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Case Law Details

Case Name : Girnar Investment Ltd Vs The Commissioner of income tax & anr (Delhi High Court)
Appeal Number : WP(C) NO.5750/2010
Date of Judgement/Order : 05/01/2012
Related Assessment Year :
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Girnar Investment Ltd vs. CIT (Delhi High Court) 

The AO passed an assessment order and raised a demand of Rs. 21.24 lakhs of which Rs. 10.50 lakhs was paid by the assessee and the balance of Rs. 10.94 was stayed. On 20.5.1998, the CIT (A) allowed the ap¬peal of the assessee and no demand remained payable by the assessee. The AO refunded the taxes paid by the assessee. Subsequently, the Tribunal reversed the CIT (A). The AO gave effect to the Tribunal’s order on 30.7.2004 and charged interest u/s 220 (2) for the entire period. The assessee filed a Writ Petition claiming that it was not liable to pay interest for the period from 20.5.1998 to 30.7.2004 when the CIT(A)’s order was operative and no sum was due from it.

Delhi High Court held that sec. 220(2) provides for levy of interest if the demand is not paid within 30 days of the service of notice u/s 156. A distinction has to be drawn between a case where the assessee pays up the entire demand raised pursuant to the assessment order within the period specified in sec. 156, wins in appeal and the amount is refunded and subsequently loses in further appeal and has to re¬pay the taxes. In such a case, as the assessee is not in default in the first instance, no interest u/s 220(2) is payable for the period when the favourable verdict of the appellate authority was operative. However, if the assessee has not paid up the entire tax within the specified period, it is liable to pay interest u/s 220(2) from that date on the unpaid amount and any variation in the amount of the demand favourable to the assessee which was directed by any of the appellate authorities in the interregnum has no ef¬fect on the liability of the assessee to pay the interest. On facts, as the assessee had paid only a part of the demand at the first stage, it was held liable to pay interest for the entire period including the period when the favourable CIT(A)’s order was operative though no interest was payable on the sec. 244A.


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  1. Nem Singh says:

    Query that no interest is payable on demand against penalty accepted after final appellate authority decision (First and second appellate authority decided in favour):

    Section 156- Notice of demand: When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the Assessing Officer shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable:

    Section 220- When tax payable and when assessee deemed in default: (1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of demand under section 156 shall be paid within thirty days of the service of the notice……………

    (2) If the amount specified in any notice of demand u/s 156 is not paid within the period limited sub-section (1), the assessee shall be liable to pay simple interest at one percent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid.

    Further the first proviso of sub-section (2) mentioned that as a result of an order u/s 154/155/250/254/260/262/264 or 245D(4) the amount on which the interest was payable u/s 220(2) reduced the interest shall be reduced accordingly.

    Therefore interest u/s 220(2) of the Act is required to be paid

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