# INCOME TAX OFFICER 'A' WARD, INDORE v. GWALIOR RAYON SILK MANUFACTURING (WEAVING) CO. LTD., BIRLAGRAM, NAGDA

- **Citation:** [1976] 1 S.C.R. 855
- **Court:** Supreme Court of India
- **Decided:** 1975-09-18
- **Case number:** Civil Appeals Nos. 76 to 80 of 1971
- **Bench:** V. R. Krishna Iyer, S. Murtaza Fazal Ali
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/income-tax-officer-a-ward-indore-v-gwalior-rayon-silk-manufacturing-weaving-co-6683
- **Pages:** 8

## Headnote

lnconu:-tax Act, 1961-Scction 220(2) and (3)-Scope of-Rate of inter ..
est 011 arrears of tax fixed b-;y the Act-Asses.te agrees to pay higher rate of
interest-Whether lncome .. tax Officer had pdwer to accept-Upward revision
of rate of interest by the Finance Act-If assessee could claim to pay only the
rate agreed but not the rate fixed by the Finance Act.
Sub-section (2) of si. 220 of the Income-true Act, 1961 makes an asses~e
liable to pay simple interest at 4% p.a. if the amount specified in any not.ice
of demand under s. 156 was not paid within the period limited under sub;s. (1/.
Sub-section (3) states that without prejudice to the provisions CO?-tarned in
suh-6. (2) on an application made by the assessee before the expiry. of the
due date under sub-s. (1) the Income-,f.ax Officer may extend
the time for
payrneiit or allow payment by instalments, subject to such conditions 'as he
may think fit to impose in the· circumstances of the case.
Out of a large sum of money which. became payable by the respondent as
income-tax, half the amount was paid and in respect of the remaining half,
which was allowed to be paid in three instalments, the respondent had undertaken to pay interest at Jhe rate of 5% p.a. even though 's. 220(2) of the
Income-tax Act, 1961 prescribed 4% as the rate of interest payable on such
arrears. The Income-tax Officer accepted the term.
By the Finance Act, 1965
the rate of interest payable under this section was
raised
from 4%
to
6% p.a. On receipt of a notice from the Income-itax Officer, that on the unpaid balance of the tax arrears the company was !fable to pay interest at
6% p.a., tha respondent moved the· High Court contending that it was not
open to the Income-tax Officer to vary the rate from 5 % to 6% even in spite
of the change made by the Finance Act, 1965, in that a vested right could not
be taken away by a statute which did not apply retrospectively. The High
Court allowed the writ petition.
On appeal to thi~ Court it was contended by the respondent that sub-ss. (2)
and (3) of s. 220 werei independent provisions which operated in fields of their
own.
Allowing the appeal to this Court,
HELD: (!) Sub-sections (2) and (3) form part of the same
section,
namely, s. 220 and are therefore closely allied to each other. It is true that
the two sub-sections <ital with separate is31.les but the non..obstante clause of
sub-s. (3) clearly restricts the order passed under suTMs. (3) to the conditions
mentioned in sub-s. (2) of s. 220 of tho Act. (860 BJ
(2) It iS: the Finance Act whi'ch fixes the rate of interest payable under
sub-s. (2) of s. 220. It is not within the comperence of the Income-tax Officer
to vary the rate of interest fixed by the Finance Act under subs. (2) of s. 220
from time to time.
(860CD]
Esthuri Aswathaiah v. Commissioner of Income-tax Mysore 60 I.T.R. 411
H
and 416, followed.
(3) Sub-section (3) of s. 220 does not empower the Incomectax Officer to
enter into any indefeasible settlement with the asse"°e or to clothe the Incometax Officer with any such power so as to vary the •tatutory inhibition contained
856
SUPREME COURT REPORTS
[1976] 1 s.c.R.
in sub-s. (2).
Any order which is passed under sub-s. (3) would be subject
to the rate of interest mentioned in sub-s. (2) and as soon as the rale men ..
tioned in subi..s. (2) is varied or enhanced by the legislature it would have to
be read into sub-s. (2) from the date of the amendment and any order passed
under sub-s. (3) would be subject to the. rare so fixed.
If this is not the position
then the order passed under sub-s. (3) being prejudicial to sub-s. (2) becomes
illegal and invalid and the Income-tax Officer exceeds the limits- of his jurisdiction
in passing such an order.
(860F-H]
In the instant case there was no question of the Finance Act operating
retrospectively nor was there any question of the Finance Act taking away a
vested right which had accrued to the assessee because the order of the Incometax Officer under sub-S. (3) of

## Text

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855
INCOME TAX OFFICER 'A' WARD, INDORE
v.
GWALIOR RAYON SILK MANUFACTURING (WEAVING) CO.
LTD., BIRLAGRAM, NAGDA
September 18, 1975
[V. R. KRISHNA IYER AND S. MURTAZA FAZAL ALI, JJ.]
lnconu:-tax Act, 1961-Scction 220(2) and (3)-Scope of-Rate of inter ..
est 011 arrears of tax fixed b-;y the Act-Asses.te agrees to pay higher rate of
interest-Whether lncome .. tax Officer had pdwer to accept-Upward revision
of rate of interest by the Finance Act-If assessee could claim to pay only the
rate agreed but not the rate fixed by the Finance Act.
Sub-section (2) of si. 220 of the Income-true Act, 1961 makes an asses~e
liable to pay simple interest at 4% p.a. if the amount specified in any not.ice
of demand under s. 156 was not paid within the period limited under sub;s. (1/.
Sub-section (3) states that without prejudice to the provisions CO?-tarned in
suh-6. (2) on an application made by the assessee before the expiry. of the
due date under sub-s. (1) the Income-,f.ax Officer may extend
the time for
payrneiit or allow payment by instalments, subject to such conditions 'as he
may think fit to impose in the· circumstances of the case.
Out of a large sum of money which. became payable by the respondent as
income-tax, half the amount was paid and in respect of the remaining half,
which was allowed to be paid in three instalments, the respondent had undertaken to pay interest at Jhe rate of 5% p.a. even though 's. 220(2) of the
Income-tax Act, 1961 prescribed 4% as the rate of interest payable on such
arrears. The Income-tax Officer accepted the term.
By the Finance Act, 1965
the rate of interest payable under this section was
raised
from 4%
to
6% p.a. On receipt of a notice from the Income-itax Officer, that on the unpaid balance of the tax arrears the company was !fable to pay interest at
6% p.a., tha respondent moved the· High Court contending that it was not
open to the Income-tax Officer to vary the rate from 5 % to 6% even in spite
of the change made by the Finance Act, 1965, in that a vested right could not
be taken away by a statute which did not apply retrospectively. The High
Court allowed the writ petition.
On appeal to thi~ Court it was contended by the respondent that sub-ss. (2)
and (3) of s. 220 werei independent provisions which operated in fields of their
own.
Allowing the appeal to this Court,
HELD: (!) Sub-sections (2) and (3) form part of the same
section,
namely, s. 220 and are therefore closely allied to each other. It is true that
the two sub-sections <ital with separate is31.les but the non..obstante clause of
sub-s. (3) clearly restricts the order passed under suTMs. (3) to the conditions
mentioned in sub-s. (2) of s. 220 of tho Act. (860 BJ
(2) It iS: the Finance Act whi'ch fixes the rate of interest payable under
sub-s. (2) of s. 220. It is not within the comperence of the Income-tax Officer
to vary the rate of interest fixed by the Finance Act under subs. (2) of s. 220
from time to time.
(860CD]
Esthuri Aswathaiah v. Commissioner of Income-tax Mysore 60 I.T.R. 411
H
and 416, followed.
(3) Sub-section (3) of s. 220 does not empower the Incomectax Officer to
enter into any indefeasible settlement with the asse"°e or to clothe the Incometax Officer with any such power so as to vary the •tatutory inhibition contained
856
SUPREME COURT REPORTS
[1976] 1 s.c.R.
in sub-s. (2).
Any order which is passed under sub-s. (3) would be subject
to the rate of interest mentioned in sub-s. (2) and as soon as the rale men ..
tioned in subi..s. (2) is varied or enhanced by the legislature it would have to
be read into sub-s. (2) from the date of the amendment and any order passed
under sub-s. (3) would be subject to the. rare so fixed.
If this is not the position
then the order passed under sub-s. (3) being prejudicial to sub-s. (2) becomes
illegal and invalid and the Income-tax Officer exceeds the limits- of his jurisdiction
in passing such an order.
(860F-H]
In the instant case there was no question of the Finance Act operating
retrospectively nor was there any question of the Finance Act taking away a
vested right which had accrued to the assessee because the order of the Incometax Officer under sub-S. (3) of s. 220 does not amount to any final settlement or
agreemwt. The notice had mere] y given effect to the legal provisions of the
Finance Act.
[86! BJ
(4) It is manifest that the Income-tax Officer couid not have passed any
order agaillst the statutory provisions of sub·s. (21 of s. 220 either with or
without the consent of the assessee.
EV'en the orde-r of the Income.tax Officer
accepting the· offer of the assesse to pay interest at the rate of 5o/o p.a. was
legally invalid because if the rate or interest fixed by the statute was 4% the
parties could not be allowed to contract out of the statute. The only relief
which the assessee could get was to pay interest at 4% p.a. prior to the Finance
Ad, 1965 and at 6% after !st April. 1965.
[861D-E]
Biswanath Ghosh v. ]n'cpme,.tax Officer, Ward, B. and Another 95 I.T.R. 372,
374, approved.
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 76 to 80
of 1971.
From the Judgment and Orders dated the 17th October, 1968
of the Madhya Pradesh High Court in Misc. Petitions No. 277, 279
B·
c
to 282 of 1966.
E.
G. C. Sharma, P. L. Juneja and S. P. Nayar, for the appellant.
S, Chowdhury, Leila Seth and U. K. Khaitan, for respondent.
The Judgment of the Court was delivered by
FAZAL ALI, J.
These appeals are by Income-tax Officer,, 'A' Ward,
F'
Indore, against the judgment· of the Madhya Pradesh High Court
and involve a questiou of law regarding the iuterpretation of s. 220
sub-ss. (2) and (3) of the Income-tax Act, 1961. In order to understand the scope and ambit of the question involved,
it may
be
necessary to mention a few facts leading to these appeals.
The respondent firm carries .on the business of manufacturing
c;;
cloth.
In 1947 the then Mahara.ja of Gwalior granted to the firm
exemption from tax for a period of twelve years from the date w~en
the firm started its factories.
Under the
Part B States (Taxation
Concessions) Order, 1950 the Commissioner of Income-tax of !he
region concerned approved of the exemption only
to
the weavmg
division of the respondent for ten years, but deferred decision regarding the staple fibre division until thel factory started functioning in
H
1954.
The Commissioner was appproached again for granting eXemption but he refused to do so.
The respondent thereafter moved the
High . Court of Madhya Pradesh for cancelling the
order
of the
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857.'
Commissioner- refusing exemption. The writ petition before the High.
Court succeeded anl:l the respondent's right to exemption was upheld
by the High Court.
Thereafter the Revenue filed an appeal to this
Court which was al!Ol\Ved and by its order dated April 28,
1964
[reported in (1964!) 53 I. T .R. 466] this Court reversed the decision of the High Court and maintained the order of the Commissioner refusing exemption. As a result of the cancellation of the
exemption, a huge amount of income-tax became due
from
the
respondent, anti the provisional assessments made for
the
years
1959-60 to 1964-65 reached the aggregate amount of over Rs. 6.60·
crores which was payable by the firm was actually demanded from
the respondent.
In fact the efl"-ct of the order of this Court was
that the amount exempted became payable at once and was accord-·
ingly demanded from the respondent but the respondent instead of
paying the amount tried to rn~gotiate with the Revenue for certain
concessions.
In this connection a series of correspondence followed
between the respondent and the
Income-tax Department including
a letter which was written by the assessee on December 26, 1964 by
which the assessee paid a sum of Rs. 3 crores and wanted
the
balance of Rs. 3 . 60 crores to be paid in instalments.
The assessee
further undertook to pay interest on the arrears at the rate of 5 %
per annum, even though under sub-s. (2) of s. 220 of the Incometax Act, 1961 hereinafter referred to as 'the Act'-he was required
to pay interest at the rate of 4% only.
In view of these favourable
terms offered by the assessee, thd Income-tax Officer acceded to its
request by his letter \:lated January 16, 1965.
The assessee
had:
agreed to pay the arrears in the following manner :
Rs. 1,00,00,000 by March 15, 1966.
Rs. 1,20,00,000 by March 15, 1967.
Rs. 1,34,76,000 by March 15, 1968.
Soon after the request of the· assessee was granted by the Income-tar
Officer, sub-s. (2) of s. 220 of the Act was amended by the Finance
Act, 1965 by which the rate of interest was increased from 4%
to 6% per annnm.
In view of this amendment,
the Income-tax
Officer by his letter dated January 10, 1966 informed the assessde
that on the unpaid balance of tax arrears the respondent would be
liable to pay interest at the rate of 6% per annum with effect frbm
April 1, 1965 instead of 5% as agreed to by the Incom~tax Officer
in his previous letter.
The Income-tax Officer pointed out that this
course was necessitated in view of the amendment made by
the
Finance Act, 1965.
Consequently a notice of demand under s. 156
of the Act was served on the resJ)ondeut which resulted in his filing
writ petitions before the High Court with the result mentioned above.
The main point urged, in the petitions before the High Court bv ·
H
the respondent was that the Income-tax Officer havill,I! acceded to the
request of the assessee a settlement between !Pe oarties was arrived
at to pay the bala)J.ce of arrears at the rate of interest at 5% oer
annum and it was not open. to the Incom~~tax Officer to vary that
858
SUPREME COURT REPORTS
[1976] 1 s.c.R.
rate to the prejudice of the assessee even in spite of a change in the
rate of interest by the Finance Act, 1965, because a vested right
coul\:i not be taken away by a statute which in terms did not apply
retrospectively .. This plea appears to have found favour
with
the
High Court, though not on the ground expressly taken by the respondent.
The High Court found that in view of
the
notice
of
demand the liability of the assessee to pay the arrears arose only
11fter the expiry of 35 days and this period had expired before
the
Finance Act, 1965 amending s. 220(2) of the Act and therefore the
Revenue had no jurisdiction to demanld payment of the arrears at the
rate of 6% interest. Thus it would appear that the
High Court
actually decided the case on a point which was not raised by
the
Iespondent in his petition but after making out a new case made out
.at the time of arguments and without giving any opportunity to the
Revenue to rebut the same.
The High Court has written a detailed
judgment regarding the time as to when the liability of the assesse·e
where a notice of demanld under s. 156 of the Act is issued would
arise.
It is, hbwever, not necessary for us to consider the reasons
·given by the High Court in detail, because in the view that we take
·we find that the basis on which the High Court has decided this case
is wholly irrelevant and is not at all germane to ihe issue that was
involved. It was not a case of a notice of demand under s. 156 of
the Act simpliciter, but the admitted position was that in ,1ew of
1he decision of the Supreme Court the respon\:lent was in arrears of
tax and had to pay heavy amounts of over Rs. 6. 6 crores.
The
respondent voluntarily paid the amount of Rs. 3 crores and request-
·ed the Income-tax Officer to allow it to pay the balance in instalments
and persuaded the Income-tax Officer ro accept the request even by
agreeing to pay a higher rate of interest of 5% than the rate prescribed under s. 220(2) of the Act.
The liability to pay the arrears
was never disputed and the oniv tlispute between the parties was as
to rate of interest that was payable.
Section 220, suh-ss. (!2) and (3) run thus :
"(2) If the amount specified in any notice of demand
·under section 156 is not paid within the period limited under
sub-section ( 1), the assessee shall be liable to pay simple
interest at four per cent per annum from the day commenc·
ing after ihe end of the period mentione(i in sub-section (1).
Provided that, where as a result of an
order under
·section 154, or section 155, or section 250, or section 254,
or section 260 or section 262, or section 264, the amount
on which interest was payable under this section bad been
reduced, ihe interest shall be reduced accordin~y and the
excess interest paid, if any, shall be refunded.
(3) Without prejudice to ihe provisions contained in snb-
~ection (2), on an application made by the assessee before
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J.T.o. v. GWALIOR RAYON SILK co. (Fazal.Ali, !.)
859
the expiry _of the due date
under sub-soction (1), the
Income-tax Officer may eii:tend the time for payment or
allow payment by instalments, subject to such conditions as
he may think fit to impose in the circumstances of the case."
The fact that the arrears werd demanded from the assessee is not
disputed as would appear from the statement made by the respondent
in paragraph 2 of the writ petition filed before the High Coutt where
it was averred thus :
"Subsequently when assessments for
the
assessment
years 1959-60 to 1964-65 were provisionally made, a huge
amount aggregating to over Rupees six and a half crores
became payable and was demanded from the petitioner."
In these circumstances, therefore, the conditions precedent to
the
application of sub-s. (2) of s. 220 of the Act were undoubtedly
fulfillefl, in this case. It would be seen. that before the
assessee
entered into correspondence with the Revenue, the rate of intere\st
prescribed under sub-s. (2) of s. 220 was only four per cent and
yet the assessee offered to pay a higher rate namely · 5% per annum
if he was allowed to pay the arrears in instalments. This request
of the assessee was accepted by the Income-tax Officer on January 16.
1965 when there was no amendment in the provisions contained in
s. 220(2) of the Act and the order passed by the Income-tax Officer
must be construed as one made urider sub-s. (3) of s. 220 of the Act.
It was suggested before the High Court that the order of the
Income-tax Officer amounted to an irrevocable
agreement
which
could not be varied mercly because the rate of interest contained in
sub-s. (2) of s. 220 of the Act was enhanced. Mr. S. C. Choudhry
learned coμnsel for the respondent, however, has fairly conceded that
there was no question of an agreement or settlement because s. 220(3)
does not empowtlr the Income-tax Officer to enter into. agreement
or settlement in ortler to bind the Revenue.
We find ourselves in
complete agreement with this view. Section 220(3) merely empowers
the Income-tax Officer to extend the time for payment
or allow
payment by instalments on such conditions as he may impose.
In
the instant case the Income-tax Officer merely exercised his powers
under sub-s. (3) of s. 220 by imposing the condition that the assessee
shall be allowed to pay the arrears by instalments if he paid interest
at the rate of 5 % per aniium offered by him.
What is important,
however, is that sub-s. (3) is not independent of sub-s. (2) bnt is
inter-connected with it. The words 'without prejudice to the provisions contained in sub-section (2)' clearly show that any order
passed by the Income-Tax Officer under sub-s. (3) must neither be
inconsistent with nor prejudicial to · the provisions contained in
sub-s. (2). In other words, the position is that although. sub-s. (3)
is an independent provision the power under this sub-section has to be
exercised subject to the terms and conditions mentioned in sub-s. (2) so
far as fhey ~ply to the facts mentioned in sub-s. (3). Thus if sub-s.
(2) of s. 220 :provided that the rate of interest chargeable would be
:B 60
SUPREME CotfRT REPORTS
[1976] 1 s.c.R.
Jour per cent per annum any order passed under sub-s. ( 3) could
not vary that rate, and if it did, then the order to that extent would
stand superseded.
The argument of the assessee is that sub-ss. (2)
and (3) of s. 220 were independent provisions which operated in fields
-of their myn.
We are, however, unable to accept this
somewhat
broad prop~ition of law.
Sub-sections (2) and (3) form part of
the same section, namely s. 220, and are therefore closely allied to
each other. It is no doubt true that the two sub-sections deal with
separate issues but the non obstante clause of
sub-s. ( 3) clearly
restricts the order passed under sub-s. ( 3) to the conditions mentioned
.in sub-s. (2) of s. 220 of the Act.
Fuqher more, it is the Finance Act which fixes the rate of interest
;payable
under sub-s. (2) of s. 220 and it is common knowledge
that every year the Finance Act makes important amendments in
the rates payable under the various provisions of the Income-tax
Act.
In these circumstances, therefore, it is not within the competence of the Income-tax Officer to vary the rate of interest fixed by
the Finance Act under sub-s. (2) of s. 220 from time to time.
We
.are fortified in this view by a decision of this
Court in Esthuri
Aswathaiah v. Commissioner of Income-tax, Mysore(!1) where this
<Court observed thus :
"The Income-tax Officer has no power to vary the rate
on which the income of the previous year is to be assessed.
The rate of tax is fixed by the Finance Act every year.
By
section 3, the tax is levied at that rate for an assessment
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the length of the previous year is fixed and the income of
the previous year is determined, that income must ·be charged at the rate specified in the Finance Act and at no other
rate."
As we have already pointed out sub-s. (3) of s. 220 of the
Act does not empower the Income--tax Officer to enter into
any
indefeasible settlement with the assessee or to clothe the Income-tax
-Officer with any _such power so as to vary the statutory inhibition
contained in sub-s. (2). Any order which is passed unXler sub-s. (3)
would be subject to the rate of interest mentioned in sub-s. (2J and
as soon as the rate mentioned in sub-s. (2) is varied or enhanced by
the Legislature it would have to be read into sub-s. (2) from the
date of the amendment and any order passed under sub-s.
(3)
would be subjeet to the rate so fixed.
In fact if this is
not the
position, then the order passed under sub-s. (3) being prejudicial to
sub-s. (2) becomes illegal and invalid and the Income-tax Officer
exceeds the limits of his jurisdiction in passing such an order.
Jn the instant case the Finance Act of 1965 became
effective
from April 1, 1965 and the Income--tax Officer in his letter dated
(!) 60!.T.R. 411,416.
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J.T.O. v. GWALIOR RAYON SILK co. {Faza/ Ali, J.)
861
January 10,, 1966, to the assessee had merely given effect to the
legal prQvisions of the Finance Act by insisting that in view of the
variation in the ra~ of interest under sub-s. (2) of s. 220 the assessee
would have to pay interest at the rate of 6% per annum only from
April 1, 1965.
There was absolutely no question of the Finance
Act operating retrospectively, no~ there was any question
of
the
Financ~ Act taking away a vested right which had accrued to the
assessee because we have already held that the order of the Incometax Officer under sub-s. (3) of s. 220 does not amount to any final
settlement or aa;reement.
There is yet another view of the matter. In the present case the
assessee himself wanted extension of time for being allowed to pay
the arr.ears by instalments.
The assessee could be
permitted
to
seek this indulgence u:nder sub-s. (3) of s. 220 only
within
the
four corners of the Jaw and not outside the same.
The moment
the Finance Act, 1965, came into operation and the rate of interest
in sub-s. (2) of s. 220 was increased from 4% to 6% per annum,
any order passed by the Income-tax Officer
would
automatica!Jy
operate in accordance with the Finance Act with effect from April 1,
1965.
This is what has happened in the present case.
Thus it is
manifest that the Income-tax O!ficer could not have passed any order
against the statutory provisions of sub-s. (2) of s. 220 either with
or without the consent of the asse'ssee.
Even the older of the
Income-tax Officer dated January 16, 1965, accepting the offer of
the assessee to pay interest at the rate of 5% per annum was legally
invalid, because if the rate of interest fixed by the statute was 4%
the parties could not be allowed to contract out of the statute. The
only relief, therefore, which ·the assessee could get is that it was
liable to pay interest at the rate of 4% and not 5% per annum for
the period January to March 1965. But from April 1, 1965 it was
bound to pay interest at the rate of 6% per annum as found by the
Income-tax Officer.
Reliance was placed by Mr. G. C. Sharma appearing for the
Revenue on a decision of the Orissa High Court in Biswanath Ghosh
v. Income-tax Officer, Ward B and Another(!) where a Division
Bench of that Court observed as follows :
"As we find, the Income-tax Officer has charged interest
at 6 per cent until the provision was amended to enhance
the rate of interest at 9 per cent.
In fact in the counter
affidavit given by the Income-tax Officer in O.J .C. No. 195
of 1972 that position has been clarified.
Mr. Pasaya! for
the petitioner claims that the rate of interest must be only
at 6 per cent in view of the fact that default in this case
had occurred prio.r to the amendment. It is only here that
he relies upon the de'cision of the Madhya Pradesh High
Court in Gwalior Rayon Silk Manufacturinf! (Weavinf!) Co.
v. Income-tax Officer [1969] 73 T.T.R.
95
(M.P.).
(1) 95 I.T.R. 372, 374.
•
862
SUPREME COURT REPORTS
(1976) 1 S.C.R.
That was a case in respect of penalty under sectign 220(2)
of the Act and the court took the view ,that th~ rate of
interest as provided on the date when pefault occurred
would apply to the !acts of the case.
We do not agre\l with
the view expressed in the said decision. It is true that
Central Act 27 of 1967 has no retrospective effect, but in
respect of continuing default alter the amendment, in our
view, the rate of interest as provided
thereunder would
apply."
The Orjssa High Court expressly dissented from the view taken by
the Madhya Pradesh High Conrt in the present
jndgment
under
appeal and we find ourselves in complete agreement with the view
taken by the Orissa High Court.
We have already pointed out, the Madhya Pradesh· High Court
did not at all go ioto the question which really arQSe in this case
with respect to the payment of interest at the rate of 6 per cent in
accordance with the Finance Act, 1965.
/
A
B
c
For these reasons, therefore, the appeals are allowed
and the
t
order of .the High Court is set aside with slight modifiq1tion, namely,
D
that the assessee shall pay interest on the entire amount of arrears
at the rate of 4 per cent per annum only during the period January
to March 1965. So far as rest of the period is concerned, the order
of the Income-tax Officer directing the assessee to pay interest at
the rate of 6 per cent per annum is restored.
In view of the peculiar
circumstances of the case, however, we leave the parties to
bear
their own costs throughout.
E
P.B.R.
Appeals allowed.
·~