Case: Vikrant Tyres Ltd Vs. First Income Tax Officer, Mysore

authority which went in favour of the assessee, the Revenue refunded the amount due as per the said order of authority. Thereafter, when the matter was taken up ultimately in Reference to the High Court and the assessee lost the case, fresh demand notices were issued and it is also an admitted fact that in satisfaction of the said demand notices the appellant had paid the amount as demanded within the time stipulated therein. The question, therefore, is : whether the Revenue is entitled to demand interest in regard to the amount which was refunded to the assessee by virtue of the judgment of the appellate authority and which was re-paid to the Revenue after decision in the Reference by the High Court on fresh demand notices being issued to the assessee ? Admittedly, on a literal meaning of the provisions of Section 220(2) of the Act, such a demand for interest cannot be made. The High Court by a liberal interpretation of the said Section and relying upon Section 3 of the Validation Act has held that the Revenue is entitled to invoke Section 220(2) of the Act for the purpose of demanding interest on such retention of money. 9. We are not in agreement with the High Court on the interpretation p0laced by it on Section 220(2) of the Act in regard to the right of the Revenue to demand interest in a situation where the assessee has promptly satisfied the demand made by the Revenue in regard to the tax originally assessed. 10. It is a settled principle in law that the Courts while construing Revenue Acts have to give a fair and reasonable construction to the language of a Statute without leaning to one side or the other, meaning thereby that no tax or levy can be imposed on a subject by an Act of Parliament without the words of the Statute clearly showing an intention to lay the burden on the subject. In this process, the Courts must adhere to the words of the Statute and the so-called equitable construction of those words of the Statute is not permissible. The task of the Court is to construe the provisions of the taxing enactments according to the ordinary and natural meaning of the language used and then to apply that meaning to the facts of the case and in that process if the tax-payer is brought within the net he is caught, otherwise he has to go free. This principle in law is settled by this Court in Indian Carbon Ltd. and others v. State of Assam, 1997(6) SCC 479 wherein this Court held "Interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf." A Constitution Bench of this Court speaking through one of us (Hon. Bharucha, J.) in the case of V.V.S. Sugars v. Government of A.P. and others, 1999(4) SCC 192 reiterated the proposition laid down in the India Carbon Ltd. case (supra) in the following words : "The Act in question is a taxing statute and, therefore, must be interpreted as it reads, with no additions and no subtractions, on the ground of legislative intendment or otherwise." If we apply this principle in interpreting Section 220 of the Act, we find that the condition precedent for invoking the said Section is only if there is a default in payment of amount demanded under a notice by the Revenue within the time stipulated therein and if such a demand is not satisfied then Section 220(2) can be invoked. 11. The High Court also fell in error in relying on Section 3 of the Validation Act to construe Section 220(2) in the manner in which it has done in the impugned judgment. Section 3 of the Validation Act, in our opinion, cannot be relied upon to construe the authority of the Revenue to demand interest under Section 220 of the Act. The said Section was enacted to cope up with a different fact-situation. That Section only revives the old demand notice which had never been satisfied by the assessee and which notice got quashed during some stage of the challenge and finally the said quashed notice gets restored by an order of a higher forum. In such situation, Section 3 of the Validation Act restored the original demand notice which was never satisfied by the assessee and the said Section does away with the need to issue a fresh notice. Beyond that that Section cannot be resorted to for reviving a demand notice which is already fully satisfied. 12. In a similar fact-situation, a Division Bench of the Kerala High Court in I.T.O. v. A.V. Thomas and Company, 1986(160) ITR 818 had held that the condition precedent for invoking Section 220(2) is that even after the notice of demand under Section 156 and after a further period of 35 days as provided under Section 220(1), the assessee should continue as a defaulter in the matter of payment of tax demanded. It further held that only in case the assessee defaults in payment of tax assessed, 35 days after the notice of demand under Section 156, the liability to pay interest accrues. In that case also, admittedly, the assessee had paid the tax when he received the demand notice under Section 156, hence, the High Court held that the requirements under Section 220(2) for attracting the liability to pay interest did not exist. 13. We are in agreement with the said view of the Kerala High Court. Though this judgment was brought to the notice of the Karnataka High Court in the impugned judgment, the said High Court thought it fit not to place reliance on the same which, in our opinion, is erroneous. 14. In the light of the above, we are of the opinion that Section 220(2) of the Act cannot be invoked to demand any interest from the appellant for the assessment years in question.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]9. We are not in agreement with the High Court on the interpretation p0laced by it on Section 220(2) of the Act in regard to the right of the Revenue to demand interest in a situation where the assessee has promptly satisfied the demand made by the Revenue in regard to the tax originallywe apply this principle in interpreting Section 220 of the Act, we find that the condition precedent for invoking the said Section is only if there is a default in payment of amount demanded under a notice by the Revenue within the time stipulated therein and if such a demand is not satisfied then Section 220(2) can besuch situation, Section 3 of the Validation Act restored the original demand notice which was never satisfied by the assessee and the said Section does away with the need to issue a fresh notice. Beyond that that Section cannot be resorted to for reviving a demand notice which is already fully satisfied.In a similara Division Bench of the Kerala High Court in I.T.O. v. A.V. Thomas and Company, 1986(160) ITR 818 had held that the condition precedent for invoking Section 220(2) is that even after the notice of demand under Section 156 and after a further period of 35 days as provided under Section 220(1), the assessee should continue as a defaulter in the matter of payment of tax demanded. It further held that only in case the assessee defaults in payment of tax assessed, 35 days after the notice of demand under Section 156, the liability to pay interest accrues. In that case also, admittedly, the assessee had paid the tax when he received the demand notice under Section 156, hence, the High Court held that the requirements under Section 220(2) for attracting the liability to pay interest did not exist.We are in agreement with the said view of the Kerala High Court. Though this judgment was brought to the notice of the Karnataka High Court in the impugned judgment, the said High Court thought it fit not to place reliance on the same which, in our opinion, is erroneous.In the light of the above, we are of the opinion that Section 220(2) of the Act cannot be invoked to demand any interest from the appellant for the assessment years in question.