1985 (6) TMI 6 - HC - Income Tax

Summary

Issues Involved:

1. Vires of Rule 11(2)(b)(i) to (ix) of the Assam Agricultural Income-tax Rules, 1939.
2. Validity of the order of assessment and demand of interest on agricultural income-tax.
3. Liability of the petitioner to pay simple interest at 6% per annum from January 1, 1970, to February 28, 1970.

Issue-wise Detailed Analysis:

1. Vires of Rule 11(2)(b)(i) to (ix) of the Assam Agricultural Income-tax Rules, 1939:

The petitioner challenged the vires of Rule 11(2)(b)(i) to (ix) of the Assam Agricultural Income-tax Rules, 1939, arguing that these provisions were ultra vires Section 19 of the Assam Agricultural Income-tax Act, 1939. The court referred to the precedent set in New Assam Valley Tea Company Limited v. Agrl. ITO [1976] ALR 46, where it was held that Rule 11(2)(b)(i) to (ix) and the proviso were beyond the rule-making power of the State Government and thus declared illegal, void, and ultra vires Section 19 of the Act. Consequently, the provisions empowering the Agricultural Income-tax Officer to levy interest beyond 6% were invalid. The court upheld this view, declaring the impugned orders marked annexures A and B invalid to the extent of the levy of interest beyond 6%.

2. Validity of the order of assessment and demand of interest on agricultural income-tax:

The petitioner contended that the levy of interest beyond the date of submission of the return (February 24, 1972) was illegal and void. The court confirmed this argument, citing the same precedent, New Assam Valley Tea Co. Ltd. [1976] ALR 46. It was ruled that interest could only be charged up to the date of submission of the return and not beyond. Therefore, the impugned orders demanding interest beyond February 24, 1972, were quashed.

3. Liability of the petitioner to pay simple interest at 6% per annum from January 1, 1970, to February 28, 1970:

The petitioner argued that under Section 19 of the Act read with Rules 11(1) and 11(2)(a) of the Rules, they were only liable to pay simple interest at 6% per annum up to February 28, 1970, and not beyond. The court examined the relevant statutory provisions and rules. Section 19(1) of the Act and Rule 11(1) prescribed that if a return was not filed by December 31 of the relevant financial year, simple interest at 6% per annum was payable from January 1 to the date of furnishing the return or February 28, whichever was earlier. Rule 11(2)(a) stipulated that if the return was filed after February 28, simple interest at 6% per annum was payable from January 1 to February 28. The court noted that Rule 11(2)(b)(i) to (ix), which prescribed higher interest rates beyond February 28, had been declared void. Therefore, there was no legal basis to levy interest beyond February 28, 1970. Consequently, the court held that the petitioner was liable to pay simple interest at 6% per annum only from January 1, 1970, to February 28, 1970. The impugned order imposing interest from March 1, 1970, to March 31, 1972, was declared invalid, void, and without jurisdiction.

Conclusion:

The petition was accepted to the extent indicated. The impugned orders marked annexures A and B were quashed. The petitioner was directed to pay interest at 6% per annum from January 1, 1970, to February 28, 1970. The Agricultural Income-tax Officer, Assam at Gauhati, was instructed to reassess the interest accordingly. There was no order as to costs.