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Writ Petition No. 4626 of 1965, decided on 17th October 1968.

Refund‑Interest‑Refund consequent to Supreme Court decision‑Paid within six months of date of order entitling refund‑Interest from date of payment to date of refund‑Whether payable‑Assessment under old Act‑Refund under new Act‑--- Provision applicable‑Income‑tax Act, 1961, S. 240 & 297(2)(c), (2)(i)‑Indian Income‑tax Act, 1922, S. 66(7).

Consequent to the decision of the Supreme Court in the assessee's case the assessee became entitled to a refund of a substantial amount which was paid within six months of the date of the order entitling the petitioner to refund. The claim of the petitioner for interest on the amount of refund from the date of payment to the date of refund was disallowed. The assessee thereupon filed a writ petition in the High Court.

Held, that as the assessment was completed before the commencement of the new Act of 1961 and the refund, in consequence of the Supreme Court decision, fell due after the commencement of the new Act, section 297(2)(i) of the Income‑tax Act, 1961, applied. Therefore, the interest payable on such refund was governed entirely by the provisions of the new Act of 1961 relating to interest payable on refunds and as the refund was granted within six months of the order directing refund, there was no liability on the part of the department to pay interest.

R. Balasubramanian for R. Venkatraman for Petitioner.

V. Balasubrahmanyan and J. Jayaraman for Respondent.

We are of opinion that the conclusion of the Commissioner of Income‑tax, Madras, is correct, though his reasoning is not acceptable. The petitioner is a public limited company doing business in general insurance. In respect of the assessment year 1954‑55, the claim for depreciation written off of buildings, air conditioning plants, lifts, etc., was allowed only to the extent of 1/5th. The result of the assessee's appeal was that the entirety of the depreciation was disallowed and the charge was enhanced. The Tribunal restored the first order with which this Court on a reference had concurred. The Supreme Court in Pandyan Insurance Co. Ltd. v. Commissioner of Income‑tax ((1965) 55 I T R 716 (S C)) however. held that the petitioner was entitled to the allowance of the entire amount of depreciation which had been written off in its accounts in the previous year relevant to the assessment year. On December 16, 1964, the Tribunal passed a consequential order under section 66‑A(4). As a result, the petitioner became entitled to a refund of a substantial amount which was paid on January 31, 1955, which was within six months of the date of the order entitling the petitioner to refund. The petitioner thereafter claimed interest from January 31, 1955, to the date of refund under the proviso to subsection (7) of section 66 of the Income‑tax Act, 1922, at 6 per cent. on the amount of tax paid in excess. The Commissioner disallowed the claim, and this petition is to quash the order.

The petitioner relies on section 297(2) (c) and contends that, since the reference to this Court and the appeal to the Supreme Court were all under the provisions of the earlier Act, it should necessarily follow that the assessee would be entitled to the benefit of the refund provisions therein. It is also said that none of the sections 240 to 244 in the new Act will apply as they all relate to proceedings under its provisions. We do not think that the argument is sound. This is a case where the assessment was completed before the commencement of the Act. We do not accede to the argument that the assessment should be taken to have been completed only when the Supreme Court rendered its judgment. Further, the refund in consequence of the Supreme Court's judgment fell due after the commencement of the new Act. The first requisites for the application of section 297(2)(i) are, therefore, satisfied. That being the case, this provision is clear that to such a case the provisions of the new Act relating to interest payable by the Central Government on refunds shall apply. In view of this provision, the intention of which appears to be that the interest on refund in respect of the assessment completed before the commencement of the new Act and on refund which fell due after its commencement, should entirely be governed by the provisions of the new Act, the words "other proceedings under this Act" in section 240 and the following sections should be understood accordingly. That is because this group of sections is designed to apply under the scheme of the Act to appeals or proceedings under the provisions of the new Act, but where the matter relates to an assessment completed before the commencement of the new Act, and the refund became due after the commencement of the Act, those provisions are qualified by section 297(2)(i), so as to make them apply to such a situation. On that view, since the refund indisputably had been made within six months of the order which directed it, there is no liability on the part of the department to pay interest. That was the view of the Commissioner, but we confirm it on the reasoning we have outlined supra.

The petition is dismissed with costs. Counsel's fee, Rs. 250.

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