CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
Section 214 - Interest Payable by Government
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Status: Spent for assessment years 1989-90 onwards (sub-section (3)); succeeded by section 244A. Live only for earlier years.
Finance Act, 2026: No amendment.
Mechanism: The Government pays simple interest (15% p.a.) on advance tax paid in excess of the assessed tax, from 1 April following the financial year to the date of the regular assessment - for assessment years up to 1988-89 only.
Litigation profile: Historically rich (the 'regular assessment' and right-to-interest questions); now spent, its principles carried into section 244A.
A. SECTION COMMENTARY
Section 214 obliges the Central Government to pay simple interest to the assessee on the amount by which the aggregate of advance-tax instalments paid during a financial year exceeds the assessed tax - that is, where the assessee has, in effect, over-paid by way of advance tax. Interest runs at fifteen per cent per annum from 1 April next following the financial year up to the date of the regular assessment. Sub-section (1A) adjusts the interest up or down to follow the result of appellate, revisional and other orders; sub-section (2) caps interest at the date of any refund; and sub-section (3) - the key to the section's present status - provides that sections 214 to 217 do not apply to any assessment year from 1989-90 onwards.
By force of sub-section (3), section 214 is alive only for assessment years up to 1988-89. For assessment years 1989-90 and after, interest payable by the Government on refunds (including refunds of excess advance tax) is governed by section 244A, which replaced sections 214, 243 and 244. The body of authority on section 214 therefore matters chiefly for old matters and for the principles it settled - principles that continue to inform the construction of section 244A.
The two great questions: "regular assessment" and the right to interest
Two questions dominated the section 214 litigation. First, the meaning of "regular assessment" - up to which date interest runs - which the Supreme Court in Modi Industries settled as the first assessment under section 143/144 (not a reassessment or an appeal-effect order). Second, the assessee's entitlement to interest on excess advance tax as a matter of right, which Modi Industries located in the right to refund that arises on 1 April of the assessment year. A subsidiary but important principle, carried into the section 244A era, is that the assessee is entitled only to such interest as the statute provides and cannot claim interest on interest - the rule in Gujarat Fluoro Chemicals.
Appealability
Consistent with the treatment of interest generally, an order under section 214 (like its mirror-image, section 215) is part of the process of assessment, and the assessee may dispute it in appeal on the ground that he is entitled to interest, or to more interest, than has been allowed - the principle in Central Provinces Manganese Ore.
B. STATUTORY POSITION (verbatim text)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no amendment to this section. Editorial "[Omitted...]" notes are those of the Legislature.
214. (1) The Central Government shall pay simple interest at fifteen per cent per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 to 213 exceeds the amount of the assessed tax from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year, during which it is payable by reason of the provisions of section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment :
Provided that in respect of any amount refunded on a provisional assessment under section 141A, no interest shall be paid for any period after the date of such provisional assessment.
(1A) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the amount of the excess interest payable and requiring him to pay such amount ; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly.
(2) On any portion of such amount which is refunded under this Chapter, interest shall be payable only up to the date on which the refund was made.
(3) This section and sections 215, 216 and 217 shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment year and, in the application of the said sections to the assessment for any earlier assessment year, references therein [except in sub-section (1A) and sub-section (3) of section 215] to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.
Explanation 1.—In this section, "assessed tax" shall have the same meaning as in sub-section (5) of section 215.
Explanation 2.—Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section.
C. AUTHORITIES
Section 214 is spent for assessment years 1989-90 onwards (sub-section (3)); interest on excess advance tax is now governed by section 244A. The authorities are arranged by (1) 'regular assessment' and the right to interest, (2) appealability, and (3) the no-interest-on-interest rule carried into section 244A. All citations have been web-verified.
Cluster 1 - 'Regular assessment' and the assessee's right to interest on excess advance tax
Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC)
Issue: From and up to what date interest under section 214 is payable on excess advance tax, and the meaning of 'regular assessment' in the section.
Held: Interest under section 214 is payable from 1 April next following the financial year up to the date of the first regular assessment (the assessment under section 143/144); a reassessment or an order giving effect to appellate/revisional directions is not a 'regular assessment' for this purpose. The right to refund of excess advance tax arises on 1 April of the assessment year, and the assessee is entitled to interest on that excess as a matter of statutory right.
Significance: The definitive Supreme Court exposition of section 214, settling the conflict among the High Courts on 'regular assessment' and on the assessee's entitlement to interest.
Cluster 2 - Appealability of the interest order
Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC)
Issue: Whether an order relating to interest (there, under section 215/139(8), but on the same principle as section 214) is appealable.
Held: The levy (or refusal) of interest is part of the process of assessment; an assessee may dispute it in appeal provided he confines himself to the ground that he is not liable to the levy at all (or, in the mirror case, that he is entitled to interest).
Significance: Establishes the appellate route for interest disputes under sections 214 and 215.
Cluster 3 - The successor regime and the no-interest-on-interest rule
For assessment years 1989-90 onwards, section 244A governs; the section 214 principles inform its construction.
Issue: Whether the assessee can claim interest on interest where statutory interest on a refund is itself delayed.
Held: Only the interest provided for by the statute can be claimed; there is no entitlement to interest on such statutory interest in the absence of an express provision. Sandvik Asia (280 ITR 643) was explained as confined to compensation for inordinate delay and not as authority for a general rule of interest on interest.
Significance: Caps the assessee's interest entitlement under the section 214 / section 244A line at what the statute provides - directly relevant to claims for excess advance tax.
Position: Section 214 does not apply to any assessment year from 1989-90 onwards; interest on refunds of excess advance tax for those years is governed by section 244A (inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1 April 1989).
Use: Fixes the live source of the Government's interest liability for current years, treated in the commentary on section 244A (Chapter XIX).
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is omitted, spent or substantially unlitigated, the candour rule is observed - the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII - COLLECTION AND RECOVERY OF TAX - C.-ADVANCE PAYMENT OF TAX
Section 214 - Interest Payable by Government
Case Laws & Commentary - Income-tax Act, 1961 (as amended by the Finance Act, 2026) - bharattax.co Treatise
Status: Spent for assessment years 1989-90 onwards (sub-section (3)); succeeded by section 244A. Live only for earlier years.
Finance Act, 2026: No amendment.
Mechanism: The Government pays simple interest (15% p.a.) on advance tax paid in excess of the assessed tax, from 1 April following the financial year to the date of the regular assessment - for assessment years up to 1988-89 only.
Litigation profile: Historically rich (the 'regular assessment' and right-to-interest questions); now spent, its principles carried into section 244A.
A. SECTION COMMENTARY
Section 214 obliges the Central Government to pay simple interest to the assessee on the amount by which the aggregate of advance-tax instalments paid during a financial year exceeds the assessed tax - that is, where the assessee has, in effect, over-paid by way of advance tax. Interest runs at fifteen per cent per annum from 1 April next following the financial year up to the date of the regular assessment. Sub-section (1A) adjusts the interest up or down to follow the result of appellate, revisional and other orders; sub-section (2) caps interest at the date of any refund; and sub-section (3) - the key to the section's present status - provides that sections 214 to 217 do not apply to any assessment year from 1989-90 onwards.
A spent provision, superseded by section 244A
By force of sub-section (3), section 214 is alive only for assessment years up to 1988-89. For assessment years 1989-90 and after, interest payable by the Government on refunds (including refunds of excess advance tax) is governed by section 244A, which replaced sections 214, 243 and 244. The body of authority on section 214 therefore matters chiefly for old matters and for the principles it settled - principles that continue to inform the construction of section 244A.
The two great questions: "regular assessment" and the right to interest
Two questions dominated the section 214 litigation. First, the meaning of "regular assessment" - up to which date interest runs - which the Supreme Court in Modi Industries settled as the first assessment under section 143/144 (not a reassessment or an appeal-effect order). Second, the assessee's entitlement to interest on excess advance tax as a matter of right, which Modi Industries located in the right to refund that arises on 1 April of the assessment year. A subsidiary but important principle, carried into the section 244A era, is that the assessee is entitled only to such interest as the statute provides and cannot claim interest on interest - the rule in Gujarat Fluoro Chemicals.
Appealability
Consistent with the treatment of interest generally, an order under section 214 (like its mirror-image, section 215) is part of the process of assessment, and the assessee may dispute it in appeal on the ground that he is entitled to interest, or to more interest, than has been allowed - the principle in Central Provinces Manganese Ore.
B. STATUTORY POSITION (verbatim text)
Reproduced verbatim from the Income-tax Act, 1961 (as amended up to the Finance Act, 2025); the Finance Act, 2026 makes no amendment to this section. Editorial "[Omitted...]" notes are those of the Legislature.
214. (1) The Central Government shall pay simple interest at fifteen per cent per annum on the amount by which the aggregate sum of any instalments of advance tax paid during any financial year in which they are payable under sections 207 to 213 exceeds the amount of the assessed tax from the 1st day of April next following the said financial year to the date of the regular assessment for the assessment year immediately following the said financial year, and where any such instalment is paid after the expiry of the financial year, during which it is payable by reason of the provisions of section 213, interest as aforesaid shall also be payable on that instalment from the date of its payment to the date of regular assessment :
Provided that in respect of any amount refunded on a provisional assessment under section 141A, no interest shall be paid for any period after the date of such provisional assessment.
(1A) Where as a result of an order under section 147 or section 154 or section 155 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264 or an order of the Settlement Commission under sub-section (4) of section 245D, the amount on which interest was payable under sub-section (1) has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and in a case where the interest is reduced, the Assessing Officer shall serve on the assessee, a notice of demand in the prescribed form specifying the amount of the excess interest payable and requiring him to pay such amount ; and such notice of demand shall be deemed to be a notice under section 156 and the provisions of this Act shall apply accordingly.
(2) On any portion of such amount which is refunded under this Chapter, interest shall be payable only up to the date on which the refund was made.
(3) This section and sections 215, 216 and 217 shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment year and, in the application of the said sections to the assessment for any earlier assessment year, references therein [except in sub-section (1A) and sub-section (3) of section 215] to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.
Explanation 1.—In this section, "assessed tax" shall have the same meaning as in sub-section (5) of section 215.
Explanation 2.—Where, in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of this section.
C. AUTHORITIES
Section 214 is spent for assessment years 1989-90 onwards (sub-section (3)); interest on excess advance tax is now governed by section 244A. The authorities are arranged by (1) 'regular assessment' and the right to interest, (2) appealability, and (3) the no-interest-on-interest rule carried into section 244A. All citations have been web-verified.
Cluster 1 - 'Regular assessment' and the assessee's right to interest on excess advance tax
Modi Industries Ltd. v. CIT (1995) 216 ITR 759 (SC)
Issue: From and up to what date interest under section 214 is payable on excess advance tax, and the meaning of 'regular assessment' in the section.
Held: Interest under section 214 is payable from 1 April next following the financial year up to the date of the first regular assessment (the assessment under section 143/144); a reassessment or an order giving effect to appellate/revisional directions is not a 'regular assessment' for this purpose. The right to refund of excess advance tax arises on 1 April of the assessment year, and the assessee is entitled to interest on that excess as a matter of statutory right.
Significance: The definitive Supreme Court exposition of section 214, settling the conflict among the High Courts on 'regular assessment' and on the assessee's entitlement to interest.
Cluster 2 - Appealability of the interest order
Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC)
Issue: Whether an order relating to interest (there, under section 215/139(8), but on the same principle as section 214) is appealable.
Held: The levy (or refusal) of interest is part of the process of assessment; an assessee may dispute it in appeal provided he confines himself to the ground that he is not liable to the levy at all (or, in the mirror case, that he is entitled to interest).
Significance: Establishes the appellate route for interest disputes under sections 214 and 215.
Cluster 3 - The successor regime and the no-interest-on-interest rule
For assessment years 1989-90 onwards, section 244A governs; the section 214 principles inform its construction.
CIT v. Gujarat Fluoro Chemicals (2014) 358 ITR 291 (SC) [Three-Judge Bench]
Issue: Whether the assessee can claim interest on interest where statutory interest on a refund is itself delayed.
Held: Only the interest provided for by the statute can be claimed; there is no entitlement to interest on such statutory interest in the absence of an express provision. Sandvik Asia (280 ITR 643) was explained as confined to compensation for inordinate delay and not as authority for a general rule of interest on interest.
Significance: Caps the assessee's interest entitlement under the section 214 / section 244A line at what the statute provides - directly relevant to claims for excess advance tax.
Status note - section 214(3) and section 244A
Position: Section 214 does not apply to any assessment year from 1989-90 onwards; interest on refunds of excess advance tax for those years is governed by section 244A (inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1 April 1989).
Use: Fixes the live source of the Government's interest liability for current years, treated in the commentary on section 244A (Chapter XIX).
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is omitted, spent or substantially unlitigated, the candour rule is observed - the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.