessee-Assessment made in 1966-Tax detennined paid-Appea~Assessment set aside-Fresh Assessment directed on different C basis-Excess amount refunded immediately-Claim of interest u/s 244(1)-Whether any amount became due as a result of Appellate Assistant Commissioner's orde~eld, No-Proviso to Sec. 240 was merely clarificatary.

The assessee-respondent, a limited company was taken over by the D Government. The company received compensation therefor, which amount was brought to tax. Original assessment was completed on January 31, 1966. On appeal, the appellate Assistant Commissioner set aside the assessment and directed the Income-Tax Officer to complete the assess- ment afresh u/s 12-B of the Income Tax Act, 1922 and not u/s 10(2) (vii) of the Act. Assessee filed an appeal before the Tribunal but it was dismissed. E Fresh assessment was completed in 1973. Excess amount was refunded to the assessee in the same month. The asses

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 240

All 50 judgments and leading authorities on Section 240 →

Recent GST High Court judgments

Search GST case law →