Case: A.S. Glittre D/5 I/S Garonne and others Vs. Commissioner of Income Tax, Kerala-II

2. The appellants - assessees, are non resident shippers represented by one common agent. The ships carry goods from the Port of Cochin to various places. The ships concerned are, Fernbrook, Fernwave, Fernmoor, Ferngate and Ferndale. Fernbrook called at the Cochin Port during the previous years of relating to the assessment years 1967-68, and 1969-70; Ferndale called at the Cochin Port during the year relating to the assessment year 1967-68 and the other ships, Fernwave, Fernmoor and Ferngate called at the Cochin Port during the year relating to the assessment year 1969-70. In respect of the freight earnings, assessments were made on the shippers under S.172(4) of the Income Tax Act, hereinafter referred to as the Act. The said provision enables the Income Tax Officer to make "ad hoc" assessment, on the tram-ships. The assessees paid tax so assessed under S.172(4) of the Act. Thereafter the assessees exercised the right conferred on them under S.172(7) of the Act and claimed "regular assessments" to be made. Returns were filed. It turned out that the total income assessed in all the cases were far less than the one earlier assessed under S.172(4) of the Act and on which taxes were paid by the assessees. Reckoning this, the Income Tax Officer held that the assessees are entitled to refunds of the excess amount paid by them. Such amounts were refunded. The assessees claimed that they are entitled to interest for the excess amounts paid by them, which were refunded. Such claims were rejected by the Income Tax Officer. The said rejection was upheld in the appeals by the Appellate Assistant Commissioner. The claims for interests were rejected on the ground that the payment made in pursuance to assessments under S.172(4) of the Act cannot be said to be "advanced Income tax". In the further appeals filed by the assessees, the Income tax appellate Tribunal, Cochin Bench, after review of the relevant provisions of the Act, held that under S.172(4) of the Act, the payments made (earlier in the Assessments under S.172(4) of the Act) would be on par with "advance tax" payments. It was further held that since these payments have by fiction, been treated as advance tax, it necessarily follows that all the provisions in respect of the payment of advance tax in the Act will apply. From the point of regular assessment, ie., if there is any excess payment made by the assessee, then the assessee would be entitled to the interest under S.214 of the Act. The Appellate Tribunal directed the Income Tax Officer to allow the interest claimed by the assessees.3. As directed by the High Court, the Income tax Appellate Tribunal referred the following question of law in all the cases for the decision of the Highthe amount directed under S.172, Clause (7) of the Income Tax Act, to be treated as payment in advance of the tax leviable for the assessment year in question, would carry interest as the amount of advance tax would under S.214 of the same is payable under S.207 to 213 of theHigh Court of Kerala, by a common judgment, delivered in all the References took the view that the tax paid under S.172(4) of the Act is payable on assessment and not a payment of advance tax under the Act. It was held that S.172(7) of the Act permits only "an adjustment" of the payment made under the Section as "payment in advance of the tax leviable for the assessment year" and not a payment of advance tax made under the Act. The question referred to the High Court was answered in the negative, in favour of the Revenue and against the assessees. It is thereafter, the assessees moved this Court in SLP (Civil) Nos. 8792-97/1981 and obtained special leave to appeal against the aforesaid judgment of the High Court of Kerala.

Court's reasoning:
So, necessarily all the provisions in the Act in respect of the payment of advance tax will apply. On effecting the regular assessment, if there any excess payment made by the assessee, then the assessee would be entitled to the excess amount paid and also interest, for payments made in excess of the tax assessed. We are unable to appreciate the distinction drawn by the High Court between "advance tax" and "payment in advance of the tax" mentioned in sub-s. 172(7) of the Act. We hold that the distinction so drawn has no basis. The High Court has further held that the payment made under S.172(4) of the Act is not a payment of advance tax within the meaning of the Act, as the tax paid under S.172(4) of the Act is a payment on assessment and not a payment of advance tax under the Act. We are afraid that the High Court has failed to give due effect to the language employed in S.172(7) of the Act and the scope of the legal fiction enshrined therein. The reasoning of the High Court is rather strained as the distinction drawn is without any substance or difference. S.172(7) of the Act provides for a regular assessment, wherein all the provisions of the Act will apply. It is not a mere provision for adjustment. The High Court was swayed by the title used in the corresponding provisions of the predecessor Act (Income tax Act, 1922 - S.4C), wherein there was a heading to the Section - "Adjustment". S.172 of the Act contains no such heading. We hold that the Income tax Appellate Tribunal was justified in holding that since the payment made under S.172(4) of the Act is, by fiction, treated as advance tax; all the provisions in respect of the advance tax will apply and if on regular assessment made under S.172(7) of the Act, there is any excess payment made by the assessee, then the assessee would be entitled to it and also interest thereon under S.214 of the Act.