Section 214

Section 214 — the law in short

What the courts have decided on section 214, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Gujarat Fluoro Chemicals Supreme CourtCuts both ways
  The department owes me s.244A interest and has sat on it. Can I claim interest on that interest?
  No. Only the interest the statute itself provides may be claimed from the Revenue, and no other interest on that statutory interest. This is the three-Judge Bench asked to reconsider Sandvik Asia — and it did not overrule it: it held that Sandvik Asia had been misquoted and misinterpreted by assessees and by the Revenue alike.
• Sandvik Asia Ltd v CIT Supreme CourtHelps taxpayer
  Can I still rely on Sandvik Asia to claim interest on the interest due on my refund?
  No — and the entry that used to say so was wrong. A three-Judge Bench of the Supreme Court in CIT v. Gujarat Fluoro Chemicals (18 September 2013), sitting on a reference that doubted this decision, did NOT overrule it. It held that this decision had been "misquoted and misinterpreted by the assessees and also by the Revenue" alike, and that what this Court had actually done was direct the Revenue to pay compensation for an inordinate delay of twelve to seventeen years — "not an interest on interest". So: this decision stands. What does not stand is the reading of it as authority for compounding interest on statutory interest under s.244A.
• A.S. Glittre D/5 I/S Garonne v CIT Supreme CourtHelps taxpayer
  We paid tax on each voyage under section 172(4) and then elected under section 172(7) for a regular assessment, which came out much lower and produced a refund. The Department has refunded the tax but refused interest, saying what we paid was not advance tax. Is that right?
  No. Section 172(7) creates a legal fiction by which the payments already made under s.172(4) are treated as a payment in advance of the tax leviable for that assessment year, and the Supreme Court held that in construing that fiction all the consequences flowing from it must be assumed. The ad hoc assessment under s.172(4) is superseded and a regular assessment is made as per the provisions of the Act, so all the provisions of the Act relating to advance tax apply, and on excess payment the assessee is entitled to the excess and to interest on it.
• Modi Industries Ltd v CIT Supreme CourtCuts both ways
  My assessment was reduced in appeal and more advance tax turned out to be excess. Does section 214 interest run to the date of the revised assessment?
  No. The Supreme Court, resolving a conflict that had divided almost every High Court, read regular assessment in section 214 as the first assessment order made by the Income-tax Officer under section 143 or section 144. Interest under section 214(1) therefore runs from 1 April following the financial year to the date of that first assessment, and the excess is measured against the tax determined by it, not against the tax as reduced later in appeal or revision. Excess tax thrown up by an appellate or revisional order is dealt with by the refund provisions instead, in particular section 244(1A).
• Kalyan Kumar Ray v CIT Supreme CourtHelps department
  My assessment order does not compute the tax — the figures are only on the ITNS-150. Does that make the assessment bad?
  No, and the argument runs the other way from how it is often quoted. A three-Judge Bench rejected the submission that Form ITNS-150 is not part of the assessment order. The form is itself a form for determination of tax payable, and when signed or initialled by the officer it is an order in writing determining the tax within the meaning of s.143(3), to be treated as part of the assessment order in the wider sense. The assessee lost.
• CIT v M/s. Syndicate Bank High CourtHelps taxpayer
  My refund was paid but the s.244A interest due on it was left out. Is the department liable to pay interest on that omitted interest, or is that the forbidden interest on interest?
  The Karnataka High Court held the department is liable, and that this is not interest on interest. Following the three-Judge Bench in CIT v. HEG Ltd., it held that the interest component partakes of the character of the 'amount' that becomes due to the assessee under s.244A, so an order of refund must include the interest payable, and if it does not, the Revenue is liable to pay interest on the shortfall.
• Punjab State Warehousing Corporation v CIT High CourtHelps departmentNo later treatment found
  My client's old assessment was set aside, a fresh assessment produced a large refund, and no interest was paid. For a year before 1989-90, which section gives him interest?
  For assessments up to 1988-89 there is no single interest provision: section 214 runs only to the date of the regular assessment, section 244(1) runs from three months after the order under section 240, section 244(1A) is confined to amounts paid after 31 March 1975 in pursuance of an order of assessment or penalty, and section 243 runs from three months after the total income is determined or the refund claim is made. Where the refund followed a fresh assessment and was granted the very next month, none of them was attracted, and the claim failed.
• Bhura Mal Raj Mal v CIT High CourtHelps taxpayer
  The officer has passed a s.154 order shifting my TDS credit to the next year because the payer's accounting year is different from mine. Can he do that by rectification?
  No. The Rajasthan High Court held that the credit belongs to the year in which the income is assessed in the recipient's hands, not the year fixed by the payer's accounting year or the date on the certificate, and in any event the point was at best debatable, so s.154 could not be used at all. The consequential withdrawal of s.214 interest and charging of s.215 interest also fell.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.