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Issues Involved:
1. Validity of sections 234A, 234B, and 234C of the Income-tax Act, 1961. 2. Challenge to the Central Board of Direct Taxes' (CBDT) rejection of waiver of interest. Summary: 1. Validity of Sections 234A, 234B, and 234C: The petitioners challenged the vires of sections 234A, 234B, and 234C of the Income-tax Act, 1961, claiming these provisions are ultra vires the Constitution of India. They argued that these sections are arbitrary and penal in nature, as they do not allow for the waiver or reduction of interest, unlike the provisions they replaced. The petitioners contended that the interest rates under these sections are excessively high and punitive, thus beyond the legislative competence of Parliament. The court examined the legislative intent behind these provisions and concluded that they are compensatory rather than penal. The court cited several Supreme Court judgments, including Khazan Chand v. State of Jammu and Kashmir and Central Provinces Manganese Ore Co. Ltd. v. CIT, which clarified that interest levied under fiscal statutes is compensatory, intended to compensate the government for the loss of revenue due to delayed payments. The court also noted that the provisions aim to ensure uniform treatment and reduce litigation by removing discretionary powers from assessing authorities. The court referenced the Union Home Products Ltd. v. Union of India decision, which upheld the compensatory nature of these provisions despite their higher interest rates. The court emphasized that legislative measures in economic matters are given greater latitude and that mere hardship to a particular party cannot render a statute unreasonable. The court concluded that sections 234A, 234B, and 234C are not unconstitutional, as they are designed to simplify and rationalize the tax system, ensuring timely payment of taxes and compensating the government for delays. 2. Challenge to CBDT's Rejection of Waiver of Interest: The petitioners also challenged the CBDT's rejection of their request for waiver of interest, arguing that the Board failed to consider their case on its merits and merely expressed its inability to intervene. The court examined section 119 of the Act, which empowers the CBDT to issue orders for the proper administration of the Act and to grant relaxation in cases of genuine hardship. The court noted that the Board has the authority to issue general or special orders for granting relief, even in cases covered by sections 234A to 234C. The court held that the Board's rejection of the petitioners' request without examining the merits was improper. The court directed the CBDT to reconsider the petitioners' request for waiver of interest in light of the observations made in the judgment. Conclusion: The writ petitions challenging the validity of sections 234A to 234C were dismissed. However, the petitions were partly allowed concerning the CBDT's rejection of the waiver of interest. The court quashed the CBDT's decision and directed it to re-examine the petitioners' request for waiver of interest afresh. This decision does not imply a directive to grant relief but mandates a reconsideration based on the merits.
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