1983 (2) TMI 10 - HC - Income Tax

Summary

Issues Involved:

1. Whether the power to reduce or waive interest payable u/s 215 is exercisable by the ITO only for the period exceeding one year from the date of submission of the return.
2. Whether the refusal to waive interest u/s 215 in exercise of the power conferred by rule 40, sub-rule (5) is patently erroneous in law.

Summary:

Issue 1:

The court did not find it necessary to answer whether the power to reduce or waive interest payable u/s 215 is exercisable by the ITO only for the period exceeding one year from the date of submission of the return.

Issue 2:

The petitioner, a public limited company, was required to pay advance tax based on its estimated current income. The ITO assessed the total income and rejected the petitioner's claim for the export markets development allowance u/s 35B, resulting in a higher assessed tax and interest payable u/s 215. The petitioner sought a waiver of this interest, arguing that the estimate of current income was made in good faith based on decisions of the Income-tax Appellate Tribunal.

The IAC rejected the waiver application without providing reasons, and the Commissioner upheld this decision, stating that even if the petitioner believed its estimate to be correct, the tax payment was withheld.

The court held that the IAC's order was patently vitiated for lack of reasons and that the Commissioner misconceived the scope of power under rule 40, sub-rule (5). The court emphasized that the power to waive interest is to mitigate hardship resulting from mandatory provisions and should be exercised when the default is bona fide or for sufficient reasons.

The court concluded that the lesser payment of advance tax was due to the partial disallowance of the export markets development allowance, which was supported by decisions of the Income-tax Appellate Tribunal. Therefore, the estimate made by the petitioner was bona fide, justifying the waiver of interest. The court issued a writ directing that the interest determined to be payable u/s 215 by the petitioner shall be treated as waived, thus making the rule absolute with no order as to costs.