LexAS. GLITTRE D/5 I/S GARONNE AND ORS. versus COMMISSIONER OF INCOME TAX, KERALA-II
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AS. GLITTRE D/5 I/S GARONNE AND ORS.
v.
COMMISSIONER OF INCOME TAX, KERALA-II
APRIL 3, 1997
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[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
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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 :
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''Advance Tax''-Meaning of-In the context of S.2 of the Income Tax
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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 their right under Section 172(4) of
the Act and claimed "regular assessment" to be made it turned out that
the assessees were found to have made excess payment and accordingly
the excess amount was refunded. The Income Tax Appellate Tribunal
upheld their claim to interest on the amount so refunded. However, the
G High Court held that the tax paid under Section 172(4) of the Act was
a payment on assessment and not a payment of advance tax under the
Act. The High Court further held that Section 172(4) of the Act per-
mitted only "an adjustment" of the payment made under the Section as
"payment in advance of the tax leviable for the assessment year" and
H not a payment of advance tax made under the Act. Thus, High Court
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AS. GLITTRE 0/5 l/S GARONNE v. C.I.T.
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rejected the appellant's claim to interest. Hence this appeal.
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Allowing the appeal, this Court
HELD : 1.1. Section 172 (7) of the Income tax Act, 1961 gives the
assessee non-resident shippers a valuable right to opt for a regular assess·
ment although a "rough and ready" or a "summary assessment" has already B
been made under Section 172( 4) of the Act. If the assessee exercises this
right, the "adhoc" assessment made under Section 172(4) of the Act is
superseded and a "regular assessment" is made as per the provisions of
the Act. In such a case all "the provisions" of the Act in the determination
of the tax liability including the ancillary or incidental or consequential C
matters pertaining to it are necessarily attracted. (562-C, E-F]
1.2. Section 172(7) creates a legal fiction by which the payments have
been treated as advance tax. That is the purpose for which the legal fiction
is created. In construing the said legal fiction, it will be proper and
necessary to assume all those facts on which alone the fiction can operate. D
[562-G-H]
Mohamed Iqbal Madar Sheikh & Ors. v. State of Maharashtra, [1996]
1 sec 722, relied on .
. 2. On effecting the regular assessment, if there is any excess payment E
made by the assessee, then the assessee would be entitled to the excess
amount paid and also interest, for payment made in excess of the tax
assessed. The High Court erred in drawing a distinction between "advance
tax" and "payment in advance of the tax" mentioned in Section 172(7) of the
Act. The distinction so drawn bas no basis. In holding that the payment
made under Section 172(4) of the Act is not a payment ofadvance tax within F
the meaning of the Act, the High Court failed to give due effect to the
language employed in Section 172(7) of the Act and the scope of the legal
fiction enshrined therein. Section 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 tl1e title used in G
the corresponding provision of the predecessor Act (Income Tax Act, 1922
·Section 44C), wherein there was a heading to the Section· "Adjustment".
Section 172 of the Act contains no such heading. The Income Tax Appellate
Tribunal was justified in holding that since the payment made under Sec·
ti on 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 reguExcerpt shown. Read the full judgment & AI analysis in Lexace.